Vopak streamlining completed
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Rotterdam, 8 March 2004
Vopak reported good results in local currency for Asia and Latin America, although the fall in the US dollar and the Singapore dollar against the euro had a significant impact on the results measured in euros. The weaker markets for storage in Europe and North America, as well as the failure of the global economy to recover, also depressed the results. The recovery in results during the second half of 2003 was mainly due to the improved results in Asia and Latin America and of the Oil Europe, Middle East & Africa division. The sale of the chemical tanker fleet on 27 February 2004 means that the asset disposal programme is largely complete. The investments in tangible fixed assets in 2003 amounted to EUR 106.5 million (2002: EUR 97.0 million) of which EUR 41.4 million in capital expenditures for maintenance and to enhance quality and introduce improvements concerning safety, health and the environment (SHE) (2002: EUR 41.8 million). Based on presently known projects approximately EUR 130 million will be invested in 2004. Net debt was down substantially from EUR 782.7 million at year-end 2002 to EUR 608.5 million at year-end 2003. In accordance with the amended Guidelines for Annual Reporting in the Netherlands, exceptional items have been included in the operating profit for 2003. The comparative figures for 2002 have been restated accordingly. In 2003, the net effect of this change was an increase of EUR 25.5 million on the operating profit. It will be proposed to the General Meeting of Shareholders on 13 May 2004 that an optional dividend of EUR 0.50 per ordinary share be distributed, payable in cash or in shares. This is equivalent to 30% of the net profit per ordinary share. Taking everything into consideration - and barring unforeseen circumstances - Vopak expects its operating profit for 2004 from its core activities, excluding exceptional income and expenses, to at least match that for 2003 (EUR 150.2 million as per Annexe 2). Tank-terminal Plus strategy As part of the Tank-terminal Plus strategy, the sale has been completed of a number of business lines that were not part of Vopak's core activities. For 2003 and 2004, this will produce total sale proceeds of around EUR 210 million. The results on these disposals have been included in the profit and loss account for 2003. Partly thanks to the successful completion of the asset disposal programme, Vopak can concentrate fully on its core activities: providing tank-terminal services and related supplementary services to the oil and chemical industries. Vopak is improving the profitability of these core activities. In concrete terms this means, alongside improved rates and cost control, selective growth. In addition to improving its financial position, Vopak constantly seeks to enhance quality and introduce improvements concerning safety, health and the environment (SHE). The policy for these areas aims to achieve increased awareness of SHE among all employees and to improve their approach towards these matters. In 2003, the number of accidents resulting in absence from work dropped by 23%. Selective growth Vopak bases its growth on the expansion of existing terminals, the acquisition of terminals from third parties and the construction of new terminals. In 2003, the expansion of existing terminals was mainly in Singapore, Fujairah (United Arab Emirates), Rotterdam and Thailand. Terminals were acquired in 2003 in California (United Sates), Venezuela, Colombia, Ecuador and China. The most important construction project concerns the large, new industrial terminal close to Shanghai, China. The project is progressing well and the first phase of 240,000 m3 of storage capacity will go into operation in stages from the end of 2004. Exceptional items in operating profit Exceptional income and expenses included in the operating profit for 2003 amounted to EUR 25.5 million (2002: EUR 5.0 million). The most important items were a reduction of EUR 33.2 million in the guarantee given to Univar at the time of the split-off in 2002 and the loss of EUR 12.5 million on the disposal of non-core activities (including the impairment on assets still to be sold). Operating profit and return on average capital employed Operating profit for 2003, including exceptional income and expenses, amounted to EUR 192.2 million (2002: EUR 213.0 million) and average capital employed amounted to EUR 1,336 million (2002: EUR 1,514.0 million). This means a ROCE for 2003 of 14.4% (2002: 14.1%). Prospects for 2004 Apart from Asia, the chemical industry is in depression from which it is unlikely to recover before the second half of 2004. Consequently, Vopak expects little growth in terminal activities. The demand for oil product storage is being driven by a growing geographical imbalance between the supply and demand for oil products. Occasionally, this trend is slowed down by price patterns if future prices are below current ones (a phenomenon known as backwardation). The strong market position of Vopak's terminals and the additional fuel oil capacity in Rotterdam mean that the company views the prospects in this market segment as favourable. The level of activities in the first two months of the current year is comparable to that of the last quarter of 2003. However, political developments and exchange rate fluctuations can still have a considerable impact on results. Taking everything into consideration - and barring unforeseen circumstances - Vopak expects its operating profit for 2004 from its core activities, excluding exceptional income and expenses, to at least match that for 2003 (EUR 150.2 million as per Annexe 2). Based on presently known projects approximately EUR 130 million will be invested in 2004. Post-balance sheet events Agreement has been reached with the leading oil companies in Northern Australia on the construction of a combined oil terminal in Darwin. This involves an investment of