The Strengthen pillar of our strategy mainly concentrates on Dredging & Inland Infra and Towage & Salvage. These activities are focused on large market segments with structural growth. However, we expect the pace of this growth to be slow in the short term. Moreover, Boskalis’ scope for growth in Dredging is limited given that it already holds a large share of this highly consolidated market.
Dredging & Inland Infra
Boskalis has a very strong global presence in the dredging market with a modern and versatile fleet. This puts Boskalis in a good position to take advantage of opportunities in the market. Relatively modest replacement and other investments will enable Boskalis to maintain and where appropriate expand its market position. As per the beginning of the Business Plan 2014-2016 period, these investments mainly concern a replacement mega cutter, two 4,500 m3 hoppers and the construction of a new jumbo backhoe.
In terms of equipment Boskalis took a medium-sized hopper with a capacity of 4,500 m³ into service in mid-2014 and a second early 2015 and construction work on the mega cutter is continuing apace. In addition, in the past year Boskalis was awarded the sizable contract for the Suez Canal expansion under competitive conditions, as well as recently acquiring the contract for the Pluit City project off the coast of Jakarta in Indonesia. At Inland Infra we sold the De Jong road maintenance activities, testament to the fact that we engage in active and dynamic portfolio management.
Towage & Salvage
Under the Corporate Business Plan the emphasis at Harbour Towage lies on the further development and strengthening of regional partnerships, with the focus also set on an ef.cient cost and capital structure. The terminal activities of Smit Lamnalco make a major contribution to the growth of these activities. Boskalis will make further investments in these partnerships as and when opportunities arise. At Salvage the group’s global network is brought into play for the emergency response activities while Boskalis’ engineering and contract and risk management expertise are used in wreck removal projects.
In the past year major steps have been taken in the further roll-out of the joint venture model for Towage. These include the establishment of the joint venture with SAAM for the North and South America region, the acquisition by Smit Lamnalco of PB Towage, the second-largest player in Australia, and the announcement of the intention to establish a joint venture for the combined European harbour towage operations of Kotug and SMIT. Please refer to page 28 and 29 for further details on the towage joint ventures.
Furthermore, the Strengthen pillar is aimed at streamlining the organization in order to reinforce the focus on the business. A new organizational structure has been put in place with three divisions, each with its own operational support functions, such as engineering, fleet management and crewing. The divisions have business-speci.c characteristics and success factors:
- Dredging & Inland Infra
- Offshore Energy
- Towage & Salvage
The new divisional model became effective on 1 January 2015 and the implementation is proceeding well. The model together with the harmonization of systems lays an important foundation for sustained growth.
The various steps are described in detail on pages
18 and 19.
Stake in Fugro
Boskalis entered the 2014-2016 Business Plan period with a sound balance sheet and a healthy cash flow. This starting position allows room for investment, but also gives us the option of responding to interesting opportunities in the market. It is against this background that Boskalis acquired an interest in Fugro in late 2014, a stake which is now 20 per cent. The strategy of Boskalis is focused on offshore and (maritime) infrastructure, making use of the combination of high-end know-how and maritime assets. This .ts very well with the activities of Fugro. The two companies have a lot in common in the area of assets, knowledge, capital intensity, global coverage, client base and are both global leaders in niche markets. We support the strategy of Fugro as realigned in November 2014 and announced recently that our stake is not a prelude to the launch of a bid.
A total capital expenditure program of around EUR 500 million is projected for the existing activities for 2015 and 2016, excluding acquisitions. This is in line with depreciation. A healthy balance sheet is essential, whereby we aim for a net debt : EBITDA ratio in a range of 1 to 1.5. We are committed to a stable dividend policy for our shareholders. In light of the uncertain market conditions and the acquired stake in Fugro we consider it prudent to suspend the share buy-back program for the period of one year.
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