EBH seeks new avenues
Strategies and diversification the solution
Diversification is key to the survival of Elgin Brown and Hamer Namibia (EBH) says CEO Hannes Uys.
The reality is that the company is now aggressively going head-to-head with other local service providers in terms of trying to penetrate the local market.
The company invested approximately N$ 332.5 million to acquire the three floating docks it operates, N$133 million to put necessary infrastructure in place and a invests a further N$13.3 million annually on maintenance.
“EBH deliberately kept out of the local market and refrained from competing with many of the local service providers. The company focused on the international market in support of small businesses. Since the oil price tumbled, we lost two years’ worth of revenue within seven months,” says Uys.
Oil industry
Approximately 92% of the company’s revenue is directly derived from the offshore oil industry.
The oil price dropped in mid-2014 and its delayed effect did not manifest on EBH until the end of 2015. EBH was running flat out until October 2015 and handled approximately 124 projects per year on its docks until then.
The company anticipated the delayed effect and planned to absorb a decrease of between 25 to 30% on its operations and revenue.
EBH however, did not anticipate that revenue would continue to fall until it surpassed the 50% mark and subsequently initiated its performance-enhancement initiatives mid-2015.
The processes to mitigate an over 59% drop in business and the plans in place were not adequate. The situation worsened further at the beginning of 2016 and EBH was forced to adjust and rescale operations.
“A gentleman’s agreement existed whereby EBH resolved to leave a certain segment of the market for other players. This included the Syncrolift, fishing factories, the mining sector and venturing into designing capabilities.
Staying away meant refraining from some markets and keeping other players afloat while rescaling resulted in skills being lost to other markets.”
Uys explains that it cannot continue to rely on oil to generate income.
“A number of non-Namibian companies are involved and dominate many aspects of the local market. EBH is mobilising and will try to get back some of the jobs handed to these companies. We want to venture into the construction of ships and will get technical partners on board.
The capacity, equipment and workshops to venture into these fields exists,” Uys added.
According to Uys, EBH was not looking at dominating the fishing fleet market where many small players are involved and provide services to the local fleet. According to him, taking on the fleet of Tunacor and Hangana will not be feasible and will not make economic sense.
“We want to get international fishing vessels that cannot be docked in Walvis Bay at the Syncrolift. EBH has the capacity and docked quite a significant number of international vessels recently. It is not a lucrative market in terms of profitability but we will pursue this. We simply want to sustain our business without relinquishing market share. The company must be ready to capitalise when the oil price rebounds.”
The fisheries ministry also has certain vessels in its fleet which cannot be docked by the Walvis Bay Syncrolift but are served by EBH.
Local is lekker
Evilastus Karonda, president of the Namibian National Labour Organisation (Nanlo) says it makes perfect business sense to have Namibian companies servicing projects and vessels otherwise we export jobs.
Uys also says EBH recognises that there is an official way of doing things adding that government institutions should be compelled to do business with the company.
“Namibia’s capacity to service mines in terms of their needs is hampered by the fact that such contracts are issued to non-Namibian entities. By virtue of joint ventures of sorts, the company would like to focus on this area,” Uys noted.
He named Debmarine Namibia which recently purchased a vessel that is serviced in Cape Town, South Africa.
“The argument is that the country is technically not competent to render certain required services. EBH has been profiling this issue over the past four years and cannot comprehend why this is happening. We are trying to understand what the decision-making process with regard to obtaining one of these projects entails,” Uys adds. According to Uys, it is understandable that production schedules are demanding and stated that EHB was fully aware that chances cannot be taken with the top three production vessels of a company like Debmarine.
“We need one opportunity to show its capacity and if we fail to deliver we will accept it. A
consortium of local companies has the capability to pull together and provide services to one of the smaller vessel-servicing projects. Namdock can dock vessels of up to 50 000 tonnes safely and local companies should be given the opportunity to service at least one of these smaller vessels to determine if we are capable,” Uys said.
The oil price has climbed slightly but the impact will manifest as slowly as the drop effect did. The company will be able to handle a 20-35% work influx variant.
“We are not expecting oil prices to reach US$100 within two to three years and thus we set our business to cope with the 50% reduction in revenue,” Uys said.
The 42 oilrigs anchored at Walvis Bay, 32 in Angola and Cameroon, must start operating again otherwise losses will be incurred.
The average investment of these assets is between N$53.2 and N$106.6 million, depending on the size. In order to keep the economic lifespan of vessels intact, the vessels must be dry-docked.
