IHC Caland N.V.
IHC Caland N.V.
Sales: $1.34 billion (2004)
Stock Exchanges: Euronext Amsterdam
NAIC: 336611 Ship Building and Repairing; 333120 Construction Machinery Manufacturing; 541330 Engineering Services
IHC Caland N.V. provides engineering and support services for the offshore oil and gas industry and for other industries, including dredging, mining, shipyards, gravel extraction, and others. The company's services include the design and production of offshore loading/unloading systems and even the design, manufacturing, and operation of complete Floating Production Storage and Offloading Systems (FPSO/FSO). The company, through its SBM Group of subsidiaries, builds and leases these turnkey platforms, a concept pioneered by IHC Caland itself, and the company remains the world's leading producer of FPSO/FSO systems. Through subsidiary NKI B.V., IHC Caland also provides design, engineering, and construction services for the building of airport and railroad terminal infrastructures. IHC Caland is also a world-leading provider of customized dredging equipment, an activity related to the company's former status as the world's leading manufacturer of dredging vessels. In 2005, however, IHC Caland completed the sell-off of its IHC Holland shipbuilding operations, representing the end of some 300 years of history. Listed on the Euronext Amsterdam Stock Exchange, IHC Caland posted sales of $1.34 billion in 2004.
Roots in the 16th Century
IHC Caland inherited a tradition of shipbuilding and engineering stretching back as far as 1500 and even earlier, when records indicated that the Zeeland region had already achieved recognition for its shipbuilding activities. The region was particularly active in the manufacture of dredgers, used in the construction of the country's dike system. The Smit family later emerged as one of the region's most prominent shipbuilders and engineers. The Smits originally designed and built windmills, starting in the early 17th century; some of these, such as the windmills on the Kinderdijk, remained popular tourist attractions into the 21st century. By 1687, the Smits also were building ships, especially dredgers.
The company's expertise in dredging enabled it to become a major force in the international markets for this kind of vessel. By the mid-19th century, the Smit yard was producing dredgers for Japan, starting with the delivery of its first in 1857. By the end of the century, Smit also had entered the Chinese market, delivering its first dredger in 1895. Over the next century, the company was to produce 100 vessels for China alone.
By the late 1930s, the Smit family was involved in two major Kinderdijk shipyards, L. Smit & Zoon and J&K Smit. In the early 1940s, the companies received a major order for six tin dredgers from the Billiton Mining Company, then a subsidiary of Royal Dutch Shell, for use in Billiton's Indonesian mining operations. In order to fill the order, the Smit yards joined forces with a number of other prominent yards in the region, including De Klop, based in Sliedrecht; Gusto, based in Schiedam; Verschure in Amsterdam; and Werf Conrad-Stork in Haarlem. Backed by the Billiton order, the six companies formed a partnership in 1943, called Industrieele Handels Combinatie, or IHC. The partnership delivered its first dredger, the Mendanau, in 1947.
The success of the Billiton order led the partners to begin working more closely together during the 1950s. In particular, IHC turned its long history of engineering innovation and expertise to tackle a new market, that of the burgeoning offshore platform industry. In the early 1950s, IHC began developing a new offshore platform construction technology, called Single Point Mooring, or SPM. The company successfully pioneered what was to become an industry standard.
IHC continued to display a knack for innovation. In 1961, the company released its CALM buoy system. Over the next several decades, IHC succeeded in patenting a number of new technologies related to its dual core focus of shipbuilding and offshore systems. Meanwhile the adoption of its technologies, and particularly its SPM systems, led IHC to create the dedicated subsidiary Single Buoy Moorings, or SBM, in 1969. SBM remained a leader in the SPM market, retaining a 50 percent share into the 2000s.
Another growing area for IHC was its production of equipment for the offshore industry. The Gusto yard, which itself stemmed from 1862, became the site of much of IHC's operations in this sector. In 1960, the company launched its first jack-up drilling rig, designed and built at the Gusto year.
United Company in the 1960s
By the mid-1960s, the continued growth of IHC led its partner companies to begin moving to a full-fledged merger. In 1965, the partner companies formed IHC Holland NV Industrieele Handels Combinatie NV, which was then listed on the Amsterdam Stock Exchange, with each member retaining control of a block of shares. The only member of the original partnership that did not join the new company was Conrad-Stork, because it had come under the ownership of rival shipbuilding group VMF.
