Speaker #1: Morning, everyone. Thank you for dialing in to this webcast, we have published our Q3 training update this morning. My name is Kathryn van Duttiga, Investor Relations, and Hugo, I'm here with Marc Hein, our CEO, and Kees den Oude, our interim CFO.
Speaker #1: First, Marc will present a couple of slides; we'll take around 20 minutes or so. Maybe a little bit more, and then we will open the floor for your questions.
Speaker #1: Thank you, Marc. Please go ahead.
Speaker #2: Yes, welcome everybody. Good morning, welcome to the Q3 2026 training update. We go to the second slide. As we indicated at the publication of our first half-year results, we have indicated that the second half of the year will be challenging, and our third quarter performance reflected that outlook.
Speaker #2: Revenue grew, albeit modestly, and driven by a steady growth in oil and gas and infrastructure. This highlights our ability to successfully redeploy our capacity into there, helping also to offset the continued weakness in offshore wind site markets.
Speaker #2: When we look at our margin development, it's clear that the positive impacts of the ongoing implementation of the cost reductions during the last quarters have not yet translated into our margin.
Speaker #2: The achieved cost reductions were offset by lower pricing in marine site characterization, an incremental cost related to the Middle East War. In addition, we incurred a one-off charter expenses on two inspection and monitoring campaigns in Australia.
Speaker #2: Our priority is clear: to improve profitability and strengthen cash flow. We have taken substantial action over the past years to reduce our cost base.
Speaker #2: And current 50 million annualized cost reduction program is progressing as planned, and we're building on these actions by further intensifying our focus on structural performance improvements.
Speaker #2: This increasingly involves fundamental changes in how we organize ourselves, how we operate the business, which takes time to fully implement, and we're approaching these actions with urgency and strong focus on delivery.
Speaker #2: Looking ahead, we expect offshore wind site characterization to start to recover, from the second half of 2027 onwards, as already communicated also at half-year.
Speaker #2: This expectation is supported by healthy tendering activity throughout the firm, although I have to say firm awards have yet to follow, and our offshore wind backlog remains below last year's level.
Speaker #2: It's good to take note of that. But I will get back to the backlog and outlook later. We go to the next slide. Turning specifically to the Middle East, the situation remains volatile, and continues to affect our operations.
Speaker #2: The negative EBIT impact was approximately 25 million euro year to date. Of which 50 million was already communicated in the first half of the year, which is March to June.
Speaker #2: The additional third-quarter impact mainly relates to operational disruptions. The transfer of the FUGRO resilience through the Strait of Hormuz, and some clients deciding to undertake certain inspection and monitoring campaigns in-house.
Speaker #2: We have made operational adjustments that have reduced the impact of spoofing and jamming. However, disruptions of GNSS navigation signals continue to affect operations in the Gulf region.
Speaker #2: We also see some indirect effects outside of the region, including higher fuel costs. The wider repercussions for the business environment remain difficult to predict.
Speaker #2: Looking ahead, the principal risk are potential delays in customer investment decisions, higher fuel prices, insurance costs, and changes to project startups and mobilization schedules.
Speaker #2: We're managing these effects as actively as possible and as best as we can, but the environment remains highly uncertain. We will therefore continue to monitor the developments closely and adjust our operations where necessary.
Speaker #2: Above all, the safety of our people remains our foremost priority. We go to the next slide. Now an update on the progress we have been making with our vestual rationalization program.
Speaker #2: As you know, this includes a variety of permanent and temporary adjustments to our vessel fleet. First, the retirement of own vessels. In Q3, we retired the older geophysical vessel, the FUGRO Meridian.
Speaker #2: Within the next couple of months, we will also retire an older geotechnical vessel, the Americas, FUGRO Explorer. This is, by the way, a vessel that is fully depreciated.
Speaker #2: We talk about the long-term charters. In Q4, we will let go of two of our four long-term geotechnical charters. This is the Commander Orca; we'll be released at the end of its charter period, early 2027, and the Pacific Grounds will also be released upon the completion of the charter period in Q4.
Speaker #2: There has been replaced by the FUGRO Resilience, our own capacity, which arrived in the Gulf region in early September. And it's currently fully operational on its first project in the region.
Speaker #2: Then if we talk about the vessel deployment, redeployments, so we already spoke about the FUGRO Resilience, we're also talking about the FUGRO Helmet is to schedule to sail to the Middle East region in Q4 2026.
Speaker #2: And the FUGRO Resolve is planned to operate in the Europe-Africa region as well as in the Americas, in the first half probably of 2027.
Speaker #2: We'll see that happening. We didn't talk about cold and warm layups, and there are a lot of discussions in the what is cold, what is warm, basically the longer you lay up something, the more cost you can save.
Speaker #2: The FUGRO Zenith, the FUGRO Revelation, and the Alleganza are now in the regular winter layup. That's for the winter season. While the FUGRO Pioneer has been also in a so-called cold layup since Q4, Q3 earlier in Q3.
Speaker #2: Winter layup may follow, with more vessels, depending on the completion of ongoing projects and scheduling of future work. And we'll obviously continue to reassess the fleet capacity and benchmark it current against current market developments, existing backlog, and future expectations.
Speaker #2: And we're also trying to remain flexible for work that walks in and obviously also to be ready for a potential up cycle that is in the future visible.
Speaker #2: We go to the next slide. Let me briefly comment on the development of the 12-month backlog. The backlog was 8.5% lower year on year.
Speaker #2: This decline is predominantly driven by offshore wind. Where the reduction in the market activity continues to affect the order intake for marine site characterization, as we have spoken about many times before.
