[ID] => 9985
[post_author] => 34
[post_date] => 2018-08-17 16:35:56
[post_date_gmt] => 2018-08-17 15:35:56
[post_content] => Royal Vopak, the biggest independent bulk liquids terminal operator in terms of network reach, has reported further declines in its financial performance during the second quarter. For the first half of 2018, revenues were down 6 per cent on last year at €626.1m, while operating profit fell 8 per cent – excluding exceptional items – to €236.7m.
Across its network, tank occupancy fell to 85 per cent in the second quarter, down from 90 per cent a year earlier, with much of this decline attributed to a “less favourable oil market structure” and a consequently lower demand for capacity at Vopak’s oil hub terminals.
However, CEO Eelco Hoekstra remains upbeat: “Given the market conditions to date, the results delivered are satisfactory. The execution of our strategy towards 2019 is very well on track and we increased our cost savings target for 2019.
“In the second half of the year, we will maintain our focus on both short-term performance and long-term value creation for all stakeholders and seize opportunities that are being created in today’s market,” Hoekstra continues. “This enables us to continue storing vital products with care.”
Notwithstanding Hoekstra’s bullish tone, Vopak’s oil terminals are operating in an uncertain market; while global crude oil output rose in the first half of the year, a number of supply disruptions, the re-imposition of sanctions on Iran and declining production in Venezuela and Libya caused volatility in prices. Firm demand meant that Vopak’s distribution terminals in short markets “continue to benefit from solid market fundamentals,” but in hub locations Vopak is experiencing greater competition and weaker demand for storage and handling services, particularly for fuel oil and other products currently in backwardation.
Global demand for key chemicals grew by 4.2 per cent in the first half of 2018, Vopak reports, with robust demand, cheap feedstock and strengthening economies; producers are enjoying good margins and are investing in more capacity. Vopak highlights the US, where the chemical industry continues to benefit from a strong economy, which is driving demand, while access to cheap ethane feedstock gives local producers a cost advantage over the rest of the world. “Concerns about ethylene overcapacity have faded as some projects have been delayed and strong global demand absorbs the new supply,” Vopak notes.
The chemical market in Europe has also turned a corner, following improvements in the major economies. “Demand for chemicals increased steadily [in the first half] and, after years of rationalisations, several chemical companies recently announced investment plans in Europe.”
Asia continues to offer demand drivers for chemicals, not just in China and India, and now provides an outlet for growing exports from the Middle East.
Global LPG trade increased by 8 per cent year-on-year in the first half of 2018, with increasing US exports and continued growth in residential and petrochemical end markets in the Asia-Pacific region.
Vopak is certainly keeping busy. During the second quarter, it commissioned the final part of the Chemtank joint-venture industrial terminal in Saudi Arabia and continued with construction of the new industrial terminal in Pengerang, Malaysia. This project is, Vopak says, “progressing well” and commissioning of the first phase is expected to take place before the end of the year.
Vopak’s 2014 strategic review identified potential in the LNG sector and the company has made strides in this area during the first half. “Our business development efforts in gas terminals have seen excellent progress,” Hoekstra reports. “We announced the entrance in the growing LNG market in Pakistan,” which involves Vopak taking a 29 per cent share in Engro Elengy Terminal Pakistan, “and the signing of two new joint ventures to develop LNG terminals in Germany and China.”
Vopak is also readying itself for the arrival of the sulphur content restrictions in marine bunker fuels in 2020. It has said its terminals in the main bunkering hubs in Fujairah, Rotterdam and Singapore will be ready to support the new market requirements and it has already announced plans for work at the Europoort terminal in Rotterdam, which are supported by customer commitments.
Vopak is also making strides in the digital world, with the new digital terminal management system having gone live this year in Long Beach and Los Angeles ahead of a global roll-out.
MORE CAPACITY COMING
In making its half-year financial results public, Vopak also announced a number of new projects. It will expand its Merak chemical terminal in Indonesia, adding 50,000 m³ to take capacity up to 131,000 m³ by early 2020. Merak is, Vopak notes, the main chemical import terminal in the country and is home to Indonesia’s greatest concentration of petrochemical facilities.
Vopak has also announced a new jetty for the Likeroever terminal in Antwerp, to enable planned future growth, and a “major service improvement project” at the Penjuru terminal in Singapore, to handle the demands of the local chemical market.
These project add to earlier announcements this year, including a 100,000-m³ expansion for clean petroleum products and biofuels at the joint venture import/distribution terminal in Jakarta, Indonesia; a 67,000-m³ expansion of the Sebarok terminal in Singapore, primarily to handle marine gasoil after the introduction of the global sulphur cap at the start of 2020; and 15 new stainless steel tanks for the Botlek terminal in Rotterdam, which will add 63,000 m³ of storage capacity for styrene and other chemicals.
Conversely, Vopak has also announced that it will “conduct a strategic review and test the market value” of its terminals in Algeciras, Amsterdam, Hamburg and Tallinn, signalling the prospect of another round of divestments.
Furthermore, Vopak says its terminal in Venezuela “operates under difficult circumstances”. Political, social and economic problems – inflation is expected to exceed 1,000,000 per cent this year – mean that Vopak faces an uncertain accounting position.
Overall, the short-term outlook for Vopak’s financial performance will be influenced by currency exchange movements, particularly the US and Singapore dollars, and by changes in the oil market. It does, though, have some 3.2m m³ of expansion and new construction projects due to be commissioned in 2019 and, with their high commercial coverage, these new assets are expected to contribute to a “significant” improvement in EBITDA next year.
Vopak is also focusing on efficiencies to support its operating margin; at least €25m in savings has already been delivered and another €15m is anticipated. The 2019 cost base is, therefore, expected to be below the €676m recorded for 2017.
[post_title] => Vopak: Changing tack
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[post_name] => vopak-changing-tack
[post_modified] => 2018-08-17 16:35:56
[post_modified_gmt] => 2018-08-17 15:35:56
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[guid] => https://www.hcblive.com/?p=9985
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