Esbjerg, Denmark, 12 March 2021
VIKING Life-Saving Equipment A/S has now been operating for a full year in market conditions dictated by the Covid-19 pandemic. Despite of the challenging situation, VIKING maintained a high level of activity and achieved satisfactory earnings in 2020.
Turnover of nearly 2.6 billion DKK represents a decline of 185 million DKK year over year, yet it is still the second highest figure ever recorded by the company. Profit before tax of 168.9 million DKK is also lower than the record result in 2019. VIKING CEO Henrik Uhd Christensen is satisfied with the company’s ability to withstand difficult market conditions, which have simultaneously impacted the most important customer groups and triggered a perfect storm.
“We made great efforts to prepare and to understand how Covid-19 would impact our business. The extreme fluctuations in demand have greatly impacted our production and service apparatus, but our strong global structure with a worldwide presence has enabled us to service customers despite the far-reaching restrictions. We have demonstrated our ability to adapt. Dedicated employees throughout our organization deserve the highest praise for successfully maintaining and expanding our market position,” says Henrik Uhd Christensen.
Struggling industries poised for a rebound
The largest customer segment, the cargo vessel market, benefited during the financial year from high freight rates in container shipping. The cargo market as a whole is volatile, particularly in the subsegments tank and dry bulk, as seen when tankers were used to store oil due to a slump in sales. Global freight transport by sea is expected to continue growing, albeit at lower freight rates.
The passenger ship market, which consists of cruise vessels and ferries, saw a meltdown of the cruise industry from the outset of the pandemic. The reduced mobility between countries and regions also severely impacted ferry traffic due to closed routes and ships taken out of service.
“I am certain that cruises will bounce back, but the industry probably won’t approach normalization until 2022. The large operators normally receive prepayments, which provides some crisis resiliency. The current situation is quite extraordinary, but we believe that most of our customers will make it through to the other side. Ferry services are a part of critical infrastructure and will also survive,” says Henrik Uhd Christensen.
Transition in the offshore industry
The offshore market reached a historic low with negative oil prices in the spring of 2020 as demand cratered due to the declines in transport. The oil and gas industry is dominated by large publicly-traded corporations that react severely to market declines, which means that an investment backlog will need to be addressed as the market recuperates. But this sector will also need a year of transition before the turnaround takes root.
Sales to smaller, more specialized segments have been impacted by the barriers to in-person sales. Segments impacted include sales to military customers (Defence segment) and sales of fire suits and other personal protective equipment (PPE segment). Digital meeting procedures, which were quickly implemented on very short notice, have proven to be a good alternative given the circumstances.
Customers buy the full package
“With the uncertainty about what framework Covid-19 will offer us, we are off to a good start in 2021. The continued integration of the companies we have acquired in recent years, combined with an organizational adjustment, has resulted in a well-functioning foundation for future business development. The process has been complicated by the limitations on our ability to meet, but we have managed to make things work. The strong rationale underlying these acquisitions has been confirmed by our customers. When purchasing products for newbuilds and when entering into multi-year service agreements, customers increasingly place full-scope orders that span our entire product and service program,” Says Henrik Uhd Christensen.
The service area is seeing increasing demand for fixed price agreements in the rental and service of liferafts, as well as in Life Boat Service (LBS) and Marine Fire Service (MFS). VIKING acquired the Norwegian lifeboat manufacturer Norsafe in the autumn of 2018, followed in 2019 by the purchase of Rotterdam-based Drew Marine FSR and its global service network for fire-fighting equipment.
In addition to integration efforts, VIKING has dedicated resources during the pandemic to further developing its product range and digital infrastructure – and the company feels well-equipped for the future.
Financial resiliency in uncertain times
VIKING expects business activity this year at levels similar to 2020 and with a higher profit.
“We have done really well in the past year, also when compared to other players in our industry. We have improved our debtor portfolio, reduced inventories and reduced costs without compromising on our high quality standards. The financial year saw a record-high cash flow by far, which provides resilience in times like these,” says Henrik Uhd Christensen.
The declining demand for maritime safety equipment has had unfortunate consequences for a significant number of employees at VIKING’s factories, especially in Asia.