Speaker #2: In oil and gas, the year-on-year comparison includes the large Indonesian project that was in the backlog last year. So if you exclude that project, the underlying oil and gas backlog has actually increased in multiple areas around the world.
Speaker #2: Infrastructure backlog also remains resilient, supported by continued demand across our key regions. We're seeing a broader change in customer behavior with clients increasingly awarding work closer to the planned execution date.
Speaker #2: This reduces backlog feasibility, but does not necessarily indicate an equivalent reduction in the underlying level of market activity. The backlog therefore needs to be viewed in context.
Speaker #2: The headline decline reflects both weakness in offshore wind and the effect of timing and project phasing in oil and gas. At the same time, we remain very cautious.
Speaker #2: In offshore wind, tendering activity is healthy. But firm awards have yet to be followed. And we have to rebuild our and see it back in our backlog.
Speaker #2: Overall, the backlog supports our expectation of continued activity in oil and gas and infrastructure, while offshore wind is likely to remain subdued in the near term.
Speaker #2: We go to the next slide. So now a couple of comments about the regional performance and also the business line or the two areas, marine and land.
Speaker #2: First, marine. Revenue declined by 2.1%. Now our largest business line, marine site characterization in Europe-Africa, we have seen an ongoing shift in revenue mix towards generally typically shorter duration oil and gas projects.
Speaker #2: While we continue to maintain strong market positions, particularly in geotech solutions, industry overcapacity has resulted in lower pricing, particularly in geophysical services. Although we are actively rationalizing our fleet, adjusting the cost base takes time, and therefore also this has a significant adverse impact in the group's margin.
Speaker #2: In the Americas, more asset integrity business has been seen in Brazil, as you know, on the long-term contracts that we have started. And that has been partly compensated by an ongoing soft marine site characterization marked environment there as well.
Speaker #2: In Asia-Pacific, asset integrity, revenue, included a high contribution from two inspection and monitoring campaigns in Australia. With a relatively high portion of low margin passed through revenue and a significant one-off charter cost.
Speaker #2: In the Middle East, results were impacted by incremental expense from the war, as we spoke about, including some clients deciding to undertake certain inspection and monitoring campaigns in-house.
Speaker #2: Themselves. In our land business, the 19.5% currency comparable growth was primarily attributed to strong nearshore activities in Europe and Africa. And more onshore infrastructure projects in the Americas in particular in the US.
Speaker #2: With that, we go to the next slide. Free cash flow. Whilst the free cash flow was 3 million, compared to 26 million in the third quarter of last year.
Speaker #2: The benefit of a lower working capital outflow was offset by lower operating cash flow. Primarily reflected by a decline in EBDA. Capital expenditure was 34 million, euros, and remain in line with the full-year guidance of approximately 150 million euro.
Speaker #2: Phased revenue outstanding improved from 82 days a year ago to 80 days. And the quality of the receivables remained sound. As the aging profile of our revenue or receivables improved.
Speaker #2: Working capital remained elevated at 17.7% of the 12-month revenue at the end of September. And this is driven by increased revenues in the year to date.
Speaker #2: As well as lower Capex and other payables. We've remained committed to bringing the working capital down to our targeted level of 10 to 15% range at year-end.
Speaker #2: Consistent with normal seasonality patterns, we expect working capital to unwind in the fourth quarter. We go to the next slide. The balance sheet. We continue to proactively manage our balance sheet.
Speaker #2: First, the leverage. The net debt amounted 474 million euro, as per end September 2026. Broadly unchanged from the 473 million at the end of June resulting in a net leverage of 1.9 times.
Speaker #2: As we are above the self-imposed target of 1.5 or below 1.5, I should say, we are focused and intent to further strengthen our balance sheet moving forward.
Speaker #2: Management is very focused on to improve financial performance and actively manage net debt through strict capital discipline. Limiting Capex and managing working capital down to our target level of 10 to 15% of revenue, as I just mentioned.
Speaker #2: Then our maturity profile. We are pleased to have secured a long-term funding until 2031. On the 14th of October, we announced that we have secured a two-year extension on the maturity of our existing senior unsecured debt facilities to December 2031.
Speaker #2: On the exact same terms as secured in December 2024. Extending the maturities of our RCF of 400 million and the term loan of 100 million to 2031.
Speaker #2: On the 22nd of October, we paid back the 14 million euro loan, the term loan. We took last year as a temporary measure to strengthen operational flexibility.
Speaker #2: In parallel to extending our debt facilities, we announced a 150 million unsecured financing facility with the European Investment Bank. To support a phased development and deployment of our uncrewed service vessel technology and the related subsidy robotics and remote control.
Speaker #2: The facility underpins our technological leadership and provides long-term funding. Effectively protecting our RCF from potential future funding needs related to the transformation towards US feeds.
Speaker #2: It's important to add that the facility does not determine how much and where we will invest. Further investments in US feeds will, of course, be evaluated on their own merits.
Speaker #2: The business case for US feeds is built on the ability to operate in a more efficient, safer, and sustainable way. Gradually we will be replacing our traditional geophysical vessels with US feeds.
Speaker #2: And that is also no basically not necessarily taking out all the vessels because we also feel that those larger vessels will be needed for particular projects.
Speaker #2: But over time, the larger vessels will be reduced. Then we go to the next slide. So let me turn to offshore wind. Obviously, the big question of many of you.
Speaker #2: Our long-term view of this market has not changed. Offshore wind remains an essential component of an affordable, secure, and diversified energy system. Alongside other renewable and conventional energy sources.
Speaker #2: Its strategic importance in Europe was reaffirmed by the North Sea Summit earlier this year. Reflecting the growing focus on energy security and independence. Political commitment therefore remains strong.
