Vopak takes steps for the future

IN TRANSITION

STRATEGY • VOPAK PERFORMED WELL IN THE CHALLENGING MARKET IN 2020 BUT IS TAKING STEPS TO PREPARE ITSELF FOR THE DIFFERENT TRADING ENVIRONMENT TO COME

ROYAL VOPAK HAS reported annual revenues for 2020 of €1.19bn, down on the €1.25bn recorded in 2019 but up by 3.2 per cent when recent divestments are taken into account. Similarly, excluding exceptional items, EBITDA rose by 2.6 per cent to €791.5m, although net profit dropped by 15 per cent to €305.8m.

Eelco Hoekstra, CEO, is upbeat about the results: “In 2020, we delivered EBITDA growth (post-divestments) in a more volatile business environment. We have outperformed on costs to defend EBITDA and delivered on growth projects, despite construction delays of some projects due to Covid-19 restrictions.”

The challenges posed to storage terminal operators by the Covid-19 pandemic have been well documented and have come at a time when they are facing a range of other issues that threaten the traditional way of doing business. Hoekstra explains what this has meant for Vopak: “The Covid-19 pandemic impacted the industries we serve. We have seen unprecedented changes in supply and demand of gas, chemicals and oil and subsequent response of our customers to their portfolios and supply chains. We have experienced an acceleration in the energy transition. We have seen the high dependency on digital infrastructure.

“Our strategy is aligned with these trends and strategy delivery progressed in 2020. We continued transforming our portfolio for the future and invested more than €500m in growth, resulting in an additional 1.6m m³ of capacity to meet growing customer demand, particularly in Asia and the Americas. Good progress was made in our industrial terminal portfolio with the acquisition of the Dow terminals in the US Gulf coast with our partner BlackRock,” Hoekstra adds. CHANGE IN PRACTICE The Covid-19 pandemic, while undoubtedly a challenge, has presented an opportunity to focus on the changes needed to prosper in the coming, more digitised world. Vopak has taken that opportunity, as Hoekstra says: “Our digital transformation is progressing well and the pandemic highlighted the benefits of our leading digital infrastructure. We continued the roll-out of our cloud-based system for our terminals, as part of broader efforts to develop our digital architecture to support the industrial logistic chains.”

Other factors are also at play, not least the coming energy transition and the imperative to focus on sustainability in industrial operations. Again, though, these changes will present opportunities, as Hoekstra continues: “We are excited by the future prospects and keep our focus on performance and long-term value creation. We have momentum in capturing opportunities to serve large-scale industrial clusters and are advancing our efforts in developing infrastructure to support the energy transition. We continue transforming our portfolio and position our company strategically towards more sustainable forms of energy and feedstocks.

“We aim to allocate the majority of our growth investments to industrial, gas and new

energies infrastructures,” Hoekstra adds. “Our positive views on chemicals have not changed. New growth investments in oil infrastructure are expected to be reduced and will mostly be targeted towards strengthening our leading hub positions.

“We are determined to bolster our leading position in our industry both in service and sustainability towards customers and society. We continue to seek opportunities to reduce our environmental footprint and implement our sustainability roadmap towards our ambition to be climate-neutral by 2050.”

Two new projects announced by Vopak illustrate that strategy in action. It is to add 64,000 m³ of new tankage at its Vlaardingen terminal in Rotterdam (opposite) to handle waste-based feedstocks – tallow and used cooking oil, for example – for biofuels, including biodiesel and bio-jet fuel. The 16 new tanks are due in service by the end of 2022.

“The market for energy from renewable sources in Europe is rising, also as a result of the Renewable Energy Directive II of the EU,” Vopak notes, and Patrick van der Voort, Vopak’s division president, Europe & Africa, says: “This project fits well within Vopak’s ambition to support our customers and society by developing and investing in infrastructure solutions for facilitating more sustainable energies and feedstocks. We are looking forward to continuing to invest in the Port of Rotterdam.”

The second new project is in China, where Vopak plans to add another jetty at its terminal in Qinzhou, exclusively for gas products, including propane, butane, ethylene and propylene. The project is scheduled for completion in the second half of 2022.

AROUND THE WORLD Vopak’s Europe & Africa division delivered revenues of €532.9m in 2020, down 10 per cent on the 2019 figure following the sale of the terminals in Algeciras, Amsterdam and Hamburg. On the upside, average occupancy rose from 83 per cent in 2019 to 88 per cent, and revenues were boosted by improved demand for oil product storage as a result of the contango and by the use of storage capacity that had been converted to handle new bunker fuels ahead of the ‘IMO 2020’ rule.

The Americas division posted revenues of €322.9m, up 3 per cent on 2019 despite adverse currency movements, with tank occupancy slightly up. The improvement reflects newly commissioned capacity in Mexico, Brazil and Panama and its Canadian oil product terminals benefitting from the contango, though this was offset slightly by lower chemicals throughput revenue in Houston.

The Asia & Middle East division saw a 5 per cent drop in revenues to €289.3m, which included a substantial currency effect. Revenues were affected by lower chemical throughput and by a high level of maintenance outages in Singapore, again partly offset by higher revenues from oil terminals as a result of the contango and IMO 2020-converted capacity. During the fourth quarter additional capacity was commissioned at the Merak (chemicals) and Jakarta (oil products) terminals in Indonesia.

The China & North Asia division increased revenues by 8 per cent to €42.0m. Unlike the rest of the world, the region saw an increase in chemical throughput in what Vopak describes as a “dynamic business environment”. Overall tank occupancy rose from 75 per cent in 2019 to 80 per cent.

Looking ahead to the rest of 2021 and beyond, Vopak is expecting to allocate between €300m and €350m this year to growth investments, including existing projects, new business development and feasibility studies in the area of new energies, including hydrogen. While comparatively modest, these growth plans are expected to deliver around 1m m³ of new capacity over the next three years.

In the immediate term, the new jointventure Vopak Moda Houston terminal is schedules to be commissioned in phases over the first three quarters of 2021 and will offer 46,000 m³ of storage capacity for chemical gases. The new Qinzhou industrial terminal in China is expected to be completed by the second quarter, along with expansions at the Botlek chemical terminal in Rotterdam, the Veracruz oil products terminal in Mexico and the Deer Park chemical terminal in Houston. Later in the year there are also projects due for completion in Australia (a major expansion of the Sydney oil products terminal), Mexico (40,000 m³ of new chemical tankage at Altamira) and Belgium, where the Linkeroever site in Antwerp is to get another 50,000 m³ of chemical tankage. www.vopak.com

EELCO HOEKSTRA, VOPAK CEO (ABOVE), SAYS THE

COMPANY FACED UNPRECEDENTED CHANGES IN SUPPLY

AND DEMAND, WITH ITS CUSTOMERS RESPONDING WITH