VIKING All set to Meet Global Challenges
For the 2014 financial year, VIKING Life-Saving Equipment A/S has again managed to lift both its top and bottom line to record levels. Turnover grew 7 percent to DKK 1.728 billion, and pre-tax profits reached DKK 183.7 million – an increase of 30 percent.
“The market continues to embrace the new products we’ve introduced in recent years, and our growth is broadly distributed across geographies” says VIKING’s CEO, Henrik Uhd Christensen. “But we’re operating in a global market that is still under pressure in passenger and cargo shipping, marked by low newbuilding activity, over-capacity and ship decommissioning. Again, the offshore market has achieved higher growth rates during 2014 than other segments, but its growth is decelerating. With current oil prices at USD 60 per barrel or lower, we predict reduced activity in the offshore segment.”
He goes on to add that while VIKING’s growth is partly based on market growth, it is primarily the result of increasing market share. Although other segments are expected to compensate for falling growth in the offshore market during the 2015 transition year, VIKING’s top executive expects it will be difficult to maintain the company’s many years of uninterrupted growth. Belief in the company’s long-term growth prospects remains, however, unshaken.
Shipowners demand fixed prices
In recent years, VIKING has launched a number of concepts to meet shipowner needs for fixed prices and flexibility. The flagship offering is the VIKING Shipowner Agreement, where VIKING takes care of all safety equipment and servicing requirements under pre-determined, transparent pricing. A new addition to the company’s portfolio is the ability for shipowners to obtain fixed prices for the most important safety equipment products based on local cost levels in a number of the world’s key ports.
“It’s important to understand our role in relation to the difficult situation in which many shipowners find themselves, and to meet their needs,” says Henrik Uhd Christensen. “In day-to-day ship operations, we can see that shipowners are battling intense price competition for rates. So we need to help them maintain their competitiveness. Our Shipowner Agreements, and the services that are often added to these to obtain fixed prices and flexibility will, therefore, become even more important in the years to come.”
Falling oil price impact will be felt
In recent years, offshore has grown to become a significant market segment for the company. The dramatic drop in oil prices to around USD 60 per barrel since the summer of 2014 is, however, expected to keep a lid on demand for a period of time.
“2015 will primarily be characterised by a challenging offshore market,” says Henrik Uhd Christensen. “If the price of crude oil stays at USD 60 or less, there will be consequences in the form of postponed projects and lower sales of safety equipment. We feel the negative effects of the lower oil price more quickly than the positive effects such as increased shipping of goods, more cruises and so on. In the long run however, global maritime activity indicates a trend toward constant growth, and we continue to be optimistic about market prospects.”
In 2014, VIKING established a new European production plant in Bulgaria, as well as a new regional distribution center in Denmark. In 2015, the company’s global supply chain will again be in focus, with a view to achieving higher delivery speeds and further direct deliveries of products to end-customers. Efforts to achieve greater cost-efficiencies in production, sales and service will be maintained, and special attention will continue to be lavished on new product development.
“We are convinced that constant development and improvement is necessary to maintain and improve our results, and to ensure the company’s existence in the long run,” says Henrik Uhd Christensen.
VIKING war chest ready for offensive
VIKING’s shareholders’ equity at the end of 2014 amounted to DKK 713.8 million. High earnings, combined with a conservative dividends policy, has equipped the corporation to go on the offensive in relation to challenges in the global marketplace.
“In terms of earnings, we’re at a level where a healthy company should be,” says Henrik Uhd Christensen. “Every year, we invest large sums to develop new products and systems, and to establish new locations around the world. With an EBIT margin of over 10 percent and a solid capital base, we’re able to finance a great deal of our continued development ourselves.”
VIKING’s management expects 2015 activities to be comparable to the preceding year, with a satisfactory financial result.