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Mid year results 2008Vopak: First half 2008 group operating profit excluding exceptional items up 12% to EUR 156.8 million
Rotterdam, 28 August 2008
Highlights for first half 2008:
· Group operating profit excluding exceptional items rises 12% to EUR 156.8 million (1H 2007: EUR 139.4 million)
· Net profit attributable to holders of ordinary shares increases 17% to EUR 106.9 million (1H 2007: EUR 91.5 million)
· Earnings per ordinary share up by 16% to EUR 1.71 (1H 2007: EUR 1.47)
· Vopak’s worldwide storage capacity expands further during the half year by over 4.5 million cubic metres (cbm) as newly-built storage capacity (1.1 million cbm) is commissioned and through acquisitions and new joint ventures (3.4 million cbm)
Outlook:
· Vopak will add more than 7 million cbm in total to its worldwide network in the period from 2008 to 2011
· The total investment in all projects under construction (2008-2011) is some EUR 1.7 billion (excluding acquisitions and mergers); Vopak’s share of the remaining capital expenditure is some EUR 400 million
· Vopak is positive about its commercial, operating and financial development and so fully maintains its expectation for 2008 issued previously of an increase of at least 10% in group operating profit excluding exceptional items (2007: EUR 272.9 million)
· As a result of acquisitions as well as the current expansion projects coming on stream and despite slower economic growth, Vopak expects to achieve the estimated indicator for 2011 of group operating profit before depreciation and amortisation (EBITDA) of EUR 475-550 million per year one or two years earlier.
John Paul Broeders, Chairman of the Executive Board of Royal Vopak:
‘In the past six months, consistent ongoing implementation of our strategy has again led to an increase in group operating profit. Thanks to the further expansion of our existing terminals and the completion of certain significant joint ventures, including in the Bahamas and Estonia, our proven international growth strategy is taking further shape in 31 countries, in locations of strategic importance to our customers.
A significant milestone was the official start on 28 June 2008 of construction of the Gate (Gas Access To Europe) terminal, an LNG import terminal that further strengthens our core activities and that will allow Vopak to make a positive contribution to the efficient, sustainable and safe receipt, storage and transmission of liquid natural gas for millions of European households from 2011.’
Market developments
Despite slower economic growth, Vopak’s international markets are performing well since the use of energy and liquid chemicals is continuing to rise and they are transported across longer distances. This is leading to more marine transport, and temporary storage and handling of goods in strategically located port facilities has an essential role in efficient transport. This long-term trend is continuing unabated. Demand for storage of biofuels is also increasing and Vopak is responding to this by offering storage capacity and developing specific services in cooperation with producers and traders of these products.
Growth continues
Vopak’s worldwide storage capacity grew in total by more than 4.5 million cbm (20%) to 26.4 million cbm in the first half of 2008. A major part of this came from the acquisition of the Vopak Terminal Bahamas joint venture and the Vopak E.O.S. merger (Estonia), both of which are for the storage of oil products. The network was also expanded by a new chemical terminal in Antwerp (Belgium). Also capacity was added in the new terminal in Zhangjiagang (China) for chemicals, and for a range of oil products in Fujairah, Rotterdam and Singapore. Vopak also announced new expansion plans during this reporting period based on increased demand from its customers. Please see enclosure 1 for a list of completed, ongoing and planned growth projects.A contract was signed with E.ON Ruhrgas as the fourth customer for the LNG terminal being built in Rotterdam. This means that the annual throughput of the current project of 12 billion cubic metres of gas (12 bcm) has been reached. The site can be expanded further to a maximum of 16 bcm.
Notes on the condensed interim consolidated financial statements
Income from rendering of services
In the first six months of 2008, Vopak’s income from rendering of services was EUR 453.9 million, an increase of 7% compared with the first half of 2007 (EUR 423.7 million), despite an adverse translation effect of EUR 15.1 million.
