Shipbuilder IHC suffers major loss over 2020 due to problem vessels
Last year, the Dutch shipbuilder Royal IHC again plunged deep into the red due to large losses on the construction of several problem vessels. The company, which was saved from bankruptcy last year by a support campaign, is now seeing a recovery and thinks that a slightly positive result can be achieved this year.
The operating result for 2020 came out at over EUR 199 million negative. In 2019, there was a loss of more than 111 million euros. In April last year, the government, banks and a group of companies came to IHC’s rescue with bridging loans and credit guarantees worth hundreds of millions of euros to save the company from bankruptcy and thus preserve jobs.
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.
Job cuts and divestments
In November, it was announced that 300 jobs in the Netherlands and a similar number abroad would be lost at IHC, as part of a reorganisation to save costs. In addition, 700 temporary workers were let go.
Furthermore, certain activities will be and have been divested. So far, Vuyk Engineering has been sold to Royal Doeksen, Rotterdam Offshore Group has continued as an independent company and Sif has acquired KCI the engineers. Still on the list to be divested are IHC’s Brazilian joint venture GranIHC and engineering company IHC Hitech.
Recovery of the dredging market
IHC will mainly focus on the dredging and offshore market. Initially, the Covid-19 pandemic resulted in delayed investments in the dredging market. IHC says recovery became visible in the second half of 2020, both for custom and standard modular dredgers. According to the company, the number of applications and concrete negotiations indicate a slow, but steady recovery in the dredging market.
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.
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.
Growth expected in mining and defence
The mining and defence markets are also important for the company from Kinderdijk. 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 is said to have been a good year for the 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.
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 Dutch submarine 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.
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.
‘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,’ says CEO Gerben Eggink. ‘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.’
Among the ships IHC is expected to deliver in 2021 are the 44,180 kW cutter suction dredger Spartacus for DEME and the 29,190-kW rock cutter suction dredger Hussein Tantawy for the Suez Canal Authority.
Source (in part): ANP
Picture: In October 2020, Royal IHC launched the 29,190-kW rock cutter suction dredger Hussein Tantawy, which is being built for the Suez Canal Authority (SCA) (by Royal IHC).