While revenue increased for the seventh year in a row at supply company Wrist Ship Supply, last year's result was not entirely satisfying for CEO Robert Kledal, who had to watch the bottom line reduce by DKK 45 million.
We would like to see our EBITDA result increase by about 20 percent compared to 2016"
"Internally in our business, we would like to see our EBITDA result increase by about 20 percent compared to 2016."
"It depends on whether the investments, we have made, begin to give returns and we correct some of the departments that we are not satisfied with today," says Kledal to ShippingWatch, pointing to the companies in Asia and the US which did not deliver as expected.
The operating result (EBITDA) amounted to DKK 206 million last year, and the result went ahead by a fifth as is expected, which will mean a 2017 profit of approximately DKK 247 million.
It will be the best operating result in the company by far, and DKK 20 million more than the prior record.
Asia and US underperformed
According to the CEO, 2016 was not a "continuation of the good trend," Wrist Ship Supply experienced over the last five years. This is partly attributed to the bad shipping markets, which extends beyond the ship supplier's orders.
However Kledal says that Wrist Ship Supply's own business is not completely without blame.
"There are certainly also areas where we should have done better. Asia was not entirely in a position to handle the customer intake, we had provided. In the USA, we are finally satisfied on the top line, but we must work on our cost structures," says Kledal, stressing that there are also many areas where things are going according to plan.
"But it is clear, that when the operating margin declines, it naturally reflects that we are a company which invests a lot. And we have many impairments which are both a good and bad thing."
Wrist Ship Supply has experienced that the size of the average orders is falling, which is a challenge for the supply company considering the costs of delivering goods to vessels.
Good, stresses Kedal, because both Wrist Ship Supply and Altor, which has owned the company since 2007, believe in the future.
"But when the water level drops, you can also see that besides the EBITDA line, which we are most concerned about - there are larger impairments and interest expenses."
In the tough shipping and offshore market, where companies across the board are experiencing difficult conditions, Wrist Ship Supply has seen the size of its average orders drop.
"This is naturally a challenge, because our bill for each individual order shrinks, but we still need to go down to the warehouse and collect the goods, drive them out to the vessel and maybe even freight the goods out to the ship via a launch boat."
"And the variable expenses do not decline just because our orders have shrunk by six percent," says Kledal.
Looking at acquisitions
At the beginning of last year, the company took over Garrets International, and over the year Wrist Ship Supply established activities in Hamburg and Las Palmas, while also expanding storage facilities in Dubai, Rotterdam and Vancouver, moving the internal service centre to Manila.
The year before that, there was another acquisition, of the Aberdeen-based North Sea Stores and Dutch Den Helder.
Kledal characterizes Wrist Ship Supply as a "consolidated company" in the industry, and he expects that Wrist Ship Supply will live up to that description this year. He points to a positive cash flow in the company and an owner in Altor, which allows Wrist Ship Supply, to invest despite the tough market."
"It is important for us that we can deliver an organic growth which is better than our competitors. We are a consolidated company in the industry, and therefore it is also important for us to grow through acquisitions, and fortunately we have the financing which allows for acquisitions such as garrets, and we want to consider the industry consolidation," says Kledal, adding that there is no acquisition on the cards right now, but that he expects activity on that front this year.
English Edit: Lena Rutkowski