Koninklijke Vopak NV

AEX:VPK

Earnings Call Transcript 2018-Q4

[Eelco M. Hoekstra, Chairman of the Executive Board & CEO]

Hello, my name is Eelco Hoekstra, Chief Executive Officer of Royal Vopak.Today, we announced our 2018 financial results, and I would like to give you a brief summary. So firstly, given the market conditions in 2018, we delivered solid financial results and increased our earnings per share by remaining focused on business opportunities. Secondly, the execution of our strategy is well on track. So allow me to elaborate on that. To meet the increasing global demand for the products we store, we made significant progress in capturing growth and realizing our digital transformation. I'm excited that we have been able to announce significant expansion projects in the last years, meeting new consumer demands. The execution of this strategy is leading to a further shift in our portfolio towards industrial terminals, terminals for chemicals and terminals for gases, including LNG. Expansion projects in these areas are currently on the way in Malaysia, Indonesia, Canada, Brazil and in the Netherlands.In 2018, we acquired a share in Pakistan's LNG import facility. We commissioned the first phase of our new industrial terminal in Pengerang and expanded our chemical presence in Houston. So as such, we delivered 1.1 million cubic meters in 2018 of our 3.2 million cubic meter expansion program to be completed towards the end of 2019.In addition, we commenced major service improvement projects to strengthen our chemical storage positions globally and initiated investments in our oil hub terminals in preparation for the IMO 2020 bunker fuel regulations.One more reason for excitement is the progress that we have made in our digital transformation. Our new unique cloud-based digital terminal management system is now in place at the first terminals in Americas and in Asia. And I believe that a digital transformation is key to growing our competitive edge and capturing the opportunities of this digital era. We take pride in storing lighter products with care for a growing world population. For 2019 and beyond, we focus on short-term performance and seizing long-term opportunities, delivering value today and creating value for tomorrow for all stakeholders. Thank you very much for listening.And with this, I invite Gerard Paulides to further elaborate on the financial results of 2018.

[Gerard B. Paulides, CFO & Member of the Executive Board]

Thank you, Eelco. Let's turn to some key figures for 2018. Our financial performance in 2018 was solid, and we have momentum with our value delivery towards 2019. We look at the future portfolio with confidence.Now the numbers. Earnings measured as EBITDA of EUR 734 million reflect a solid performance in a challenging oil market when the business environment for chemicals and gases was good.Now turning to cash. We delivered EUR 687 million cash flow from operations, demonstrating the resilience of our portfolio. And in line with our growth strategy, we increased our growth investments to approximately EUR 1 billion for the period 2017 to '19, including recent investment decisions to expand our operations in Vietnam and Mexico. The net profit for the year was EUR 290 million, resulting in earnings per share of EUR 2.27. And we have announced an increase in our cash dividend to EUR 1.10 per share. Meanwhile, our strategic review and testing of the market value of 4 of our terminals is in progress and in line with the 6 to 12 months we said we would take.Now looking ahead to 2019. Given our 3.2 million cubic meters expansion program over 2018 and 2019 and combined with the cost-efficiency program, Vopak has the potential to significantly improve the 2019 EBITDA, subject to market conditions and currency exchange movements. At the end of the fourth quarter 2018, 1.1 million cubic meters was commissioned and 2.1 million cubic meters will be delivered over the course of 2019. We expect growing storage and logistical services demand for industrial terminals and LNG, LPG and chemical gas terminals, and target 1 to 3 investment opportunities for each segment in 2019 to 2020.Our cost-efficiency program to support margin development progressed well in 2018. In aggregate, we aim to reduce Vopak's future cost base by EUR 40 million at the end of 2019. As a result, the cost base for 2019 is expected to be below the 2017 reported operating expenses. This is subject to currency exchange movements, discretionary cost allocations and portfolio decisions.Now to conclude. We are well positioned for 2019, and look back at the solid financial performance in 2018. Thank you for your attention.