Royal IHC: 'Recovery in Sight' After Challenging 2020
As many maritime markets were challenged by COVID-19, Royal IHC, a Dutch maritime conglomerate and bellwether for the industry, reported its annual numbers indicated the smoke is clearing and a recovery is in sight.
2020 will surely go down as a year many inside and out of the maritime industry will want to soon forget, and in releasing its annual figures Royal IHC noted that the first half of 2020 was dominated by refinancing and recapitalization, with COVID-19 having a "major impact" on order intakes throughout 2020. For the year, Royal IHC achieved a negative EBITDA of EUR 199 million in 2020, as expected.
Select numbers from Royal IHC help to illustrate the challenge:
The first half of 2020 was dominated by the refinancing, recapitalization and resizing of Royal IHC to reflect the economic reality, a reality which meant the loss of 600 jobs—300 domestic and 300 outside of the Netherlands—as well as the reduction of 700 temporary workers.
“Royal IHC is now on track after a challenging 2020," said Gerben Eggink, Royal IHC CEO. "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.”
Following is a brief look inside some of Royal IHC's key markets.
Custom dredgers: "Slow and steady"
While the initial response to COVID-19 was—as it was in most industries—to delay investments, Royal IHC said it began to see recovery in the second half of 2020. 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.
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, was 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.
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.
In 2020 Royal IHC started to expand its activities in the global defense market. Contacts have been strengthened with the Dutch Ministry of Defense. 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 Defense in the context of the adaptive armed forces. Royal IHC also intensified its cooperation with NAVAL Group to qualify for the Walrus replacement program.
Royal IHC said it expects a worldwide increase of investment in defense 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.