EUR 33 million, with the intention that the terminal commences operations in August 2005. On 27 February 2004, the chemical tanker fleet was sold to Deutsche Africa Linien/John T. Essberger, part of the German Rantzau group. This produced a decrease of EUR 102 million in tangible fixed assets and a reduction of 300 in the workforce. Corporate Governance Vopak attaches great importance to an equitable balance between the interests of the various stakeholders in the company. Integrity, openness, supervision, transparent reporting and accountability are the cornerstones of Vopak's Corporate Governance policy. The company also intends that its activities respect the public interest. The principal elements of Royal Vopak's Corporate Governance structure are published in a separate section in the annual report and will form a separate item for discussion on the agenda of the General Meeting of Shareholders on 13 May 2004. As part of compliance with the Dutch Corporate Governance Code, published on 9 December 2003, Vopak decided to make some changes to its own Corporate Governance structure. Any current deviations or departures from the Principles and Best Practices of the Code are explained in the annual report. Furthermore, the regulations of the Supervisory Board, the Executive Board and the committees of the Supervisory Board, as well as the whistleblower regulation, will be published on the company's website, at the same time as publication of the annual report, at the beginning of April 2004. Proposed dividend It will be proposed to the General Meeting of Shareholders on 13 May 2004 that an optional dividend of EUR 0.50 per ordinary share be distributed in cash or in shares. This is equivalent to 30% of the net profit per ordinary share. Key figures
*)after reclassification in accordance with the new Guideline of the Council for Annual Reporting in The Netherlands
Number of shares outstanding
The General Meeting of Shareholders will be held at the company’s office on 13 May 2004.
The dividend will be made payable on 9 June 2004.
The results for the first half of 2004 will be published on 18 August 2004.
Profile The company is divided globally into five market regions and operates a network of 71 tank terminals with a combined storage capacity of approximately 19.9 million m3 in 29 countries. Annexes:
Annexe 1: Notes to the results by market region Europe, Middle East & Africa (EMEA)
The figures for 2003 and the comparative figures for 2002 exclude the activities sold and to be sold concerning gas sea transport and gas barging, chemical tankers, warehousing, forwarding, the inland barge fleet for edible oils and mineral oils and the participating interest in tank containers. The fall in net turnover is mainly attributable to the reduction in capacity following an incident in Rotterdam and the inability, because of adverse market conditions, to fully adjust the rates in line with cost increases. The terminals in Antwerp achieved good results once again and the gas terminal in Vlissingen reported a recovery in turnover and results.
Once the company was over the setbacks in the first quarter due to the harsh winter around the Baltic, the decline in activities during the period leading up to the Iraq War and an incident at the Europoort terminal, turnover and results both recovered. A large-scale investment project to strengthen the share of the market for the storage and processing of fuel oil was started in 2003 and will be completed in 2004. A long-term contract for the storage of fuel oil was concluded with a leading Russian oil company.
The capacity of the participating interest in Fujairah (United Arab Emirates) was increased substantially to 1,090,000 m3.
The results of the participating interest in Tallinn (Estonia) were impacted mainly by the harsh winter of 2003 and by foreign currency translation effects. The foreign currency translation effects also negatively influenced the results of the participating interest in Fujairah.
The turnover and results of this division were hurt by the adverse effects from translating amounts in the various Asian currencies into euros. Concerning operations, oil storage and chemical storage activities both increased. In Singapore, the capacity for oil storage was expanded by 100,000 m3. July 2003 saw the acquisition of an interest in a terminal in Tianjin (China). New contracts have now been concluded and the capacity of this terminal is being enlarged.
For Vopak’s growth in Asia, the industrial terminals play a key role. These terminals are fully integrated in a chemical complex or oil refinery and generate a steadily growing income stream based on contracts with extremely long terms. In 2003, the results of this segment were once again excellent.
In US dollars, turnover in 2003 grew by 3.9%, with the growth being mainly achieved by the tank terminal activities on the west coast. The terminal in Long Beach, California, purchased in July 2003, also contributed to this growth. The high natural gas prices in the USA caused a weakening of its competitive position for the production of chemicals, which is causing an increase in imports and a decrease in exports. The emphasis on cost control in the chemical industry offers opportunities in the area of outsourcing by chemical companies to independent service providers such as Vopak.
Through the acquisition of terminals in Venezuela and Colombia and of the participating interest in Ecuador, this division further strengthened its position as the leader in Latin America.
The drop in operating profit is largely attributable to the fall in the US dollar. Measured in US dollars, however, the operating profit actually went up. The new terminals performed above expectation.
Annexe 2: Consolidated profit and loss account
Annexe 3: Consolidated balance sheet at 31 December before proposed appropriation of profit
Annexe 4: Consolidated cash flow statement
Annexe 5: Details of participating interests
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