Royal IHC: recovery in sight after challenging year

In 2020 IHC' revenue declined to 737.7 million euro from 1,069.7 million in 2019. Order portfolio as of Dec 31 was 450.5 million (2019 - 689.8 million) Royal IHC achieved a negative EBITDA of EUR 199 million in 2020 (2019 -111.5 million) as expected, the IHC press release said.

NEW STRATEGY
The first half of 2020 was dominated by the refinancing and recapitalisation of Royal IHC. A strategy was also drawn up to focus the company on its core activities and bring the size of the organisation in line with a more realistic revenue expectation. The implementation of the transition plans and the strengthening of Royal IHC's position in the maritime sector followed in the second half of 2020.

REALISTIC SIZE
After determining the core activities, a start was made on selling or discontinuing the non-core activities. In addition, the organisation has become more efficient. The resultant downsizing measures aim to bring Royal IHC in line with realistic revenue expectations in terms of its size. This means that there has been a reduction of 300 jobs in The Netherlands and 300 jobs abroad. In addition, there has also been a reduction of 700 temporary workers.

CONSEQUENCES OF COVID-19
The COVID-19 pandemic has been a dominant factor throughout the year for both order intakes and the ability to operate safely worldwide. Thanks to a clear crisis approach, the number of infections within production was limited, but Royal IHC regrets the loss of a colleague and a limited number of other colleagues were ill for a long time with COVID-19.

ROYAL IHC ON TRACK
Gerben Eggink, Royal IHC CEO, says: “Royal IHC is now on track after a challenging 2020. There is maximum focus this year on successfully completing a number of large and complex projects that were contracted in 2017 and 2018.

“Although the consequences of the COVID-19 pandemic will have an impact on the 2021 results, we still expect a positive result. The prospects for the years that follow are also hopeful. There are clear signs of recovery in certain markets, and that will lead to new applications for the construction of ships and equipment in 2021 and beyond.”
 

VARIOUS MARKET DEVELOPMENTS:
CUSTOM DREDGERS
The market's initial response to the COVID-19 pandemic was to delay any investments. In the second half of 2020, the recovery started to become visible. The number of applications and concrete negotiations indicate a slow but steady recovery in the dredging market. The increased demand for custom dredgers is an indication of this trend.

STANDARD MODULAR DREDGERS
Despite postponed investments due to the COVID-19 pandemic, a positive result (at the level of 2018) was noticeable in the second half of 2020. Due to the short lead times around the purchase and a worldwide sales market, the COVID-19 effect will lag behind in 2021 with a lower expected turnover than 2020. Due to the restructuring of the organisation and the necessary changes to improve efficiency, this business unit will again see a positive result for 2021.

OFFSHORE ENERGY: OIL AND GAS
In the offshore energy market for oil and gas, the negative effect of COVID-19, in combination with a very low oil price in the first half of 2020, has been enormous. Investments in capital-intensive oil and gas projects were postponed or even stopped altogether. Demand for services and refurbishments from Royal IHC remained stable, albeit at a lower level. This has led to new service contracts for pipelay vessels, refurbishment orders, a range of tandem mooring and offloading systems, and riser pull-in systems.

RENEWABLES
The offshore renewable energy market continued to grow in 2020. This resulted (also for IHC IQIP) in a higher turnover and order intake compared to 2019.

MINING
The effect of the pandemic was also noticeable in the mining market, especially with regard to large capital-intensive investments. Despite the decline in the number of smaller orders, 2020 was ultimately a good year for the Royal IHC mining cluster. Two customised dredgers and a multi-year maintenance and service contract were realised. At the end of 2020, it became clear that demand in this market will increase due to shortages in raw materials.

DEFENCE
In 2020 Royal IHC started to expand its activities in the global defence market. For example, contacts have been strengthened with the Dutch Ministry of Defence. This initially led to a number of engineering assignments.

Royal IHC is now a member of the ‘HR ecosystem’ and a partner in the Maritime Capacity Alliance. This is aimed at the exchange of knowledge and innovations, and in cooperation with the Ministry of Defence in the context of the adaptive armed forces. Royal IHC also intensified its cooperation with NAVAL Group to qualify for the Walrus replacement programme.

Royal IHC expects a worldwide increase of investment in defence equipment in the near future. In The Netherlands, this could lead to extra expenditure for, among other things, the replacement and renewal of part of the naval fleet.

SERVICES AND PARTS
Royal IHC's business activities surrounding the provision of services, equipment and parts remained relatively stable in 2020. This included maintenance and the improvement or renewal of installations and components. The minimum expectation is that this will also apply to 2021 across all markets in which Royal IHC is active.