Industrial storage firm Vopak will develop a new terminal in China and expand existing ones in Belgium and Mexico to focus on chemicals as its oil terminals in Singapore become less profitable due to new shipping rules, it said on Monday.
The Dutch firm said it would develop a storage facility for chemicals in Qinzhou Chemical Park in southwest China after poor oil terminal performance hurt its third-quarter core profit.
Terminals in Singapore, the world’s biggest bunkering port, have been scrambling to convert to handle cleaner shipping fuel to meet new International Maritime Organization regulations known as IMO 2020 aimed at curbing pollution.
Vopak reported earnings before interest and taxes (EBIT) slightly below consensus at 407 million euros ($454.70 million), saying the oil terminals in Singapore and Europe partially offset good performance from new assets.
Its shares were down 3.2% at 1030 GMT, set for their steepest fall since April 23.
“Singapore is the toughest one in terms of the third-quarter performance,” finance chief Gerard Paulides said on a conference call.
However, Vopak is working to restore the capacity of its Singapore terminals so that they will start supporting profitability in the fourth quarter, he added.
Vopak said the slight drop in its end-of-quarter occupancy rate, which came in at 84%, reflected market conditions at oil hub terminals and conversion activities related to IMO 2020.
Other segments of Vopak’s business remained solid, it said, adding most fuel oil capacity conversions for IMO 2020 have been delivered and will support revenue from the fourth quarter.
ING analysts, however, said how long the effects from IMO 2020 will last is “difficult to say”.
Vopak said it would continue to boost its global terminal portfolio with investment of 300 million euros to 500 million euros in 2020.
“I think we might be pushing toward the higher end of the range if we are successful in 2020, and I don’t see any reason why we wouldn’t be,” Paulides said.
The new industrial terminal in China, in which Vopak will hold a 51% share after developing it together with Shanghai Huayi Group and Guangxi Qinzhou Linhai Industrial, will have an initial capacity of 290,000 cubic metres and is expected to be commissioned in mid-2021, Vopak said.
It added it would expand its Linkerover terminal in Belgium by 30,000 cubic metres, and its Altamira terminal in Mexico by 40,000 cubic meters.
Reporting by Zuzanna Szymanska in Gdansk, Editing by Sherry Jacob-Phillips, Louise Heavens and Emelia Sithole-Matarise