IHC initially attempted to consolidate its operations and bring them under a single, central leadership. In 1966, the company merged the two Smit companies into a single concern, Smit Kinderdijk. IHC also attempted to bring its other member companies together. Yet by 1968 it became evident that differences in corporate cultures, as well as the strong historical identity of each company, made further consolidation too difficult. Instead, in 1968, IHC adopted a new organizational structure, grouping its operations into three primary divisions. Offshore included Gusto, and then SBM starting from 1969. Dredging included Smit, as well as Verschure and De Klop. The company also set up a separate division for its Mining & Transport Engineering operations.
The economic slump during the 1970s led the company to a first consolidation of its shipbuilding and other operations in the latter half of the decade. The company shut down the Verschure yard in 1980, then merged De Klop with another Schliedrecht shipbuilder, Van Rees. Meanwhile, the shipbuilding operations at the Gusto shipyards were closed in 1978; in that year, instead, Gusto was reformed as Gusto Engineering B.V., focused on drilling and other equipment for the offshore industry.
IHC entered the 1980s with hopes for a resurgence in the international dredging market, and in 1983 commissioned a new modern wharf facility on the former Van Rees site. The company also had extended the IHC Smit Kinderdijk operation, adding new facilities for special construction operations. Smit Kinderdijk also launched a modernization effort, completed in 1986.
Yet the hoped-for upswing in the dredging market did not materialize. With its sales dropping and profits crashing, IHC was forced to undertake a more thorough restructuring. In 1986, the company began shutting down facilities and slashing jobs. By 1987, as its losses continued, the company further reduced its shipbuilding operations to just two sites, Sliedrecht and Kinderdijk. These companies were then merged together to form the single IHC Holland N.V.
By 1988, the last of IHC's founding members had sold its stock, and IHC at least succeeded in acquiring full control of the operation. The company changed its name, to IHC Caland, which served as the holding company for its diversified companies. Among them, SBM had continued to develop strongly, particularly after it pioneered another groundbreaking market for the offshore oil and gas industry. In 1977, SBM built the first Floating Production, Storage and Offloading system, or FPSO/FSO, a turnkey offshore platform complex that was built for and sold to Shell. Yet SBM also conceived another industry first—that of leasing FPSOs. The first of these was built and leased in 1981.
Exiting Shipbuilding for the New Century
Into the 1990s, IHC confronted a declining market for dredgers. In order to reduce its vulnerability to the softening market, the company acquired Dutch shipbuilding company Merwede in 1993. That company, founded in 1905, enabled IHC to begin extending into other shipbuilding areas, notably ferries, while also expanding its position among the worldwide dredger market.
In 1997, IHC again boosted its shipbuilding operations through the acquisition of the Giessen de Noord shipyard. This company also provided expanded capacity for IHC's dredger business. Yet IHC continued to seek expansion opportunities elsewhere as the European shipbuilding industry faced increasingly stiff competition from lower-cost competitors in Asia. The Giessen de Noord purchase became attractive in this light as it brought a new operation, NKI B.V., into the IHC fold.
NKI was founded in 1970 to provide engineering and construction services for airport and other terminal infrastructure projects. By 1974, the company had received its first contract, for Schiphol Airport, and by 1977 won its first international contract, for the Murtala Moh Airport in Lagos, Nigeria. NKI later expanded its operations to include railway terminals as well.
IHC expanded its offshore services division in 2001 through the acquisition of U.S.-based Atlantia Offshore Limited. Founded in 1979, Atlantia focused on the Gulf of Mexico and North Sea markets, designing and constructing fixed platforms. The company's first platform was commissioned in 1984, and by 2005 the company had built more than 150 platforms worldwide. Two years later, IHC added to its design and engineering capacity with the acquisition of Ocean Design, based in Houston.
Mission Statement: IHC Caland's mission is to be a leader in its chosen fields of business, and thereby realise on a long-term basis a return on its invested capital substantially higher than its cost of capital. In this way it aims to create value and provide the shareholders with a return on their investment commensurate with the risk involved, and so also to secure the continuity and independence of the corporation.
