Profitability and downsizing at IHC Merwede

Record turnover was backed by a €1.8bn order book. The reduced level of profit compared to the previous year was explained by operational issues during the construction of a large custom built vessel, with the overall picture being one of a company in good financial health.

However, IHC Merwede will downsize its production capacity in line with demand in order to maintain solid profitability. In line with this, the company has decided to mothball the Hardinxveld-Giessendam shipyard this year and terminate its lease on the Heusden yard at year’s end. No redundancies are forseen and the employees will be relocated to other IHC Merwede facilities and replace temporary staff.

After years of growth in both the dredging and offshore sectors the global recession is having an impact on IHC Merwede’s markets as the number of competitors increased significantly when standard shipbuilders turned to specialist market segments. Also, the number of new orders declined in 2009 on a global basis. Despite these unfavourable developments, IHC Merwede maintained its market share in 2009 and received orders for new ships and equipment worth €450m.

The order book carried over from the previous year ensured that IHC Merwede’s shipyard capacity was fully utilised in 2009 and this will continue in 2010. It was the company’s busiest ever year for production and a record for the delivery of vessels and equipment.

Although an isolated number of contracts were renegotiated, there were no cancellations and many customers are cautiously optimistic about long-term market prospects.

IHC Merwede CEO Govert Hamers said, ‘As part of our outlook for 2010, we anticipate a slight decrease in turnover, but still expect to achieve a solid profit. Our main priorities for the forthcoming year are to increase sales, reduce costs and to strengthen our focus on research and development.’

As expected, the dredging sector has also been experiencing a downturn, with protectionism now an issue in some regions, where local shipyards are receiving substantial financial support and there are restrictions on foreign suppliers. IHC Merwede’s response has been to develop new dredging vessels such as completely new line of ‘green’ IHC Beaver cutter suction dredgers.

In response to an increasing number of requests for deep sea dredging and mining application solutions, IHC Merwede has combined all of its activities in this sector to create a new business unit, IHC Deep Sea Dredging & Mining. It will focus on the extraction of minerals in deep water (to a depth of 3,000m) and vertical transportation of these materials.

This emerging area of the business is promising because demand for raw materials (minerals) is expected to double in the next 25 years according to studies from the Organisation for Economic Co-operation and Development (OECD), which suggest existing sources on land will be inadequate.

For the Offshore & Marine division, the $80 barrel of oil is seeing oil companies are cautiously rekindling their investment programmes to find new supplies of oil and gas. Easily accessible sources have already been found, so the search is focussing on more remote areas, such as the ocean floor and Arctic Regions, where activities of this kind are unprecedented. Innovative technology is therefore required to explore and exploit these new reserves.

IHC Merwede is responding to these developments with a major expansion of activities in the offshore sector. It is promoting its pioneering role in the market by developing new offshore construction vessels for seabed pipelaying, diving support, subsea trenching equipment, oil well drilling, placing wind farms and specialist marine handling systems.

The latest technology is currently being developed for these new and promising markets. This led to the establishment of the division's own research body, the IHC Offshore Technology Institute (OTI) in 2009. Its initial tasks will be to focus on market analysis and determine which technologies are required to satisfy each market segment. The OTI aims to become a research institute for the offshore sector with a global reputation within the next five years.