Speaker #2: At the same time, the industry continues to recalibrate. Developers are placing greater emphasis on financial discipline project returns and delivery certainty. Governments are also working to improve auction frameworks and risk allocation.
Speaker #2: This is necessary to restore developer appetite and to create a healthier basis for investments. However, the translation of political ambitions into bankable projects and firmer words is still taking longer than anticipated.
Speaker #2: Progress differs significantly country by country. And developers remain selective. There are nevertheless encouraging signs. The recent successful auction in Denmark supports our view that the European market is gradually moving towards recovery.
Speaker #2: Further auctions are expected in a number of markets, including the United Kingdom, France, the Netherlands, and several Asian countries. In parallel, investment in European grid infrastructure is increasing.
Speaker #2: This is essential to address the connection constraints and ultimately enable further offshore wind development. And the medium and long-term investment outlook remains attractive. And to go in a bit more detail, the next slide.
Speaker #2: And this slide provides more detail on what the recovery could mean for FUGRO and, importantly, the expected timelines. The chart shows the sharp reduction in awarded European offshore wind capacity in 2026.
Speaker #2: It also shows the significantly stronger pipeline of ongoing and planned auctions over the coming quarters. If you look at the graph here, you need to take a little bit of time to really understand what you're seeing here because the last three columns there, or the last three bars, you need to add together to get the combined gigawatts of new auctions being brought to the market in the upcoming three quarters.
Speaker #2: And you see different forms of that. So we already seeing healthy tendering activity, supported by improving auction and contracting frameworks across several countries. And these changes are intended to provide developers with more attractive balance between risk and expected returns.
Speaker #2: The important point is that there is a time lag between the auction and the resulting activity for FUGRO. So an auction process normally takes between three to six months.
Speaker #2: Where the site is awarded to the developer, survey activity would normally begin around six to nine months later. Depending on the type of auction and the maturity of the project.
Speaker #2: And again, you see different means of auction suggested here in the slide. In several markets, including the Netherlands, Belgium, Germany, Denmark, governments are also commissioning surveys before the auction itself.
Speaker #2: These state-led programs can create activity earlier in the cycle. Beyond the initial site characterization phase, FUGRO can also support projects through the detailed engineering investigations, construction support, and subsequent inspection and monitoring.
Speaker #2: The opportunity therefore extends across a considerable part of the project lifecycle. Based on the current auction pipeline and the expected timing, of the subsequent surveys, work we continue expect offshore wind site characterization activity to begin recovering from the second half of 2027.
Speaker #2: And I do want to emphasize that we remain cautious. Tendering activity is healthy, but firm awards have yet to follow at the required scale.
Speaker #2: Our expectation is therefore based on a visible and improving pipeline, but we still need to see this pipeline to convert in actual projects and backlog.
Speaker #2: We go to the next slide. Two more slides. So now turn to the other core markets of FUGRO, where the medium-term outlook remains sound.
Speaker #2: In offshore oil and gas, we continue to see selective growth rather than a broad-based expansion. The market is absolutely affected by the ongoing volatility in the Middle East, but the underlying fundamentals remain supportive.
Speaker #2: Continued investment is required to compensate for the natural field depletion and also to maintain sufficient spare production capacity. We see particularly attractive activity in frontier and deep water developments in Latin America, Asia Pacific, and Africa.
Speaker #2: At the same time, construction activity is increasingly focused on smaller tie-backs and modifications to existing assets, rather than large new greenfield developments. These play well to our broad offering across site characterization, asset integrity, and inspection and monitoring.
Speaker #2: The aging offshore asset base also creates structural demand for inspection, maintenance, and life extensions of services. This provides a relatively resilient source of activity, even in a more volatile investment environment.
Speaker #2: In infrastructure, long-term investment programs continue to support activity levels. We are seeing particularly opportunities around nuclear energy and data centers in Europe and the United States.
Speaker #2: With data center investment also accelerating in Asia Pacific. We do, however, remain mindful of the pressures for the geopolitical uncertainty, persistent inflation, and increasing sovereign debt.
Speaker #2: These factors can affect timing of public and private investments, overall though, the expectation investment growth in both offshore oil and gas and infrastructure supports our confidence in the medium-term outlook of these core markets of FUGRO.
Speaker #2: I come to the last slide. To conclude, our outlook for the full year remains unchanged. Market uncertainty is expected to persist, and what is normally a seasonally slower fourth quarter.
Speaker #2: Customer caution over capacity in parts of the marine site characterization market and continuing impact of the war in the Middle East are all expected to weigh on profitability and therefore on our full-year margin.
Speaker #2: Against that backdrop, our immediate priorities are clear. We're focused on improving profitability, protecting cash generation, and strengthening our balance sheet. The $50 million annualized cost reduction program remains on track.
Speaker #2: At the same time, we're intensifying our efforts to structurally improve performance. This goes beyond the current program and includes further changes in the way we operate and organize our business.
Speaker #2: As well as the already named vessel rationalization measures discussed. We're also applying strict capital discipline. Capital expenditure for the full year remains limited to approximately $150 million, and we expect the normal fourth quarter working capital unwind to support cash flow.
Speaker #2: So while the near-term market environment remains challenging, we're taking decisive action on the elements within our control. At the same time, the medium to longer-term financials across offshore wind, oil, and gas, and infrastructure remain sound.
Speaker #2: And with that, I would like to open up for questions.
Speaker #1: Ladies and gentlemen, we are now ready to take your questions. If you wish to ask a question, please press #P5 on your telephone to enter the queue.
