Profit will be at least EUR 275 million, a growth of over 27% compared to 2007. With the above, the outlook as indicated in August will be met, despite the negative developments of the past few months, which were not known at that time. This was reported by Mr. Wester in his speech for employees today.
Growth in turnover and profit has taken place throughout the whole company. In particular the seismic activities have turned the capacity expansion into turnover and results. Also the other activities, primarily the offshore related ones, show growth in turnover and result.
In May, the oil price increased to about USD 145 per barrel and then dropped to around USD 40 per barrel at year end, and is now rebounding a bit. The oil price is now at a level at which the oil and gas industry is evaluating what the return on their new investments will be. This also in the light of the strongly increased exploration and production costs in the past few years, amongst others because it is increasingly difficult to find new locations. In this, one should make a distinction between the shorter and the longer term. For the longer term there are not many structural changes, because the depletion of existing fields, at about 6 to 9% per annum, is continuing and the demand will increase quickly as soon as the world economy recovers. The national oil companies and large international companies, a for Fugro particulary important group of clients, are focusing primarily on the longer term projects, also because of political and strategic considerations.
Smaller players, which depend on external financing and/or short term cash flows, will be forced to postpone projects until better returns are within reach, although this may deteriorate their future competitive position. Delay of some projects in the startup phase is noticeable at the moment. A similar picture as outlined above for the oil and gas industry applies, possibly even more so, to the mining sector.
With regard to infrastructure, Fugro is focusing especially on larger projects for transport (roads, bridges, harbours) and the maintenance thereof, as well as water management such as coastal protection and rivers. Furthermore, there is an increasing activity for projects in alternative energy like wind parks and nuclear plants. In various countries, governments have announced that they intend to stimulate the local economy by financial injections for infrastructure (with as uncertain factor the period of time between aforementioned intentions and the concrete realisation of work). In contrast to this, elsewhere there are signs of a decline in activities, like in Dubai.
For the coming one to two years much uncertainty exists about the duration and seriousness of the world wide recession and its effect on our activities. However, as soon as a positive turn around will become visible, the sectors on which Fugro focuses should offer good opportunities, such as in energy, transport, minerals and water.
Fugro is financially in good shape, with a healthy balance sheet and a strong cash flow, and has developed a broad services portfolio, like services through the full life cycle of an oil field, and services for new infrastructure projects as well as for the maintenance of existing infrastructure.
Fugro has a good backlog at the start of the new year, to which recently interesting orders have been added, such as:
- a new award for a geochemical coring programme in the Jacuipe basin in the northeast of Brazil with a contract value of EUR 6 million;
- two contracts for the execution of extensive oceanographic and meteorological measurement programs in the Indian Ocean offshore Tanzania and Mozambique. The programs will be more than a year’s work;
- in the last few weeks we received awards for more than EUR 35 million for seismic projects.
Nevertheless, we have to be very alert to the developments in the coming months, particularly with regard to the investments of the oil and gas industry, and will anticipate on that by amongst others:
- Restriction in investments, unless profitable in the short term or strategically very important.
- Critical appraisal of the operational units on their short term performance.
- Where necessary, use the flexibility in capacity, like vessel charters.
- Strict cost control and further optimisation of operational efficiency.
- Continue to provide high quality services by education and training of our staff, with special attention to health and safety aspects (HSE).
With the essential commitment of our now about 13,500 employees, that are working with state-of-the-art knowledge and equipment, Fugro is convinced that Fugro will successfully sail through these more difficult times.
Cautionary Statement regarding Forward-Looking Statements
This announcement may contain forward-looking statements. Forward-looking statements are statements that are not historical facts, including (but not limited to) statements expressing or implying Fugro N.V.'s beliefs, expectations, intentions, forecasts, estimates or predictions (and the assumptions underlying them).
Forward-looking statements necessarily involve risks and uncertainties. The actual future results and situations may therefore differ materially from those expressed or implied in any forward-looking statements. Such differences may be caused by various factors (including, but not limited to, developments in the oil and gas industry and related markets, currency risks and unexpected operational setbacks).
Any forward-looking statements contained in this announcement are based on information currently available to Fugro N.V.'s management. Fugro N.V. assumes no obligation to in each case make a public announcement if there are changes in that information or if there are otherwise changes or developments in respect of the forward-looking statements in this announcement.