2002 Annual Report - SBM Offshore

FOREWORD
Board of Management
2002 was a year of mixed blessings. The offshore
division continued to flourish, with several new units
being added to the fleet of FPSO’s and FSO’s and an
all time high order backlog. One of the Group’s
shipyards however encountered severe operational
and market problems. These problems required a
provision of € 25 million, which caused a decrease in
net profits to € 71.5 million.
Economic growth in many parts of the world is
stimulating the demand for oil and gas products. The oil
companies’ continuing efforts to replace and expand
production are the major drivers of our growing offshore
oil and gas activities, now and in the foreseeable future.
In 2002, the market for dredgerbuilding was steady while
demand from the very competitive specialised shipbuilding
market was weak.
Performance
Profits were mainly driven by revenues from the Group’s
fleet of FPSO’s and FSO’s. However, all major Group
activities, apart from the shipyard van der Giessende
Noord, performed well. New orders amounted to
€ 1.9 billion, close to the record level of 2001. Order
backlog reached a level that was never achieved before,
while new additions to the lease fleet further improved
the visibility of cash flow and earnings. Two of the three
Group shipyards also achieved satisfactory results, both
in new order intake and in results from production.
The Group realised its mid-year revised profit forecast,
but failed to meet the original forecast profit, due to the
one-time provision for van der Giessen-de Noord, the
shipyard specialised in custom-built vessels such as
Ro-Pax ferries. van der Giessen-de Noord was to some
extent a victim of its own success. The abolition of
subsidies in the year 2000 led to a flood of orders at yearend,
and with hindsight, the company underestimated
the cost price of these projects, leading to substantial
losses on orders. The company’s problems were
subsequently compounded by a dearth of orders in its
market, necessitating a major downsizing in capacity.
The prompt action taken, including a change of
management, has restored control of the situation.
Consistent execution of strategy
Over the past decade our Group has built a strong trackrecord
in developing its offshore oil and gas activities.
The decision in 1996 to develop in-house topsides
competence and to continue to develop vessel design and
conversion ability, effectively transformed the offshore
division from a mooring supplier to a full blown FPSO
supplier. During 2002, the Group had a record six FPSO’s
8
under construction, confirming its position as the
world’s number one FPSO supplier. Our strategic choice
in 1996 to grow the FPSO/FSO lease fleet has also proved
to be right. Our lease and operate fleet of eight FPSO’s
and five FSO’s (end 2002) has become the flywheel of our
activities, generating stable long-term income.
Increasingly we benefit from growing experience and
economies of scale in project management, design and
installation. Prices and delivery times can be estimated
with a high degree of accuracy, thereby minimising the
risks and increasing the chances of a successful outcome.
Last year, we have expanded our staff in Houston, which
has become the deepwater offshore oil and gas capital of
the world. We now have the capacity to satisfy our major
clients’ requirements on their doorstep. Through
cooperation of GustoMSC with SBM-IMODCO and
Atlantia, IHC Caland’s centre in Houston is fully
equipped for the design, engineering and construction of
complex FPSO’s, TLP’s and related offshore products.
This has improved the growth potential of all of the
Group’s US based offshore activities. Each of our FPSO
centres in Monaco, Houston and Schiedam now has the
full competence to design and construct a complex
FPSO. The overall increase in resources also allows the
Group to tackle, on a selective basis, the ultra-large
projects which it had previously avoided, or only
performed in partnerships.
The Group’s policy of strategic partnerships paid off in
2002, with two new long-term high value FPSO lease and
operate contracts, and one major FPSO upgrade
contract, all under the partnership with the Angolan state
oil company, Sonangol.
In the market for dredgers and related equipment, the
Group’s continued efforts to deliver high quality and
cost reducing technological solutions, often exceeding
existing limits, such as the deep dredging equipment
developed last year, is being recognised and rewarded. In
specialised shipbuilding the current market circumstances
are tough, but we believe that our specialised
know-how combined with capacity reduction and the
closer cooperation between technical departments, will
enable us to benefit from a market recovery as soon as it
takes place. Under normal circumstances, the dredger/
specialised shipbuilding activities have delivered an
attractive Return on Capital Employed.
Strategic initiatives 2003
In 2003, our strategy will focus on further growth of our
offshore oil and gas activities, on maintaining and
reinforcing our leading market position in dredgerbuilding
and on restoring cost effective specialised
shipbuilding. Initiatives and plans include:
x reinforce and fine-tune the three centre FPSO
execution capability;