Speaker #1: The first question comes from Luc van Beek from De Grove Petercam. Please go ahead.
Speaker #3: Yes, good morning. I have two questions for now. So first, on you mentioned in the press release that you're taking actions to fundamentally change how you organize and operate the business.
Speaker #3: So that sounds like something different than just cost savings by taking out vessels and people. So can you elaborate a bit on that? And my second question is on the capacity planning in view of the smaller shorter projects and the tendency of customers to wait longer before they award new projects.
Speaker #3: Does that make it more difficult for you to keep your vessels vessel planning optimal?
Speaker #2: Thank you, Luc, for the questions. So your first question is around the additional announcement that we are looking more fundamentally at how we're organized, how we operate.
Speaker #2: This is something that we have kicked off over the last couple of months. Basically, to more structurally look at how we're organized, what do we do centrally, what do we do decentral?
Speaker #2: Are there efficiencies possible? For instance, by implementing maybe more AI solutions, but also other software tools where possible. So we're looking at all the functional setups that we have in the organization.
Speaker #2: And see if we can bring efficiencies there. By reviewing. Basically, throughout the whole organization, vertically, how we're set up. For instance, in legal or HR or finance, and so on.
Speaker #2: So we do that throughout the business, but also throughout the functional services. And this is obviously something that will yeah, that's not low-hanging fruit.
Speaker #2: It's not necessarily meant to generate huge cost savings, but it will take 6 to 12 months probably to properly implement certain things and maybe some things will even take longer.
Speaker #2: But this is more fundamental way of seeing how can we further optimize our organizational setup. Your second question is about capacity vessel planning. The shorter projects.
Speaker #2: Obviously, that means you need more projects to fill up your vessels. That also could mean, and this is what we have seen in some areas in the world, more idle time on vessels.
Speaker #2: In between projects. Obviously, in the past, where you had longer and larger offshore wind projects, that were further in.
Speaker #1: Ladies and gentlemen, we are experiencing a technical difficulty. Please hold on.
Speaker #3: I think we dropped out on our sound from connection issues here. On our side, Luc, did you get my answer?
Speaker #1: Luc has disconnected. We Luc, if you can signal again, #P5 to enter the queue. For the remainder of your question, we will continue oh, there he is.
Speaker #1: Luc, your line is now open.
Speaker #3: Yes, sorry. I lost the connection halfway. The answer, I think, on the vessel utilization.
Speaker #2: Okay. Yeah, it was a problem on our side, the connection. So apologies for that. Okay, so on the capacity look, I was saying that you're correct that with shorter projects, this is obviously a bigger challenge to keep the vessels properly utilized and deployed.
Speaker #2: It's you have larger chance to have some gaps in the utilization between the projects if you have shorter projects. Whereas in the past, with the longer and larger offshore wind projects, it's easier to do this planning and more securely to have high utilization.
Speaker #2: So in that sense, you're right. We obviously adjusting to that. We let go of short-term third-party vessels, which we always do in the winter seasons and also as I spoke about, reduce the longer-term charters.
Speaker #2: And obviously take out some of our older capacity as well. So in that sense, we put more tension on the total fleet to have higher utilization.
Speaker #2: That is our key goal.
Speaker #3: Thank you.
Speaker #1: All right. The following question comes from Philip Ngodo from Kepler Chevreux. Please go ahead.
Speaker #3: Good morning, and thank you for taking my questions. I have three, if I may. Four on the vessels that you're relocating. I was wondering to what extent do you have visibility on work for these vessels?
Speaker #3: So I assume, of course, you relocate them, but then there should be there for a longer period of time. Otherwise, it's not with relocation costs.
Speaker #3: So what visibility do you have on actual work for these vessels? And also, for example, in the case of the helmet vessel, that it's I believe it's scheduled we're relocated to the Middle East.
Speaker #3: What's the risk that the vessel could be impacted by ongoing tensions in that region? That's my first question. My second question was if you could elaborate a little bit on the I missed it, but on the campaign that was taken in-house by client, I believe.
Speaker #3: What was the reason for that? And could we see more of these things happening in the future as well? And my last question is on that chart that you show with the auctions in upcoming auctions.
Speaker #3: Two questions there. The offtake only, the six gigawatt for the UK, does that imply that you expect AR8 to lead to about six gigawatt of offshore wind auctions being awarded on the CFD contract there?
Speaker #3: And maybe also on the 10 gigawatt that it's linked to other regions, could you maybe explain which regions specifically? Because it does make up a large part of that site-only part.
Speaker #3: Those are my questions.
Speaker #2: Yeah, thank you, Philip. So first, vessel relocation. Obviously, you know that we have already relocated the Brazilians and. Yes, that took a bit longer.
Speaker #2: To eventually gather through the Strait of Hormuz. But we managed to do that, and that the vessel is now operational. The decision that we have taken on the helmet is done because we hired their quite a number of third-party vessels against a certain cost, and we believe that by bringing in the helmet, we can do this work also with our own capacity.
Speaker #2: So there is work that we can immediately start doing once we are there. We obviously realize that that is still a journey to go through.
Speaker #2: Therefore, we have also prospects along the way. So in Egypt and also in other places, along the way there, we might be able to keep the vessel already earlier occupied on projects.
Speaker #2: So we obviously doing this with great care, and we're not moving on spec, so to say, vessel to the other side of the world.
Speaker #2: We also spoke about a vessel, the Resolve, being deployed in between Europe and Americas and Africa. We are obviously only moving these assets when we have work in a particular area.
Speaker #2: We're also not sailing over to Africa without firm work on the books. So that's what I can say around that. Because you're right, moving vessels around the world costs a lot of money, and you only do that when you have some certainty to have work and return.
