Boskalis jaarverslagen 2011

Strategic and market risks

The Boskalis markets are heterogeneous and often develop differently. In most cases, the (ultimate) clients are national, regional, and local governments, or associated institutions such as port authorities or private port operators, major international oil and gas companies and other large private clients such as container shipping companies and mining companies.

Factors outside our control may have a negative impact on our markets, in particular in the short term and medium term, despite the long-term growth trends. These include general or regional geopolitical developments, such as political unrest, regime changes, government-imposed trade barriers, financial markets turmoil or crises in the financial sector, and similar developments. Such developments may negatively affect our activities in certain regions or even globally if they have major negative consequences for the global economy or for exploration and exploitation activities in the energy products and commodities markets. Boskalis aims to respond as effectively as possible to both positive and negative developments in individual market segments through a global spread of its activities, an extensive, versatile and internationally based fleet, and strong positions in the home markets. Moreover, our activities are largely focused on the maintenance and development 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, historically speaking, cancellations or substantial reductions in the size of contracts after agreement has been reached have been relatively rare, such cancellations or substantial reductions of work in portfolio cannot be ruled out. In the wake of such a cancellation or substantial reduction, losses may arise from the unwinding or settlement of the financial derivatives taken out to cover the related currency risks and/or fuel cost risks but for which the underlying transaction or cash flows will no longer be realized.

Boskalis deals with large, internationally operating competitors as well as more regional or local competitors with activities restricted to one or several submarkets. In most cases, projects and service contracts are brought to the market using public or private tender procedures. With respect to the majority of contracts, competition is price-based. However, clients – primarily in the oil and gas industry and private port operators – are increasingly taking other factors, including qualitative ones, into consideration when awarding contracts.

For the submission of tenders, adequate approval processes are in place, including the evaluation of identified risks and/or potential liabilities associated with the execution of a particular project.

Boskalis’ activities are capital-intensive, with dredging in particular being a capital-intensive business with high entry and exit barriers, especially for companies operating in the international arena. Because of the capital-intensive nature of the activities, market prices are to a great extent influenced by the relationship between the demand for services and the available capacity or utilization levels of the equipment. This means that a broad international spread of market positions, and a leadership position in terms of equipment, costs and standardization of equipment are key success factors. Boskalis places a great deal of emphasis on these, both as a critical focal point in operational management and in terms of investment strategy. For individual investment proposals an adequate evaluation and approval process is in place.

As part of implementing its strategy, Boskalis acquires other companies. In order to be able to realize the anticipated results, Boskalis attaches great importance to integrating such acquisitions with care. Creating value for our stakeholders and retaining key personnel are an important part of this process.

 

Added to My report add to My report Source: Annual review 2011, Report of the Board of Management, page 49