Vopak navigates the pandemic

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RESULTS • VOPAK HAS MANAGED TO NAVIGATE THE COVID-19 CRISIS WITHOUT ANY GREAT IMPACT ON ITS FINANCIAL AND OPERATIONAL PERFORMANCE, AND IS LAYING PLANS FOR GROWTH

VOPAK HAS REPORTED a decline in its first-half financial figures, with revenues down 8 per cent compared to first-half 2019 at €589.3m and adjusted EBITDA down 5 per cent at €402.6m. Operating profit fell 6 per cent to €256.8m and net income dropped 4 per cent to €166.1m.

However, adjusted for currency movements and the divestment of three terminals in Europe last year, Vopak calculates that EBITDA improved by 4 per cent, reflecting resilient business performance including the effect of contango oil markets, IMO 2020 converted capacity and reduced chemicals throughput.

Divestments resulted in a 17 per cent fall in revenues in Vopak’s Europe and Africa division, and revenues were also down by 8 per cent in the Asia and Middle East division, as a result of lower revenues from chemical terminals and out-of-service capacity in Singapore, which was partly offset by improved performance of its oil terminals as a result of the contango and IMO converted capacity. Performance in China and North Asia was flat on first half 2019, though the Americas division delivered a 7 per cent increase in revenues following the commissioning of new capacity in Mexico, Brazil and Panama.

“In the first half of 2020, we delivered good financial performance in a more volatile business environment,” says CEO Eelco Hoekstra. “We captured opportunities in our oil storage portfolio, resulting in improved occupancy rates. At the same time, we experienced reduced throughput for chemicals, in particular in Houston and Singapore.

“We initiated a further response in cost management to protect earnings. Relative to our original plan, we missed some contributions due to delays in growth projects and out of service capacity as construction work was restricted in the second quarter. The value of these growth projects are not affected,” Hoekstra adds.

RESPONSE TO THE VIRUS Vopak’s figures include a second quarter that covers the main period of the Covid-19 pandemic thus far. Its results actually show an improvement in profitability in the second quarter compared to the first, with net profit (including exceptional items) rising from €81.0m to €116.4m and overall capacity utilisation up from 84 per cent to 88 per cent.

Referring specifically to the impact of the Covid-19 pandemic, Vopak says: “Our main focus is on the health of the people working for our company in all locations and to limit the spread of the Coronavirus, to manage the impact on our business and to assess the impact on the economy and society. Therefore, we have put global and local measures into place to protect our employees, their families and our operations based on information provided by the World Health Organisation, national and local health authorities. To date, we have observed a limited impact on our operations. All our 66 terminals are operational and there have been no significant disruptions to business continuity.”

Eelco Hoekstra adds: “I am proud of all people working for Vopak and appreciate their extraordinary efforts and commitment to safely serve our customers and society by storing vital products with care during the Covid-19 pandemic. We remain focused on ensuring the health, safety and well-being of our employees and to keep our company performing well.”

“An effective control and governance structure to respond to the impact of the global pandemic, with continued decisionmaking to support business execution and well-being of people, has been put in place,” the company explains. “Operational and financial performance, cash flows and our financial position have not been significantly affected. Our financial results reflect our resilient business performance. Timing of some growth projects execution is affected by generic local lockdown measures in various countries.

“Our focus in these circumstances is on the short-term delivery and protection of longterm value. Vopak plays an important role within society by storing vital products with care. We are doing our utmost during the Covid-19 pandemic to continue to fulfil this role in all our locations around the world.

“Although the pandemic brings a lot of uncertainty and the estimates remain subject to future events, we expect to continue to manage our performance in line with our original business plan and unchanged strategy.” Indeed, Vopak says it has implemented cost control measures to see it through the current crisis; it has already achieved some €295m and it is aiming for €600m by the end of the year.

LOOKING AHEAD That business plan and strategy have, Hoekstra says, proven to be robust. “The delivery of our strategy has progressed well in 2020 and we continue to invest in 2020 and 2021 with confidence. Complementary to our investments in growth, service and IT capex, we continue executing our share buyback program to increase distribution to shareholders,” he says.

“To meet new customer demand and support our portfolio transformation we have taken new capacity into operation in Malaysia, Panama and Vietnam and completed the divestment programme of some of our European assets. This year, we announced the construction of a new chemical gases terminal in the US [in a joint venture with Moda Midstream in Houston] and capacity expansion for an industrial terminal in China [the Caojing terminal in Shanghai], both fully rented out under long-term contracts with reputable customers. We are further upgrading our chemical terminals in the port of Rotterdam and Antwerp to continuously improve our service capabilities.

“Good progress has also been made with the development of our LNG and industrial terminal portfolio. Our digital transformation is progressing well. The roll-out of our new cloud-based system for our terminals has continued in an efficient virtual manner,” Hoekstra concludes.

For the rest of this year, Vopak has new capacity due onstream at its sites at Jakarta and Merak in Indonesia, Rotterdam-Botlek and Vlissingen in the Netherlands, and Durban, South Africa. Completion dates have slipped somewhat due to work restrictions during the Covid-19 crisis, with new capacity at Veracruz, Mexico now expected onstream early in 2021 rather than this year. The new Lesedi oil products terminal in South Africa, in which Vopak has a 70 per cent holding, is also scheduled to start operations by the end of the year, rather than mid-year, while the first phase of the Vopak Moda Houston chemical gases terminal should be ready later in 2020.

Looking slightly further ahead, the Vopak Moda Houston terminal is due for completion in 2021, as is a new 290,000-m³ industrial terminal in Qinzhou, China, in which Vopak has 51 per cent interest. A 130,000-m³ industrial terminal in Corpus Christ is scheduled to be finalised in 2022. Next year will also see the arrival of new tankage at the Deer Park chemicals terminal in Houston, Texas; at the oil products terminal in Sydney, Australia; at the Linkeroever chemicals terminal in Antwerp, Belgium; and at the Altamira chemicals terminal in Mexico. www.vopak.com

EELCO HOEKSTRA, VOPAK’S CEO (ABOVE), SAYS THE

FOCUS DURING THE PANDEMIC MUST BE ON SHORT-

TERM DELIVERY AS WELL AS THE PROTECTION OF