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Tuesday, October 25, 2016

Strategy Adjustment at Royal IHC

October 16, 2016

Strategy Adjustment Photo Royal IHC

Strategy Adjustment Photo Royal IHC

As a result of persistently poor market conditions, Royal IHC fine-tunes its strategy by further boosting knowledge-intensive activities

 Persistently poor market conditions force a fine-tuning of strategy
 The management intends to reduce around 425 permanent and temporary contracts, mainly in indirect and support positions
 Dutch-based IHC units to continue to operate as IHC knowledge centre

KINDERDIJK - 14 OCTOBER 2016 - As a direct consequence of persistently poor market conditions, Royal IHC, supplier of maritime equipment, is fine-tuning its strategy. IHC remains as committed as ever to boosting its knowledge-intensive activities, as is already happening in IQIP, Mission Equipment and Services. Responding to market demand, activities in The Netherlands will focus on creating added value for customers.

Hence, IHC is increasingly outsourcing production activities in order to remain distinctive and cost-efficient in its marketing of ships, equipment and services, with product development and design, as well as sales and marketing remaining within the
company. This adjustment in strategic direction will have an impact on around 425 employees in The Netherlands. The management of IHC is talking about this with Works Council and trade associations.

Economic developments in the markets in which IHC operates continue to be extremely turbulent. As in 2015, the oil price and increasing international competition in particular have led to a significantly lower order intake in the first nine months of 2016 than anticipated. IHC has already announced that it expects to remain below the forecast sales budget for the whole of 2016. The associated low level of turnover makes it necessary to drastically cut costs, particularly in support positions within the organisation.

In addition, the company's sectionbuilding activities will be further outsourced in order to respond to competition from Eastern Europe and Asia. IHC will maintain the shipbuilding slipway in Krimpen as its main slipway. The Kinderdijk slipway will be maintained as a reserve. In response to the economic situation and the need for cutbacks, the Executive Board is being reduced to two members: CEO Dave Vander Heyde and CFO Arie Vergunst.

Future focus on knowledge
IHC expects to emerge from this downsizing process as a smaller and healthier company that is once again able to flourish as a leading supplier of maritime equipment. In the period ahead, IHC will be focusing on boosting its sales activities. In addition, IHC units that are currently thriving, such as Beavers, IQIP and Services, will be given space to maximise their potential for growth.

IHC will also invest in consolidating staff expertise and knowledge in order to maintain its leading position in the design, engineering, assembly and commissioning of vessels and equipment. Furthermore, international activities will be significantly expanded. In Brazil, IHC has now developed a solid base for itself in terms of market position and technological innovation.

By expanding its international activities, IHC is responding to its customers' growing preference for more "local for local" design and construction. This will also ensure that existing local market potential is properly exploited.

Staff meetings
At staff meetings at all locations, the management will today provide staff with further details of its intentions. The Works Council and trade associations have been notified about the plans for downsizing. IHC has agreed with the Works Council and trade associations on a series of dates to discuss the timeline and conditions. The management fully understands the major consequences the necessary measures will have for many employees. Of course, any IHC staff who become redundant will be given full support in moving towards the next step in their careers.