Almost every division contributed to this further increase, which more than made up for the reduction resulting from sales of business units last year and the adverse currency translation effect. The improvement was achieved by a combination of improved occupancy rate at existing terminals, new terminals coming on stream, acquisitions and an increase in turnover per cubic metre of storage capacity.Occupancy rate remained at about 95% (1H 2007: 96%) despite the sharp increase in total storage capacity, and this underlines the market demand for storage.
Group operating profit
1) Pro forma group operating profit 1H 07 is calculated based on 1H 08 exchange rates
Group operating profit rose by 12% to EUR 166.5 million (1H 2007: EUR 149.3 million). After adjusting for exceptional items, group operating profit also rose 12%, to EUR 156.8 million (1H 2007: EUR 139.4 million). The increase is 20% if a pro forma adjustment is also made to the 2007 group operating profit for discontinued operations and the effect of currency translation.
The improvement is a result of the strategic focus on growth, both at existing businesses and by the development of new terminals and through acquisitions. The various divisions were able to maintain their margins by responding actively to the wishes of our customers. Management of increasing costs, which include the preparation of expansion projects, energy costs and operating expenses, requires continuous attention in view of rising inflation.
With the improvement in the result brought about in part by expansions and the related increased use of capital, ROCE including exceptional items fell slightly to 24.2% (1H 2007: ROCE 25.9%), with an increase in earnings per share.
Exceptional items in the first half of 2008 were the gains resulting from the merger of Pakterminal and E.O.S. terminals in Estonia and the sale of the inland shipping activities to the Interstream Barging joint venture, together making an exceptional gain of EUR 9.7 million (exceptional gain 1H 2007: EUR 9.9 million).
Net profit attributable to holders of ordinary shares
Net profit attributable to holders of ordinary shares rose by 17% to EUR 106.9 million (1H 2007: EUR 91.5 million). The net profit rose as a result of a higher group operating profit and lower finance costs. The effective interest expense is lower than last year, the lower dollar exchange rate had a positive effect on finance costs and a relatively larger portion of the interest has been allocated to projects under construction.
This increase resulted in earnings per ordinary share growing to EUR 1.71 (1H 2007: EUR 1.47).
Non-current assets
Property, plant and equipment increased to EUR 2,016.9 million (31 December 2007: EUR 1,780.6 million) as a result of acquisitions of joint ventures and investments in the Vopak Terminal Bahamas, among other things. Property, plant and equipment decreased, while financial assets increased, because of the contribution of Pakterminal (Estonia) to the Vopak E.O.S. joint venture and the sale of the activities of Vopak Barging Europe to the Interstream Barging joint venture. Details of the effects of these transactions are given in enclosure 3f: Acquisitions and deconsolidations.
Apart from the acquisitions, total capital expenditure during the first half of 2008 was EUR 179.8 million (1H 2007: EUR 155.5 million), of which EUR 133.4 million (1H 2007: EUR 113.4 million) was invested in the expansion of existing terminals and the construction of new terminals. Please see the growth outlook in enclosure 1 for further details of the approved plans.
Shareholders’ equity
Shareholders’ equity rose by EUR 37.8 million in the first half of the year to EUR 847.5 million (31 December 2007: EUR 809.7 million). The increase came mainly from the net profit for the first half year and the movements recognised directly in equity. In addition, a dividend of EUR 61 million was distributed in the first half year. A detailed breakdown is given in enclosure 3e.
Interest-bearing loans
As a result of the capital expenditure programme, total long-term interest-bearing loans increased to EUR 724.4 million at 30 June 2008 (31 December 2007: EUR 672.2 million). The average interest rate fell to 6.1% (1H 2007: 6.5%).
Events after the balance sheet date
20 July 2008
Gate terminal B.V., a joint venture between N.V. Nederlandse Gasunie and Vopak, concluded a project financing agreement of EUR 745 million with the European Investment Bank and an international syndicate of 10 banks. The facilities have terms of 20 years and consist of two arrangements. The European Investment Bank is financing approximately EUR 340 million and the banking syndicate up to approximately EUR 405 million, excluding a guarantee facility. Both facilities are at variable interest rates. Gate terminal has financial hedge instruments in place to substantially mitigate interest rate fluctuations.
