Vopak refocuses investments

THROW THE SWITCH

RESULTS • TURBULENCE IN THE OIL AND CURRENCY MARKETS IMPACTED VOPAK’S REVENUES IN 2018 AND ENCOURAGED IT TO FOCUS ON INDUSTRIAL AND GAS TERMINALS

AFTER A YEAR when changes in the market encouraged it to revisit its strategic plan, Vopak has recorded a 4 per cent drop in revenues and EBITDA excluding exceptional items. Revenues fell to €1.25bn and group operating profit was off by 6 per cent at €463.3m.

The drop in revenues was mainly due to currency translation effects, but oil market conditions also played a part, with utilisation down at the company’s main oil hub terminals. Overall tank occupancy slipped from 90 per cent in 2017 to 86 per cent for 2018 as a whole.

Vopak’s global storage capacity increased by 1.1m m³ over the course of 2018 to reach 37.0m m³ and a further 2.1m m³ is due to be added during 2019.

“Given the market conditions in 2018, we delivered solid financial results and increased earnings per share by remaining focused on business opportunities,” says CEO Eelco Hoekstra. “The execution of our strategy is well on track. To meet the increasing global demand for the products we store, we made significant progress in shifting the portfolio and realising our digital transformation.

“We are excited that we have been able to announce significant expansion projects in the last years, meeting new consumer demands,” Hoekstra continues. “The execution of this strategy is leading to a further shift in our portfolio towards industrial terminals and terminals for chemicals, LNG, LPG and chemical gases. Expansion projects in these areas are currently underway in Malaysia, Indonesia, Canada, Brazil and the Netherlands.

“One more reason for excitement is the progress that we have made in our digital transformation. Our new unique cloud-based digital terminal management system is now in place at the first terminals in Americas and Asia. We strengthened our cybersecurity program. We believe that our digital transformation is key to growing our competitive edge and capturing the opportunities of the digital era,” Hoekstra concludes.

NUTS AND BOLTS That renewed interest in developing industrial terminals is evidenced by some of the new projects announced by Vopak over the past year. It will, for instance, expand the Botlek terminal in Rotterdam with an additional 63,000 m³ of storage capacity in 15 stainless steel tanks to handle styrene and other chemicals; it has a 50,000-m³ expansion planned for the chemical terminal in Merak, Indonesia that will take capacity there up to 131,000 m³; and it is to build a new jetty at the Linkeroever terminal in Antwerp to cope with future growth.

At the same time, Vopak is alert to global developments. The impending introduction of the International Maritime Organisation’s (IMO) global sulphur cap on marine fuels has led it to plan a 67,000-m³ expansion of the Sebarok terminal in Singapore to cater for marine gasoil, and is investing in the Europoort terminal in Rotterdam, supported by customer commitments, to handle low-sulphur fuel oil. Financial and political problems in Venezuela have led it to deconsolidate its wholly owned terminal in Puerto Cabello, in recognition that it has no control from an accounting perspective.

Vopak has also been active in the gases sectors, with plans to invest in a new LPG import and distribution terminal in Richards Bay, South Africa in partnership with its local partner Reatile; and a 9,200-m³ expansion of »

the Vlissingen terminal in the Netherlands to serve the regional market for LPG and chemical gases. In LNG, Vopak has completed its previously announced plan to take an initial 29 per cent share in the Engro Elengy LNG terminal in Pakistan, sited next to its existing joint-venture liquids terminal. It has also taken positions in joint-venture LNG import projects in Germany and China.

Since the end of 2018, more plans have been announced. Vopak has boosted its shareholding in Engro Elengy to 44 per cent; it has also taken an additional 46 per cent share in Vopak Terminal Ningbo in China, making it the controlling shareholder. And the release of its 2018 financial results was accompanied by the announcement of plans to add 20,000 m³ of storage for chemicals at its terminal in Vietnam, for startup in first quarter 2020, and a 110,000-m³ expansion of the Veracruz terminal in Mexico to handle clean petroleum products. The Veracruz project already has a high level of commercial coverage and is expected to be in service late in 2020.

Finally, in a novel move, Vopak is planning to join with Whitehelm Capital and Groningen Seaports to build a 27-MW solar photovoltaic park adjacent to its Eemshaven terminal. The facility will provide electricity for Vopak, local consumers in Groningen and the wider power grid, and is expected to be in operation in 2020.

AROUND THE WORLD Vopak’s Europe & Africa division was affected by the “less favourable oil market structure”, with overall occupancy dropping from 91 per cent in 2017 to 85 per cent. This was partly offset by higher revenues at its chemical and vegoil terminals in the AmsterdamRotterdam-Antwerp (ARA) range. Revenues for the division were down 3 per cent at €626.1m while, excluding exceptional items, EBITDA fell 7 per cent to €302.8m

Revenues for the Asia & Middle East division were impacted by negative currency movements as well as weakness in Singapore’s oil terminals. Occupancy rates declined from 91 per cent in 2017 to 86 per cent, revenue was down 8 per cent at €312.9m and, excluding exceptional items, EBITDA fell 9 per cent to €256m.

The small China & North Asia division performed more strongly, with revenues up 10 per cent at €33.2m and EBITDA, excluding exceptional items, up by 130 per cent at €53.4m. Occupancy rate improved from 70 per cent in 2017 to 75 per cent. Much of the improvement was due to the resumption of normal activities at the Haiteng terminal in China in June 2018.

The Americas division posted a 2 per cent drop in revenues to €281.3m, although that included a negative currency translation effect of €17.9m, absent which there would have been a 4.3 per cent increase. EBITDA, excluding exceptional items, fell 1 per cent to €129.0m, although again, taking out the negative currency effects, this would have been up by 6.4 per cent. Occupancy rates were flat at 89 per cent.

Vopak’s developing LNG division recorded an EBITDA increase of 5 per cent to €34.9m, primarily due to improved results at its jointventure facilities.

Vopak says that, in light of its expansion programme over 2018 and 2019 and with high commercial coverage, and in conjunction with its cost efficiency programme, it has the potential to “significantly improve” EBITDA in 2019 – subject to market conditions and currency exchange movements.

Eelco Hoekstra comments: “For 2019 and beyond, we continue to focus on delivery of short-term performance and seizing longterm opportunities, delivering value today and creating value for tomorrow for all stakeholders. We take pride in storing vital products with care for a growing world population.” HCB www.vopak.com

VOPAK CEO EELCO HOEKSTRA (ABOVE) SAYS HE IS

EXCITED BY RECENTLY ANNOUNCED EXPANSION

PLANS AND THE PROGRESS BEING MADE IN DIGITISING

THE COMPANY’S TERMINAL NETWORK