New Suez Canal dredging helps Boskalis sail past first half profit forecast

Dutch marine engineering company Boskalis reported a 21 percent rise in first-half earnings, comfortably beating market expectations thanks to an exceptionally strong performance by its dredging business and an investment windfall.

However the company warned on Thursday that earnings for the fall year would fall short of the record profit it booked in 2014. It had provided no full-year guidance when reporting 2014 earnings in March.

Investors focused on the positive news, with shares rising more than 10 percent and enjoying their best day since November 2010.

Net profit rose to 307 million euros ($341 million) in the six months to the end of June as work on the Suez Canal drove demand for dredging capacity to maximum levels. Analysts polled by Reuters had on average expected net profit of just 184 million euros.

“We are especially proud of the successful execution and swift realization of the Suez Canal project, which was on an unprecedented scale and had to be completed within an extremely short timeframe,” commented CEO Peter Berdowski. “Partly due to the Suez project the dredging fleet was kept busy plying the waterways in the first half of the year. The high fleet utilization made a strong contribution to the good result.”

Earnings were boosted by a gain of 28.5 million euros as the 25.1 percent stake Boskalis holds in rival Fugro rose in value, but analysts said earnings were still well ahead of expectations.

Thijs Hollestelle of ING, who rates shares a buy, said the company’s oil and gas division was not showing weakness yet for the year ahead “a remark we believe the market will like.”

On the downside, CEO Peter Berdowski said costs would rise as worn dredging equipment must now be replaced. “You pay a price for that in the second half,” Berdowski told Reuters.

Berdowski said the replacement process had a ripple effect.

“You don’t have your margins on projects, you don’t have the hire (leasing out) of your vessels…and on top of that you have the out-of-pocket costs for your repairs,” he said.

Furthermore, while the company believes demand for dredging and servicing offshore wind farms will remain strong, it is preparing for a lengthy downturn in oil markets, which is causing Boskalis customers to postpone projects.

Boskalis’s order book fell to 2.96 billion euros as of June 30 from 3.29 billion at the end of 2014.

“It’s not only for the coming one or two years, but we think (the oil services industry downturn) will last for at least three to four years,” he said.

The company said it will cut maximum 2015 capital expenditure from 275 million euros to 250 million and possibly as low as 225 million.

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