Speaker #2: Then you asked around elaboration on the clients taking some work in-house in the Middle East. Basically, what you have to imagine that some of these clients that have projects ongoing and this could be construction clients as well to do all sorts of construction work within the Gulf, they have issues to also keep their own schedules or stick to their own schedules because they need to bring in more capacity or maybe supplies or maybe pieces of equipment to be installed.
Speaker #2: And they sometimes face difficulties with that because they also need to go through the Strait of Hormuz. Then they have idle capacity in the area.
Speaker #2: And basically, they try to also optimize their capacity that they have. And sometimes even a very large asset can then be deployed to do a simple survey, for instance, or a simple operation ROV operation inspection and monitoring campaign.
Speaker #2: Because yeah, they also look at optimization. So we had some examples there in the third quarter where we lost some work simply because the client decided to do it themselves.
Speaker #2: es. With a not really suitable asset, but an asset that they had available. So that's the story. And then you talk about the auction chart that we have.
Speaker #2: Two questions from your side. The offtake only and then particularly around the UK and the AR8. We do indeed expect AR8 to be on the board in the upcoming period.
Speaker #2: There's a lot of interest shown before we already heard people asking to bring it forward. So we do expect this to move ahead. How large exactly?
Speaker #2: I'm not 100% sure. So we'll have to follow up on that. But we saw an AR7 that I think they came out with five point something gigawatts in the end.
Speaker #2: They awarded more than seven. I'm not necessarily saying that this could be the same or so, but we have to see what are the eventually will be.
Speaker #2: Then but I think at the moment it's scheduled for six gigawatts. Then the 10 gigawatts that is also listed below in the comments that we have at the bottom of the slide.
Speaker #2: You see how it's built up. It's built up by a number of countries there. Finland, Portugal, Italy, and so on. So you can see their build-up of the other element.
Speaker #3: Okay. Thank you. Very clear.
Speaker #1: The next question comes from Jeremy Kincaid from Van Landschap Kempen. Please go ahead.
Speaker #3: Good morning, Mark and Katrine. Just one question for me as well on the same slide. Obviously, a large part of the story requires a recovery in the second half of 2027 as offshore wind recovers and the tender outlook certainly does look very promising.
Speaker #3: But when I look at the chart, 2025 had 13 gigawatts' worth of capacity awarded. Over the next two and a bit years, it's going to be over 40 gigawatts.
Speaker #3: It feels like quite a lot for these offshore wind developers to absorb. So I was just curious, on your thoughts, if the industry can actually handle that much, additional capacity, and if there's any talk around the offshore wind developers hiring in advance of this or any indicators to suggest that developers can actually and want to bid on the full 41 gigawatts?
Speaker #2: Yeah. Jeremy, really good question. And a couple of things that I can say about that. We also indicated here that yeah, it does not necessarily mean that if governments come out with auctions that everything will be taken.
Speaker #2: That is, I think, very important to take note of. Additionally, it doesn't include what you see here because here we only talking about the auctions.
Speaker #2: It doesn't include the government work that also is done before auctions even start. So that is also important to mention because Germany we have announced the work that we have secured again for the upcoming period years in Germany for BSH.
Speaker #2: So those kind of things are not in included anyway. That is one thing. The other thing is that if we see here the 40 gigawatts, it's split in different ways.
Speaker #2: Obviously, as you see, it is something to that is currently scheduled for the next three quarters. I do expect a change in this first and foremost because even in some countries like, for instance, France, there's elections.
Speaker #2: So we'll have to see where it is moving to, what it will be decided. But this is just us reflecting what is currently on the books on the planning.
Speaker #2: Just to indicate more clearly what is currently scheduled. I have already mentioned in a number of occasions that I'm concerned exactly about what you mentioned, that everything comes at once.
Speaker #2: So we have seen in Fugro 25 and 26 being yeah, almost a now not a grinding halt but a very strong reduction in new auctions and work for Fugro.
Speaker #2: And this is basically yeah, coming to an end with the intentions that all the governments have to bring yeah, Europe into a situation where there's energy independence.
Speaker #2: So there's a lot of commitment from these governments. However, they need the time to actually get to these new contract forms. And to organize themselves and now you see all these countries more or less coming out at the same time or in the upcoming period.
Speaker #2: And that is somewhat concerning because as you say, operators will not be able to take everything in and they will make choices. Also, the industry will not be able to serve everything that is potentially happening.
Speaker #2: At the same time. So and that has a risk, obviously, that you will see maybe also an effect again a few years thereafter that it's yeah, that operators say, well, hang on, prices move up or whatever.
Speaker #2: The case could be in these quick turnarounds. So I share that few, Jeremy.
Speaker #3: Great. Thanks for the color.
Speaker #1: The following question comes from Dais Bergkelder from ABN AMRO Auto BHF. Please go ahead.
Speaker #3: Morning all. Thanks for having me. First, a couple of questions on yeah, call it one-off effects or extra effects in the quarter we had.
Speaker #3: You mentioned 10 million impacts from Middle East. Can you maybe quantify the Australian impact? Can you maybe quantify the impact of higher fuel costs and maybe quantify the impact of higher insurance costs?
Speaker #3: Then second question is on the backlog. I'm very happy to see that the backlog is in marine is picking up again. It's 10% higher.
Speaker #3: And of the previous quarter, a question there, does it already include the full contract of Timor-Leste or only a small part of that contract?
Speaker #3: Then you're also a chair in the Dutch Maritime Organization or so. Can you maybe tell us a bit more on how the discussions with the Dutch government are progressing regarding offshore wind?
