Worldwide trends
Europe
The demand on the Dutch market reflected an erratic pattern throughout the entire year, particularly the daily distribution to smaller and medium-sized customers. While volumes remained stable, the average order size declined. Nevertheless, last year Van Leeuwen once again booked a number of good projects in the slightly growing market for steel structures. It achieved this due to its in-depth product knowledge, good relationships with specialized producers and short delivery lead times whenever necessary.
Our distribution companies in Belgium and France reinforced their market position at the expense of the competition. In spite of the slowdown in demand, low tonnage prices and the overall pressure on prices, it remains essential to effectively provide the right services to specific customer groups, such as cylinder manufacturers, machine builders and construction companies. The more frequent but smaller order volumes are putting the distribution companies to the test. In 2015, Van Leeuwen differentiated itself by keeping local stocks at the right level and by safeguarding the required delivery reliability. Tailormade concepts gained in popularity in 2015, including the rapid cutting service provided by our Belgian company Wauters. With its bar steel product portfolio, Wauters focuses on customers in the hydraulics,
mechanical engineering and equipment manufacturing sectors.
Our branch in Vyškov, Czech Republic, continued to expand its operations. In Central Europe there is a high demand for deliveries from stock in the manufacturing industry. Our local branches profit from this by maintaining extensive stocks and offering ample cutting capacity. The Vyškov warehouse furthermore provides sufficient space for the customer-specific storage of materials.
In the first half of 2015, the project teams in Zwijndrecht had their hands full with the execution of a large number of projects. Under the global framework contract with BP for the supply of pipes, fittings
and flanges, we were responsible for major deliveries to an upstream project in the Caspian Sea. Later in the year, however, the activity level in the upstream segment was low. Under pressure of the low price of oil, furthermore, many projects were halted. This affected this customer segment, as well as the shipbuilding sector that generally supplies specialized materials for this industry. The volume supplied to these sectors suffered as a result.
In contrast to the negative developments in the upstream segment, there were sufficient investments in the downstream segment (petrochemical plants, such as refineries). Our project teams in the Netherlands and Belgium were involved in various projects, among others in Antwerp. Furthermore, in 2015, a great deal of effort went into the implementation of the global contract signed with ExxonMobil at the end of 2014 for the delivery of pipes, fittings and flanges for projects and for daily maintenance (MRO) at all ExxonMobil sites. By now, 22 ExxonMobil sites are fully supplied on a daily basis and the first projects are being carried out in Asia and Europe in cooperation with EPCs. Experienced local and regional Van Leeuwen teams with specialized knowledge dedicated themselves throughout the world to ensure the successful implementation of this contract.
We have further reinforced our MRO services in many areas throughout the world. In view of the increased price competition, Van Leeuwen is increasingly focusing on service as a differentiating factor, rather than on price cutting. The total cost of ownership stands to benefit more from a comprehensive service and logistics concept than from low selling prices. We also apply this service concept to the delivery of pipes, fittings and flanges for the daily operations in support of maintenance and repairs (MRO).
In 2015, we opened a new project office in Paris. This new office enables us to further expand our contacts with large, internationally operating energy companies and engineering firms in France. The
Paris team works together with the project acquisition and execution teams in Le Havre (France), Vilvoorde (Belgium) and Zwijndrecht (the Netherlands). In view of the interesting developments in the North African market, we are increasingly active in this area. In addition to traditional deliveries for the oil and gas industry, the demand from the manufacturing industry is growing here.
In 2015, we sold our 28% interest in the joint venture Benteler Distribution Deutschland to Benteler Distribution International. As a result, a positive and productive partnership that lasted over 12 years came to an end. The sale of this minority interest enables us to operate independently on the German market and to directly supply international customers with branches in Germany.
Middle East
Our companies in the Middle East started off the year with a wellstocked order book. Most of these projects have since been delivered and the results were very satisfying. In 2015, the effects of political
tensions and the low price of oil were highly visible in this region. Projects and investments came to a halt or were postponed. Following the start of lifting sanctions in Iran, we took initial steps to once again build up our position there. Van Leeuwen has had a strong position in this country in the past.
Asia and Australia
This past year, our regional head office in Singapore was very actively involved in the execution of a number of larger projects in Asia and beyond. Van Leeuwen has been active in this region for more than forty years and for many international EPCs, Van Leeuwen is the right partner for larger, complex projects.
With our regional warehouses in Singapore, Malaysia and Thailand, we have access to excellent facilities and a broad product portfolio for the entire region. Furthermore, the warehouse in Kulai, Malaysia, offers ample opportunities for storing materials for customers and specific projects. In addition to energy customers, we now also do this for OEM customers, for example in the crane construction sector. Customers that we have been supplying for years in Europe are now
contacting us in this region as well.
Our company in Thailand expanded a number of MRO contracts and now makes daily deliveries to many petrochemical plants in Sri Racha, Rayong and Map Tha Phut. Sales in the Philippines and Vietnam increased and our Shanghai branch completed a number of projects on the Chinese market. The local Chinese market continues to be very difficult, however, in part due to overcapacity and a slowdown in demand. Our previous joint venture in China has since been converted into a fully owned Van Leeuwen company. This office continues to remain active in procurement in China.
In Australia, Van Leeuwen has branches in Sydney, Melbourne, Adelaide, Perth and Brisbane. The Australian market has further consolidated in recent years. The low level of investment in mining and the impact of the low price of oil are very noticeable. There is a slowdown in demand and a shrinking manufacturing industry due to the transfer of production to other countries in Asia. Nevertheless, Van Leeuwen is maintaining a solid position in this challenging market, in part due to our strong position in the Fluid Power segment. The Wheatstone LNG Project, to which we made our first deliveries two years ago, is reaching its final stage. By the end of the project, we will have supplied some 40,000 tons of materials. This concerns the supply of pipes and pipe components of various carbon and stainless steel qualities for the development of an offshore gas field and for an LNG mill in Western Australia.
North and South America
The impact of the slowdown in the energy segment was most noticeable in North America. In Alberta, Canada, investments in the oil sands came to a virtual standstill as a result of the low oil prices. We were therefore forced to reduce our operations in Canada. The difficult market conditions also had their effect on our Houston office. However, this branch was able to book a number of export-oriented
projects, particularly for the mining sector in South America.
The start-up of our global contract with ExxonMobil was another large-scale activity in the United States. We have since been supplying the required materials for daily maintenance, and the larger shutdowns and turnarounds to seven sites in the United States. For this purpose, Van Leeuwen signed a partnership agreement with Lockwood International, an international supplier of industrial valves. In addition to making daily deliveries to the various sites, we expect to execute a number of larger projects for ExxonMobil in mid-2016.
The Brazilian market is experiencing great difficulty at the moment. The economic and political climate has deteriorated and the stateowned oil company Petrobras is suffering under the price of oil and corruption scandals. These conditions have an impact on the market and our operations. The situation for our Brazilian branch, which we acquired two years ago, is therefore very difficult and compels us to take measures.