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Svitzer prepares to go it alone

After 45 years as part of Maersk, Danish towage business is about to re-emerge as a standalone company

Towage and terminal service may not be a high-growth sector. But the chief executive says there are benefits to avoiding the cyclicality of other shipping segments

BY THE end of April, leading towage operator Svitzer will become a separate listed company on the Nasdaq Copenhagen following its demerger from Maersk.

It will not be the first time it has had to go it alone. Its time under Maersk ownership makes up only a quarter of its near 200-year history.

But during that time it went from being a small Danish company to an international business and the largest operator of harbour and terminal tugs.

“We have enjoyed being owned by Maersk and have had a lot of benefits, but we are ready to stand on our own feet,” chief executive Kasper Nilaus told Lloyd’s List in an interview. “We did that for more than 100 years and are ready to do it again.”

The decision to demerge was largely driven by Maersk efforts to cut costs and focus on its core container integrator strategy, but it was a decision Nilaus was happy with.

“We are born with a very large shareholder base of Maersk shareholders and the same board of directors,” he said.

“But now, we will be listed on our own merits as a standalone towage and marine services company. That is positive as we will have more attention and dedication to what is right for Svitzer. We will position ourselves in the best possible way to continue the long history we have had and be successful in the future.”

That will mean more scrutiny of the company, which has been a relatively small business unit line in Maersk’s reporting when compared with its ocean, logistics and terminals businesses.

But Nilaus believes Svitzer has sufficient merits of its own as a stable business that does not suffer the same cycles and swings of other parts of shipping.

“We have activities in 37 countries, operate in 141 ports in harbour towage and have 40 terminals in direct contracts,” he said.

“We have exposure to container, oil, cruise and car carrier sectors, and a vast diversification of customer, contract types and geographies. When you put all that together, you get a very stable business.”

A downturn in one sector or region is often balanced out by an uptick in a different sector or region, giving a more stable performance.

That may be a change for investors more used to the slings and arrows of shipping’s outrageous fortunes, but that is something Nilaus is prepared for.

“For the stock market to appreciate who we are, we need to inform our investors and analysts,” he said.

“We are not traditional shipping. It is not cyclical. It is stable. We are part of the infrastructure in the port. That means we have more stable returns. We have had good stable growth over the past five years and we expect that to continue.”

Svitzer’s annual report for 2023, which it published independently of Maersk’s ahead of its demerger, shows a slow and steady growth pattern since 2019, far removed from the explosive growth and sudden contraction seen in box shipping, for example.

In the past three years, revenues have grown from DKK4.7bn ($683m) to DKK5.8bn, while earnings before interest, tax, depreciation and amortisation rose from DKK1.4bn to DKK1.7bn.

“We had sound underlying growth in our harbour towage and were able to increase prices along with inflation, but we also saw growth in our terminal towage,” Nilaus said. “We have also won significant new terminal towage contracts.”

This meant there was a “strong underlying business”, which while it would not have the sudden surges in revenues seen in other sectors, would continue to grow in line with the market at around 3.5%-5% a year.

The infrastructure model can also be seen in Svitzer’s dividend policy, which aims to return 40%-60% of profits to investors each year.

“Our value proposition is that we are an infrastructure share that grows with the market and pay a healthy dividend,” Nilaus said. “If you appreciate stability, Svitzer is a good place to go.”

Cashflow was sufficient to cover both dividends and future investments, he added.

“If there are major growth opportunities coming up, then we need to either borrow a bit more, which would still be conservative, or else go to the market,” he said. “But what we are forecasting now can be contained within our cashflow.”

One area where investment will be required is in decarbonising the business. Svitzer has an ambition to reduce emissions by 50% by 2030 and become carbon neutral by 2040.

Nilaus said the company had already made significant inroads, reducing emissions by almost a quarter since 2020. This had partially been done by the use of biofuels, but also by optimising the operation of its vessels.

The company has its own port monitor tool that allows it to track the movement of the vessels it works, limiting the speeds they are required to work at and the period for which they are deployed. It is also working to optimise the equipment and engines on its tugs.

“We try to use the lowest consumption possible and run the engines more efficiently,” Nilaus said.

The biggest challenge, however, will be the decarbonisation of the fuel required.

Nilaus said methanol would be the most likely contender for its uses, but the towage sector faces challenges other sectors do not.

“If we are to use future fuels, we need access to those in every port we operate in,” he said.

“We cannot just make a bunker stop en route around the world. We need methanol available in Angola and in London.”

Battery technology could also come into play, as capacity rises and costs fall.

“Our tugs spend a lot of time at berth,” he said. “In principle, if you have green shore power, you can plug them into a grid.”

But that too requires a grid infrastructure to be in place, which cannot always be guaranteed.

“You do have that challenge with batteries. I don’t think in the medium term they will work alone,” he said. “For now, it is going to need the back-up of a combustion engine for those times when the extra power is needed.”

Further digitalisation of the business is also on the cards, because this too can improve emissions from port operations.

“You have very busy ports with a lot of actors — shipping companies, agents, crane facilities, towage operators, pilots,” Nilaus said.

“There is no doubt that in most ports there is an opportunity to optimise. You can save money, time and emissions by optimising across the different actors in port.”

But the sheer number of moving parts made that difficult.

“We are trying to get as close as possible to port authorities and to our customers to minimise the friction and lack of transparency in scheduling,” he said.

“The digital area is one in which we have to become better. We are in a world now where you can get a lot of benefit out of the data. Where we have implemented our solution, we are saving 10% on fuel. The possibilities for efficiency out of the correct use of data are big.”

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