Speaker #3: Whether you see any acceleration there in the streams? Finally, there's a very strong pickup in nuclear. Can you maybe also quantify the size there and the backlog related to nuclear?
Speaker #2: Okay, Dais. Thank you very much. For all the questions. So first, maybe the one-off effects and I think you mentioned in particular the Middle East.
Speaker #2: So indeed, altogether, the Middle East here today is now 25 million as mentioned before and 10 million in the second quarter. That is more tilted towards the region itself.
Speaker #2: And I think that is what we have communicated. I do not have an exact number for insurance cost increases but I think in particular, the insurance cost was obviously high when you bring a vessel through the Strait of Hormuz.
Speaker #2: So that is a business case that you need to make. And you need to wait till the right moment where the situation is at such a state in such a state that the insurance cost come down and then you say, okay, now we go through with all the additional measures that you have to take.
Speaker #2: And those can vary a lot day by day, week by week. So we obviously I think we timed it quite well with the resilience at the time.
Speaker #2: But and the fuel cost, yeah, is significant that we have in Fugro. We obviously especially had in the second quarter more contracts that were probably affected by not being able to fully recharge the additional cost to our customers.
Speaker #2: We're obviously much sharper on that now this conflict is ongoing for some time. So over time, this should further reduce. On the other hand, it is sometimes included in our top line because it's obviously charged as revenue also to the customer.
Speaker #2: And then there's obviously also affecting in that sense maybe a little bit the margin. So that's good to realize. And on the 25 million in the Middle East as a whole, I could say that probably three quarters of that is in the region itself and one quarter in the rest of the world.
Speaker #2: Then I support your comment on marine growth between the second and the third quarter. On the backlog, Timor-Leste is fully included there. So that was all awarded two lots geophysics and geotechnics.
Speaker #2: Deepwater development, very interesting new area. And a good project for Fugro to be involved. So that I can say there. And then maybe first nuclear.
Speaker #2: I don't have a very specific number for you on the nuclear side. I know that specifically in the United States, we're involved in multiple projects.
Speaker #2: We have secured several. And some are multi-year. So then we are involved in yeah, in the upcoming years, where we have to do certain amount of work in a certain timeframe or spread around a longer time.
Speaker #2: But we can come back on that and see if there's any additional information on it. But at the moment, I think we have to wait probably for the first official announcement on one of these projects.
Speaker #2: But very often, we're not allowed to also be specific around the contract values that these clients are more or less always stating that they don't want to have that out in the open.
Speaker #2: So we need to be careful there. And your last question, if I have answered all the others by the way, is around yeah, me being also chair of Maritime and Offshore NL.
Speaker #2: And specifically what the Dutch government is doing. I think we see that in most of the governments being involved in the Hamburg Conference, that's they are absolutely preparing for these new options and they take it quite seriously.
Speaker #2: They also see that the industry is suffering from this period. They realize it. They try to do what they can, but they also need a certain amount of time.
Speaker #2: So I think the right steps are being taken. And everybody is fully committed to make this happen. And to also drive the energy independence, as I said before, of Europe.
Speaker #2: Quite an important thing. It's also in Brussels, I think, high on the agenda. Having said that, it takes time and they have limited means to further speed it up.
Speaker #2: And that is also where my concern is raised, that yeah, everybody's trying really hard to push, push, push, and then suddenly everything comes more or less in the same period.
Speaker #2: And that is a little bit a concern. And I do hear also from these governments that they try to coordinate it between the countries but it's very, very difficult.
Speaker #2: So this is a little bit what I can say on this element.
Speaker #3: Okay. Thank you.
Speaker #1: The next question comes from Quirin Mulder from ING. Please go ahead.
Speaker #3: Yeah. Good morning, everyone. A couple of questions on wind from my side. And on the working capital. Do we hear me?
Speaker #2: Yes, we can hear you. Absolutely, Quirin. Welcome.
Speaker #3: Okay. On the working capital, it's 17.7%. That is a relatively high and it's not related to the DSO. So maybe you can explain what is.
Speaker #3: What is the cause there? That's my first question. And about wind. First of all, if you look at the order book in wind, that is even larger than in the second quarter.
Speaker #3: How can we translate? Is that related to the fact that you have now included third quarter 27 in the order book against taking out this third quarter of 26?
Speaker #3: Is that what's happening? Is that the shift of a quarter? So maybe you can elaborate that or is that increase of. And then how is the in the wind, how is the competition at this moment?
Speaker #3: How desperate are they with regard to winning orders? Even if there's some tendering activities, that these tenders are being concrete and then you still have very, very low prices in the market.
Speaker #3: Is there anything you can say about that?
Speaker #2: Can you Quirin? Very good. So maybe if I first talk about the order book in wind. So what you see there is that yeah, the first projects slowly coming through in this area are some of the tenders basically being awarded to projects.
Speaker #2: That helps in building backlog again. I don't think we have seen yet the larger translation of tenders into firm backlog, which is something that I think we should get more clarity on in the upcoming months.
Speaker #2: Because as I said before, there's a healthy tender activity. No firm projects or not enough firm projects yet to really say, okay, now the activity is also immediately increasing.
Speaker #2: So I think the signals that we earlier in the year flagged and saw are now becoming more specific and concrete in the forms of tenders.
Speaker #2: Not yet in the forms of projects. In the extent that it needs to be. But to some extent, yes, that is also happening. And we have received also some awards over the last few weeks, some of it still needs to be announced.
Speaker #2: So that is it's good signals, but we remain cautious because we need a lot more translated into the backlog in that sense to have firm work and to see the activity really increasing.