30 July 2008
Vopak increased its shareholding in the Vopak E.O.S. joint venture in Estonia from 35% to 50% by exercising the call option granted to it following the establishment of the joint venture on 23 April 2008. N-Trans and Vopak established the Vopak E.O.S. joint venture to make more efficient use of their combined terminal facilities in the region. The port of Tallinn is a strategic location for the global export of oil products from Russia, Belarus and Kazakhstan to the rest of the world.
1 August 2008
The Japanese joint venture, Nippon Vopak (40% Vopak-owned) reached agreement with Mitsui & Co on the acquisition of all the assets of the Nagoya and Moji Tank Terminals in Japan, with a total capacity of 84,700 cbm. The two terminals are currently fully used by a number of Japanese oil and chemical companies. The facilities will become part of Nippon Vopak’s terminal network in Japan, which already has three terminals in Kawasaki, Kobe, and Yokohama. The terminals in Nagoya and Moji will increase the total storage capacity in Japan to 220,500 cbm.
5 August 2008
N.V. Nederlandse Gasunie and Vopak, strategic partners in Gate terminal, announced that Gate terminal had signed a long-term throughput agreement with the German company, E.ON Ruhrgas AG (E.ON Ruhrgas), one of Europe’s leading energy companies, for an annual throughput of 3 billion cubic meters (bcm) of regasified liquefied natural gas (LNG). It will be the fourth energy company to use Gate terminal as an entry point for the supply of LNG to the north-west European market. Together with the agreements previously signed by DONG Energy, EconGas and Essent, Gate terminal will have a total annual throughput of 12 bcm from the second half of 2011, when it is expected to become fully operational. As part of the agreement, E.ON Ruhrgas will acquire a 5% equity stake in Gate terminal, the first LNG import terminal under construction in the Netherlands.
Forward-looking statements
This document contains statements of a forward-looking nature, based on currently available plans and forecasts. Given the dynamics of the markets and the environments of the 31 countries in which Vopak renders logistics services, the company cannot guarantee the accuracy and completeness of such statements.
Unforeseen circumstances include, but are not limited to, exceptional income and expense items, unexpected economic, political and foreign exchange developments, and possible changes to IFRS reporting rules.
Statements of a forward-looking nature issued by the company must always be assessed in the context of the events, risks and uncertainties of the markets and environments in which Vopak operates. These factors could lead to actual results being materially different from those expected.
Key figures*
* unaudited
** including exceptional items
Financial calendar
* This list provides only an indication of the expansion efforts within the network and is not exhaustive
Enclosure 2: Notes on the results by division
Chemicals Europe, Middle East & Africa (CEMEA)
Income from rendering of services rose by 3% to EUR 159.5 million as a result of product changes and rate revisions and the loss of income from business units that have now been sold. The negative currency translation effect was EUR 4.0 million for the period. Capacity expansions, rate revisions, good cost management and exceptional income from the sale of the inland barging fleet to the Interstream Barging joint venture contributed to an 18% improvement in operating profit to EUR 49.3 million. The negative currency translation effect for the period was EUR 1.3 million. The Hemiksem terminal in Antwerp (Belgium) has been sold and is being prepared for handover in the third quarter of 2008.
Oil Europe, Middle East & Africa (OEMEA)
Income from rendering of services rose by 23% to EUR 126 million, mainly as a result of the addition of extra storage capacity in Rotterdam. The additional capacity at Rotterdam, along with improved results from the joint ventures in Fujairah and Estonia and exceptional income of EUR 5.2 million relating to the contribution of Pakterminal to the Vopak E.O.S. joint venture saw a further increase of about 25% in operating profit to EUR 56.3 million.