By then, however, IHC's shipbuilding business was struggling to survive in a depressed market against its lower cost Asian rivals. At the beginning of 2003, the company continued to affirm its commitment to its shipbuilding, and especially its dredger building business. By the middle of that year, with 100 percent of its profits now generated by its offshore business, IHC was forced to concede defeat. In that year, the company closed the Giessen de Noord shipyard. IHC then announced a plan to spin off its remaining shipbuilding operations as a separate and independent company.
Yet mounting losses in the division forced IHC to drop the spinoff plan by October 2003. Instead, the company announced its intention to move out of shipbuilding altogether, and began looking for a buyer for its shipbuilding operations. That operation was completed in March 2005, with the creation and sale of IHC Holland Merwede. Rabobank acquired a 49 percent stake through a subsidiary, while IHC Holland Merwede's management and employees acquired a 33 percent stake. The remainder was bought by Indofin, an investment group owned by the De Bruin family. IHC Caland looked forward to a new future as a specialized engineering group.
Atlantia Offshore Limited (U.S.A.); IHC Gusto Engineering B.V.; IHC Holland; Marine Structure Consultants; N.K.I. B.V.; SBM Group; SBM Imodco (U.S.A.); SBM Offshore Systems; SBM Production Contractors; SBM Services.
Halliburton Company; Bechtel Corporation; Dragados, S.A.; Edeco Petroleum Services Limited; BJ Services Company.
- The Smit family of Kinderdijk begins shipbuilding, later specializing in building dredging vessels.
- The IHC partnership is created through the combination of six shipbuilders, including two Smit companies, Gusto (founded 1862), De Klop, Verschure, and Conrad-Stork.
- The company begins developing the Single Point Mooring offshore platform system.
- Gusto launches the first jack-up drilling rig.
- IHC is incorporated, and the company lists on the Amsterdam Stock Exchange.
- The Smit companies merge as part of an effort to centralize IHC operations.
- IHC changes its strategy and develops a decentralized model.
- SBM is created as a dedicated offshore engineering subsidiary.
- SBM builds the industry's first FPSO for Shell.
- The Gusto shipyards shut down and Gusto becomes an offshore engineering specialist.
- SBM becomes the first to build and lease FPSOs.
- IHC launches a reorganization, resulting in the consolidation of shipbuilding to just two sites, creating IHC Holland.
- IHC becomes IHC Caland, which operates as a holding company for shipbuilding and offshore businesses.
- IHC acquires the Merwede shipyard, founded in 1905, diversifying its shipbuilding into ferries and other vessels.
- IHC acquires the Giessen de Noord shipyard.
- IHC acquires the Atlantia Offshore Systems, focused on the Gulf of Mexico and North Sea markets.
- IHC shuts down the Giessen de Noord shipyard and announces plans to spin off its shipbuilding operations, which are combined and reformed as IHC Holland Merwede.
- IHC announces its decision to sell the shipbuilding business instead of spinning it off as a separate company.
- IHC completes the sale of IHC Holland Merwede.
Bickerton, Ian, "IHC Caland Abandons Ship to Rivals After 300 Years," Financial Times, August 26, 2003, p. 22.
——, "IHC Caland Issues Warning, Drops Spin-Off," Financial Times, October 7, 2003, p. 26.
——, "IHC Optimistic Over Oil Activity," Financial Times, August 31, 2004, p. 24.
Hill, Helen, "IHC Caland Bows Out of Shipbuilding," Lloyds List, March 3, 2005.
——, "IHC Caland Optimistic After Shipyard Disposal," Lloyds List, February 1, 2005.
"IHC Caland Backs Shipbuilding in Spite of Trying Times," Lloyds List, June 23, 2003.
"IHC Caland Goes Ahead with Double Yard Sale," Lloyds List, August 6, 2004.
Krane, Jim, "Dutch Oil Drilling Equipment Maker Reports Flat Profits," AP Worldstream, January 31, 2005.
Ramstack, Tom, "IHC Caland Bows Out of Shipbuilding," Financial Post, August 26, 2003.
—M. L. Cohen