Speaker #2: And as we say, it probably is also due to the lack of new options and so on, as presented more visible in the second part of 2027 activity-wise.
Speaker #2: And then maybe connect immediately competition and pricing. We have spoken about that. Obviously, also at first half of the year, I think we have done quite well in securing work, especially in geotech area.
Speaker #2: That means that obviously with significantly less work out there, that competition is also becoming more aggressive to secure work for their assets. So that pressure will continue to be there in the upcoming quarters.
Speaker #2: I believe. I don't necessarily say that the prices will come down significantly on top of what it has already been, especially in geophysics it's probably more stabilizing.
Speaker #2: At this level, which is a low level and it needs to improve as soon as activity comes up. Then working capital. Working capital, as you say, it's not in the days still outstanding.
Speaker #2: It is yeah, obviously a combination of things, but yeah, net debt is also stabilized, but working capital is basically a combination of yeah, collections that still need to be done.
Speaker #2: And invoices that need to be sent out. And especially the last, the latter part, we're strongly focusing on the working progress to bring that down cases as interim CFO really on top of that to make sure that everybody is invoicing as much as we can.
Speaker #2: To also be able to collect, yeah, with the amount of days there. So this is obviously one reason and yeah, you also have to deal with the relationship with the revenue and then that gives a certain percentage.
Speaker #2: We do expect in the fourth quarter that it will come down as normal with the normal seasonal pattern.
Speaker #3: Okay. Thank you.
Speaker #4: The next question comes from Christophe Samoy from KBC Securities. Please go ahead.
Speaker #3: Yes. Good morning, Christophe Samoy, KBC. Thank you for taking my questions. First of all, on the slide with the auction schedule, aside the absolute amount of gigawatts mentioned, is there any support in there for Fuhro from the quality of work, type of work?
Speaker #3: And then I'm specifically referring to floating versus fixed bottom of wind, whether that already be a meaningful growth contributor for Fuhro. And then as a follow-up, can you confirm that looking at the life cycle of an offshore wind project, that up until the auction phase, the vast majority of the geodata that you collect occurs through geophysical and not geotechnical?
Speaker #3: That would be the first block of questions. And then secondly, strong performance seen in land, in terms of top line, also in the backlog.
Speaker #3: Can we say that the land division has turned the corner or is there some one-off large project in there? And what about ground IQ?
Speaker #3: Do we see simply a continuation of demand in projects there or do we see an acceleration, if you could give a little bit more color on that too?
Speaker #3: Thank you.
Speaker #2: Yeah, thank you very much for the questions there. So maybe first to talk about floating wind and the areas allocated to that. We have done globally already quite a few projects or survey work related to floating wind proposed areas.
Speaker #2: I think it is still an area that is not developing very rapidly. So it's still the verdict is out how fast and how yeah, economically viable these solutions are.
Speaker #2: But I think people are continuing and still planning also in Asia quite a bit of floating wind projects. So I think this is definitely not going away.
Speaker #2: There is also work to be done on the floating wind side. So the difference, there is absolutely a difference, I would say, on the other hand, yeah, floating wind, the windmills that are floating, also need to be attached to the sea bottom.
Speaker #2: And therefore you still need to do site characterization work. You also still need to know all the details of the seabed. So in that sense, there is a difference.
Speaker #2: You could probably say less geotechnical work required, but because you have less piles in the seabed and it depends on the solution that you use, I think there are many, many, many different solutions being worked on for offshore wind.
Speaker #2: So it's very difficult for floating offshore wind, very difficult to make a generic comment around that. But there are still work, everything you do offshore, there's work required in the seabed.
Speaker #2: And that is geotech as well as geophysics. If I jump to, sorry, yeah.
Speaker #3: Yeah, just wondering, whether you could confirm or not that looking at the life cycle of an offshore wind project for Fuhro, up until and including the auction phase, the vast majority of work is geophysical.
Speaker #3: Instead of geotechnical, it's only after the auction phase and the run-up to FID and then towards construction that geotech becomes the vast majority of your work.
Speaker #2: This is in principle correct. However, we also see still fields that have been awarded already to clients that clients are now starting to kick off and ask geotechnical work for.
Speaker #2: So we do not necessarily feel that it's only geophysics being required to moving forward. And there's also a difference in what kind of geotech work is required in the particular soil conditions where we have complex soil.
Speaker #2: There's a lot of coring required and especially in the upcoming period, we do see a lot of coring geotechnical requirements coming up. So and that is something that Fuhro does really well.
Speaker #2: So if I move over to the land side, we did see a strong performance in land, which is largely attributed to the nearshore work that we have been doing in the region, Europe, Africa, and primarily Europe.
Speaker #2: We had some larger projects nuclear developments as well. Nearshore developments where we used large jackup barges that were deployed with high utilization. This has driven a lot of nearshore activity that is booked in our land division.
Speaker #2: And that has caused for sure a better return. On the other hand, we also have seen increased activities in the Americas on the land side.
Speaker #2: And an improvement on some of the European countries on the land base as well. So this is something that is a result of some of the restructurings that we have done in 2025, early 2026.
Speaker #2: And then specifically talking about ground IQ, which is also attributing to a better result in the land business, we see this progressing well. And further expanding.
Speaker #2: And we do see still lots of opportunities to further grow this solution. In the business, in the land business, eventually as I mentioned before, moving a large part of the land business into a combined solution where geophysics and geotechnics are combined to give clients a lower cost, significantly better answer much faster.
Speaker #3: Okay. Thank you. No further questions. Back to the operator.
Speaker #4: Next question comes from Beth Bergfelder. Please go ahead.