Asia
Income from rendering of services rose by 16% to EUR 77.6 million, despite an adverse currency translation effect of EUR 2.4 million. The main reason was the increased capacity at new and existing terminals, including those in Australia, Singapore and Zhangjiagang (China). This, along with better results from the various joint ventures, resulted in a 19% higher operating profit of EUR 46.3 million despite increasing costs associated with the new terminals and an adverse currency translation effect of EUR 2.0 million.
North America
The lower income from rendering of services of EUR 56.0 million can be explained by the loss of income from business units sold in 2007 and an adverse currency translation effect of EUR 7.1 million. This loss of income was partly offset by higher rates. The operating profit fell for the same reasons to EUR 16.8 million, including an adverse currency translation effect of EUR 1.6 million. There had also been exceptional income of EUR 2.8 million in 2007. These items were offset in part by improved margins. Vopak Terminal Bahamas is also already making a positive contribution to the operating profit.
Latin America
Income from rendering of services rose slightly to EUR 33.4 million, thanks to higher occupancy rate in Brazil and storage capacity expansion in Mexico, offset in part by an adverse currency translation effect of EUR 1.5 million. Group operating profit fell slightly to EUR 10.4 million, including an adverse currency translation effect of EUR 0.5 million.
Enclosure 3: Condensed interim consolidated financial statements
General
Koninklijke Vopak N.V. (‘Vopak’) is a listed company registered in the Netherlands with activities in 31 countries. The interim condensed consolidated financial report for the first half of 2008 includes the figures of Vopak and its subsidiaries (jointly referred to as the ‘Group’) and the Group’s interests in joint ventures and associated businesses, using the equity method.
This condensed interim condensed consolidated report has been prepared in accordance with IAS 34 Interim financial reporting. It does not contain all the information required for full financial statements and should be read in conjunction with the audited financial statements included in the 2007 Annual Report.
Except for IFRIC 14 and the new long-term incentive plan, the accounting policies and measurement principles used to prepare this interim condensed consolidated report are the same as those used for the balance sheet at 31 December 2007 and the 2007 income statement.
The Group’s objectives and policy on financial risks and risk management are also unchanged compared with those set out in the consolidated financial statements for the financial year 2007.
This condensed interim consolidated report was approved by the Executive Board and the Supervisory Board on 27 August. The consolidated half-year figures have not been audited.
IFRIC 14
IFRIC 14 offers guidelines on how to assess the limit in IAS 19 on the amount of the surplus that can be recognised as an asset. If a pension plan is in deficit on a finance basis (i.e. not on an IAS 19 basis), IFRIC 14 provides an explanation of when a supplementary liability should be recognised for this deficit in addition to the IAS 19 liability/asset. This change in accounting policy took effect on 1 January 2008 and reduced equity at 1 January 2008 by EUR 2.5 million (after tax) and the net half-year profit for 2008 by EUR 0.2 million.
Share-based payments
On 1 January 2008, Vopak introduced share-based payments (long-term incentive plan) for members of the Executive Board and senior managers. The fair value at the date of granting the rights to shares is recognised in personnel expenses with an equivalent increase in equity for the period in which the employees can make an unconditional claim on rights to shares. The cost of the share-based plan is allocated evenly over the period in which performance is measured.
At each balance sheet date, Vopak revises the estimate of the number of rights to shares that are expected to be exercised. Any effects of revising the original estimates are recognised in the income statement with an equivalent adjustment in equity. The fair value is set at the date of grant using a binomial model and taking the provisions and conditions of the long-term incentive plan into account.
Enclosure 3a: Consolidated income statement*
* unaudited
1) including exceptional items of EUR 9.7 million
2) including exceptional items of EUR 10.8 million
3) including impairment of EUR 0.9 million
Enclosure 3b: Breakdown of income from rendering of services and group operating profit*
* unaudited
Enclosure 3c: Condensed consolidated balance sheet *
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