Boskalis Annual Report 2020
operating out of various international locations, and strong positions in its core markets. Moreover, our activities are largely focused on the development, construction, installation and maintenance of infrastructure, which means that longer-term developments will generally outweigh short-term economic fluctuations. Contracts are not included in our order book until agreement has been reached with the client. Although experience shows that once agreement has been reached, cancellations, postponements or substantial reductions in the scope or size of contracts are quite rare, they do occur, certainly in markets that are under severe pressure. Consequently, if such a cancellation or substantial reduction occurs, losses may arise from the unwinding or settlement of financial derivatives which were taken out to hedge related currency risks and/or fuel price risks, but for which the underlying transaction or cash flows will no longer be realized. Boskalis deals with a variety of competitors in the various markets and submarkets in which it operates. Such competitors vary from large, internationally operating companies to more regional and local companies. A considerable part of our revenue is derived from contracts awarded through public or private tender procedures, with competition often being predominately price-based. However, other factors – such as the assurance of adequate safety, social and environmental practices as well as the financial resilience of the contractor – are more often taken into consideration when awarding contracts. Proper decision-making processes have been put in place for the submission of tenders to ensure that the risks associated with the execution of a specific project are systematically identified and assessed.
A substantial part of Boskalis’ activities are capital-intensive which means that prices in these markets are largely influenced by the utilization rate of the relevant equipment at a given time. This implies that a broad international presence along with a leadership position in terms of type and quality of our equipment and cost competitiveness are key success factors. Boskalis places a great deal of emphasis on these, both as a critical point of attention in operational management and in its capital allocation decisions. Consequently, individual investment proposals are subjected to a thorough evaluation and approval process. In the course of executing its strategy, Boskalis regularly acquires companies. To achieve the anticipated results, Boskalis assigns great importance to integrating such acquisitions with care. Creating value for our stakeholders and retaining key personnel are important elements in this process. CONTRACTING AND EXECUTION RISKS The main operational risks for Boskalis are related to the contracting and execution of projects. For a substantial part of our contracting activities the common type of contract is fixed price/lump sum. Under this type of contract, the contractor’s price must reflect virtually all the operational risks as well as the risks associated with the procurement of materials and subcontractor services. Typically, it is not possible to charge clients for any unforeseen costs. Furthermore, many contracts include milestones and associated penalty clauses for if the milestones are not achieved on time. That is why great OPERATIONAL RISKS
The trailing suction hopper dredger Prins der Nederlanden departs from Manila, where it made a short stop for a crew change in July as travel restrictions prevented Filipino crew from flying home
ANNUAL REPORT 2020 – BOSKALIS
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