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Boskalis jaarverslagen 2012

Strategic and market risks

The Boskalis markets are heterogeneous and often develop differently. Our main (end) customer groups are national, regional and local governments, or associated institutions such as port authorities, private port operators and oil & gas and energy companies (operators as well as contractors). Other customer types are (container) shipping companies, mining companies and (infrastructure and real estate) project developers.

Despite the positive long-term growth prospects, our markets can be regularly – certainly in the short and medium term – negatively impacted by factors outside our control. Such factors include e.g. general and/or regional geo-political developments, such as political unrest, piracy, regime changes, government-imposed trade barriers, turmoil on the financial markets and crises in the financial sector. Such developments may negatively affect our activities in certain regions or even globally if they have major negative consequences for the economic developments in certain regions or for the global economy, or for exploration and exploitation activities in the energy and commodities markets. Boskalis aims to respond as effectively as possible to both positive and negative developments in individual markets through a global spread of its activities, an extensive and versatile fleet operating out of various international locations, and strong positions in its core markets. Moreover, our activities are largely focused on the development, construction, installation and maintenance of infrastructure, which means that longer-term developments will generally outweigh short-term economic fluctuations.

Boskalis does not include contracts in the order book until agreement has been reached with the client. Although experience shows that, once agreement has been reached, cancellations or substantial reductions in the size of contracts are rare, such cancellations or substantial reductions of work in the portfolio cannot be ruled out. As a consequence, if such a cancellation or substantial reduction occurs, losses may arise from the unwinding or settlement of financial derivatives which were taken out to cover related currency risks and/or fuel cost risks, but for which the underlying transaction or cash flows can no longer be realized.

Boskalis deals with a variety of competitors in the various markets in which it operates. Such competitors vary from large, internationally operating competitors to more regional and local competitors with activities restricted to one or several (geographical or activity-related) submarkets. With respect to a large part of our revenues, contracts are awarded through public or private tender procedures. Competition for most contracts is primarily price-based. However, many clients, particularly in the oil & gas sector and private port operators, are taking other factors – including quality-related ones, such as the assurance of a safety and environmental policy and compliance with relevant rules and guidelines – into consideration when awarding contracts. We have appropriate approval processes in place for the submission of tenders, including the evaluation of identi.ed risks and/or potential risk factors associated with the execution of a particular project.

Almost all of Boskalis’ activities are capital-intensive, with Dredging and, to a somewhat lesser extent, also Offshore Energy (in particular Heavy Marine Transport & Installation) being capital-intensive businesses with high entry and exit barriers, especially for companies operating globally. Because of the capital intensive nature of these activities, market prices are largely influenced by the balance between the demand for these services and the availability of capacity, being actual utilization levels of the relevant equipment. This implies that a broad international spread of market positions as well as a leadership position in terms of equipment, costs and the standardization of equipment are key success factors. Boskalis places a great deal of emphasis on these, both as a critical point of attention in operational management and in terms of capital expenditure strategy. A strict evaluation and approval process is in place for individual investment proposals. A key principle of our policy with regard to tenders and entering into commitments is to aim for a good balance in terms of size and type of projects and activities tendered for, type of equipment deployed and geographical spread of activities.

In realizing its strategy, Boskalis also acquires other companies. In order to achieve the anticipated results, Boskalis attaches great importance to integrating such acquisitions with care. Creating value for our stakeholders and retaining key personnel are important elements in this process.

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