Otis Finck
The reality is that the company is now aggressively going head-to-head with other local service providers in terms of trying to penetrate the local market.
The company invested approximately N$ 332.5 million to acquire the three floating docks it operates, N$133 million to put necessary infrastructure in place and a invests a further N$13.3 million annually on maintenance.
“EBH deliberately kept out of the local market and refrained from competing with many of the local service providers. The company focused on the international market in support of small businesses. Since the oil price tumbled, we lost two years’ worth of revenue within seven months,” says Uys.
Oil industry
Approximately 92% of the company’s revenue is directly derived from the offshore oil industry.
The oil price dropped in mid-2014 and its delayed effect did not manifest on EBH until the end of 2015. EBH was running flat out until October 2015 and handled approximately 124 projects per year on its docks until then.
The company anticipated the delayed effect and planned to absorb a decrease of between 25 to 30% on its operations and revenue.
EBH however, did not anticipate that revenue would continue to fall until it surpassed the 50% mark and subsequently initiated its performance-enhancement initiatives mid-2015.
The processes to mitigate an over 59% drop in business and the plans in place were not adequate. The situation worsened further at the beginning of 2016 and EBH was forced to adjust and rescale operations.
“A gentleman’s agreement existed whereby EBH resolved to leave a certain segment of the market for other players. This included the Syncrolift, fishing factories, the mining sector and venturing into designing capabilities.
Staying away meant refraining from some markets and keeping other players afloat while rescaling resulted in skills being lost to other markets.”
Uys explains that it cannot continue to rely on oil to generate income.
“A number of non-Namibian companies are involved and dominate many aspects of the local market. EBH is mobilising and will try to get back some of the jobs handed to these companies. We want to venture into the construction of ships and will get technical partners on board.
The capacity, equipment and workshops to venture into these fields exists,” Uys added.
According to Uys, EBH was not looking at dominating the fishing fleet market where many small players are involved and provide services to the local fleet. According to him, taking on the fleet of Tunacor and Hangana will not be feasible and will not make economic sense.
“We want to get international fishing vessels that cannot be docked in Walvis Bay at the Syncrolift. EBH has the capacity and docked quite a significant number of international vessels recently. It is not a lucrative market in terms of profitability but we will pursue this. We simply want to sustain our business without relinquishing market share. The company must be ready to capitalise when the oil price rebounds.”
The fisheries ministry also has certain vessels in its fleet which cannot be docked by the Walvis Bay Syncrolift but are served by EBH.
Local is lekker
Evilastus Karonda, president of the Namibian National Labour Organisation (Nanlo) says it makes perfect business sense to have Namibian companies servicing projects and vessels otherwise we export jobs.
Uys also says EBH recognises that there is an official way of doing things adding that government institutions should be compelled to do business with the company.
“Namibia’s capacity to service mines in terms of their needs is hampered by the fact that such contracts are issued to non-Namibian entities. By virtue of joint ventures of sorts, the company would like to focus on this area,” Uys noted.
He named Debmarine Namibia which recently purchased a vessel that is serviced in Cape Town, South Africa.
“The argument is that the country is technically not competent to render certain required services. EBH has been profiling this issue over the past four years and cannot comprehend why this is happening. We are trying to understand what the decision-making process with regard to obtaining one of these projects entails,” Uys adds. According to Uys, it is understandable that production schedules are demanding and stated that EHB was fully aware that chances cannot be taken with the top three production vessels of a company like Debmarine.
“We need one opportunity to show its capacity and if we fail to deliver we will accept it. A
consortium of local companies has the capability to pull together and provide services to one of the smaller vessel-servicing projects. Namdock can dock vessels of up to 50 000 tonnes safely and local companies should be given the opportunity to service at least one of these smaller vessels to determine if we are capable,” Uys said.
The oil price has climbed slightly but the impact will manifest as slowly as the drop effect did. The company will be able to handle a 20-35% work influx variant.
“We are not expecting oil prices to reach US$100 within two to three years and thus we set our business to cope with the 50% reduction in revenue,” Uys said.
The 42 oilrigs anchored at Walvis Bay, 32 in Angola and Cameroon, must start operating again otherwise losses will be incurred.
The average investment of these assets is between N$53.2 and N$106.6 million, depending on the size. In order to keep the economic lifespan of vessels intact, the vessels must be dry-docked.
Otis Finck
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