Speaker #3: Yeah. To follow up questions from my side, congrats with the hire of a new CFO. Can you explain how the, let's say, the handover will be timed?
Speaker #3: That will be handled more or less? And the second question, I forgot. Sorry.
Speaker #2: Okay. So I will fill in the second question for you, Beth.
Speaker #3: I know it now.
Speaker #2: Go, go.
Speaker #3: That's on the US fee fleet. Can you maybe give an update there on the progress? And maybe relate to that what the long-term or maybe mid-term or short-term ambition is for the shipyard making these US fees.
Speaker #2: Okay. So first, a couple of words on the CFO Emil starts on the 16th of November. So very soon. But he is actually already quite busy getting to know the company, getting to know people, doing some of the basic training that requires as well.
Speaker #2: So we're quite extensive in communication with each other, which is really good, which facilitates also fluent handover. Case now, as interim CFO, is still here, is available for us till the year-end.
Speaker #2: We can flexibly use him in the handover as well as thereafter if required. So case is also writing handover documents for Emil. So I think this is going to be a very smooth upcoming period where Emil gets a really good successful start in Fuhro.
Speaker #2: And Emil I've spoken to him, he's enthusiastic to get going as soon as he can. Then on the US fee fleet, basically we have more or less finished the build of the traditional essence, the 12-meter units that we used to build.
Speaker #2: And the last ones are finalized we are in the process of finalizing a build of five geophysical use fees. As you know, and we spoke about, we call them the prisms.
Speaker #2: Those are 17-meter geophysical uncrewed surface vessels. They come out in the first half of next year. Not all at the same time. And we'll be deployed around the world.
Speaker #2: So we're finalizing that during the installation of all the final equipment and sensors and the testing and so on. So this is being finalized.
Speaker #2: With that on the board, also with obviously a very tight investment program that we have in mind for next year, we are still focusing on keeping investments to a very much to a limit.
Speaker #2: So in that sense, we're not at the moment immediately kicking off a new US fees, albeit there is obviously a lot of work done in the background.
Speaker #2: To be ready to pick that up again. Whenever we feel the time is right. We want the first to be even more successful in deploying those units and having those successfully out there in the field.
Speaker #2: And make money with the new ones that have come out and that are coming out in the first half of next year. So this is our key focus.
Speaker #2: Then I don't know if I understood you well on the yards that are building these, because we do that in consultation with vessel builders that build the hulls and the propulsion systems for us.
Speaker #2: I believe that all vessel builders in the world eventually will start building some sort of remote solution and operated vessels. This is just the future.
Speaker #2: And that will not be stopped. So I see also in other industries. Much more uncrewed remotely operated vehicles coming in. So that is what I can say on the US fees.
Speaker #3: Okay. Thank you.
Speaker #2: I just want to come back on one question because I didn't finalize Quiraine's question on the working capital because Quiraine, I wasn't complete there.
Speaker #2: Because the percentage is high also because the payables are significantly low. We obviously have less Capex than in the past and we have less payables.
Speaker #2: So it's a bit strange, but that drives your working capital up in that sense. So therefore the percentage is still high in relation to the revenue.
Speaker #2: My apologies for that. I should have said that before.
Speaker #4: We have time for one more question. The final question comes from Philip Ngoto from Kepler Chevreux. Please go ahead. Your line is open.
Speaker #3: Yes. Thanks for taking the questions. There are two very short to clarify a few things. First of all, on the 50 million cost savings, can you just maybe give a bit more details?
Speaker #3: Where are we exactly in terms of hitting that run rate of 50 million and when do would you expect to hit that run rate to have it fully in the P&L or not fully, but at least achieving those cost savings?
Speaker #3: And the second question is maybe on just. Dividend thoughts for the results over 2026? I mean, your dividend policies, of course, on a percentage of net results, but likely 2026 will be a net loss year given how the first half of the year was.
Speaker #3: So what are the thoughts early thoughts in the dividends?
Speaker #2: Okay. Thanks, Philip. For your first question on the 50 million program, yeah, this is letting go of some of the charters. We have communicated that in the deck as well that some will happen in the fourth quarter.
Speaker #2: So in that sense, everything is prepared. Everything is ready. As soon as the project completes, we let go of the vessel. An example I mentioned, for instance, the Fuhro Graus is one of those.
Speaker #2: So then you see that we can immediately act as soon as the last day of work is done. And there are a few other things that are happening in the fourth quarter.
Speaker #2: And some are actually happening around the first quarter. It's not only assets, it's also obviously related cost there and some people. So I believe that all these actions will be taken certainly in the first half of 2027, that the actions are taken.
Speaker #2: So I think that program we could say is then implemented in the first half of 2027 with the majority in Q4 and Q1 of next year.
Speaker #2: Then your other question was referring to the dividend? Oh yeah. Okay. Yeah. So I will say the same thing as I said before. A dividend is very important to Fuhro, obviously.
Speaker #2: We realize that Fuhro has been over the last couple of years paying dividends. To take the final decision on what we're doing there is obviously too early at the moment.
Speaker #2: So the right timeframe for that is to look at your full-year results, your full-year cash generation, and then take final decisions on dividends. I can just assure you that, yeah, when we started paying dividends, we said we only start when we can actually pay multiple years in a row dividends.
Speaker #2: We do obviously realize that with the current free cash flow production, this is a different discussion than maybe a couple of years ago. Nevertheless, we'll take those decisions only on the full-year results.
Speaker #3: Okay. Thank you.
Speaker #2: And with that, I think we finalize the last question. So I want to thank everyone for participating. And wish you all good day. And if you have any additional questions, obviously you can contact Catherine from Investor Relations.
