An interview with the Executive Board
Thanks to the continued trust and loyalty of our customers, Damen has enjoyed an acceleration in sales growth in recent years. With Damen likely to achieve a record orderbook by the end of the second quarter, the three board members – Chief Executive Officer René Berkvens, Chief Operations Officer Arnout Damen and Chief Financial Officer Frank Eggink – outline their thoughts on the company’s achievements to date and indeed, the challenges from accelerated growth and where it could do better.
Q: Clearly, Damen has accomplished a great deal in 2012 and 2013; new yards have been opened and business has been booming in some of your market segments such as Security, Offshore and Yachting, but has it all been ‘plain sailing’ to use a nautical term?
René comments: “2013 was an absolute record year, our order intake was steady and we achieved 170 deliveries.
“However, this doesn’t mean it wasn’t without its challenges. We had to ‘fight on many fronts’ as it were – maintaining our quality engineering, getting the right stock levels, logistics etc. Our subcontractors worked with us on this and it wasn’t easy for them either. I can safely say that without our trusted suppliers we wouldn’t have realised the results that we did.”
Frank adds: “Damen is not alone in having to deal with growth pains. The Group has grappled with sales growth of current and new vessel types, corresponding hull stock levels for fast delivery times, higher customer finance demands, assimilating new and experienced talent while maintaining the company culture, enhancing organizational capability through investments in systems and process redesign, developing new production capacity both owned and with business partners and cashflow. Striking a sustainable balance between all has presented a formidable challenge and that is what the Executive Board is singularly focussed on. Personally, I think we are capable of achieving even more than we do today. Damen is performing well but there is considerable potential that we all work hard to unlock.”
“Crucially, we want to be able to control the impact of this terrific growth so it is sustainable,” René says.
Q: This growth led to a big influx of new talent to Damen to ensure that it could meet its customers’ needs. How did you deal with that?
René explains: “Indeed, we have had an influx of both young and new blood and experienced hires both in the Netherlands and abroad. This meant that many people had to get used to a new environment, forming new working relationships, new ways of working and becoming part of the Damen family. We strive for ‘One Damen’ in everything we do.”
Arnout stresses: “Many of our new engineers had to face a steep learning curve for sure. But without this influx of engineering expertise we could not have taken on some of the pioneering offshore projects for instance. We now have the engineering capacity to serve our customers better, to cut down lead times, while still ensuring the high Damen quality levels.”
Q: Would you say the shipbuilding environment is changing, and if so, how is Damen adapting to this?
René says: “There is certainly more distance between the designers and engineers of the vessel and the shipbuilding location. And it is a challenge to overcome these distances and deliver results through a more geographically dispersed organisation.”
Frank adds: “As the company grows worldwide, it does require somewhat of a shift in mindset; everyone needs curiosity and more cultural awareness about the countries where we produce and where we sell our vessels. We all need to have a sustained determination and eagerness to continuously improve in every aspect of our business activities.”
“We see my father Kommer still going around many vessels with his notebook looking at how things can be improved – we should all share this same drive for perfection and do that wherever we are in the world,” Arnout says.
Q: And regarding the portfolio, do you think you have the right balance?
René says: “It is important to have the right combination in our sales portfolio, not just the standard built series production that Damen is known for, but also the more specialist vessels such as those in the offshore sector that need more of a project organisation behind them.”
“Essentially, we should strive to avoid large swings in financial performance. A higher degree of predictability will allow us to attract the funding we need for growth at acceptable pricing,”
Crucially, we want to be able to control the impact of this terrific growth so it is sustainable
Q: And as much as Damen has had many successes, there are segments of this highly cyclical industry that are still struggling – the cargo, coastal and inland sectors for instance? What has Damen done to address this?
Frank: “We have captured the opportunity of sales deceleration in the cargo and coastal markets and decided to transfer our production capability even more to the Far East. This will achieve a more cost competitive environment for our vessels and we can pass this on to our customers.”
“However, all the product knowledge remains in the Netherlands and Damen only builds at those locations where it can absolutely guarantee the Damen standards of quality,” Arnout stresses.
Q: Guaranteeing reliability and quality is fundamental to Damen’s values – would you say the customers are looking more towards the overall TCO – Total Cost of Ownership?
“Yes, absolutely. At Damen our customer’s experience of a vessel has to be unsurpassed. They must be satisfied in view of the TCO,” Arnout says.
Q: And presumably that’s why the company continues to spearhead its R&D programmes so it can continue to innovate and, as a consequence, achieve a lower TCO?
Arnout emphasises: “Damen always has been very focused on product development and this has led to the pioneering Hybrid ASD Tug, the Sea Axe bow and soon the LNG-powered EcoLiner.
“The PSV 3300 and Damen Offshore Carrier (DOC) were the result of years of R&D. The DOC is a new design, but we’ve already sold two to major clients and building them as we speak. Through design and process innovations we can reduce the TCO.”
“We are always mindful of our customers’ requirements, in terms of vessel characteristics. It is vital we continue to align our standards with their needs in terms of, for example, seakeeping capabilities, operating cost and fuel efficiency, price point and swift delivery times. And this should be combined with an after-sales service, which is second to none,” René comments.
Q: As well as after-sales service, is Customer Finance an important part of the service portfolio too?
Frank says: “Financing solutions are needed by many of our customers. Currently, Damen can offer a series of financing solutions. Based on customer feedback, we have identified potential for other solutions tailored to their specific needs and we are working closely with our ‘house’ banks and other financial institutions to complement our suite. Our growth and that of our customers has been materially helped by their support and that of for example Atradius’ excellent export credit insurance programmes, for which we are grateful. Goes without saying we aim to continue to build on these close relationships in pursuit of future growth. “
Q: Reflecting on 2013, what stands out as the innovation of the year?
All three: “We are all in agreement that it is the Walk-to-Work vessel. Damen went back to the essence of the performance requirements for this product, such as the need for staying out at sea for longer periods of time and the need for more permanent support facilities for those working further offshore than usual. We listened closely to what the market was telling us, started the design from scratch and came up with a hotel and work vessel in one. It fulfils the requirements of safety and crew comfort for projects taking place further out to sea.”
Damen can offer a series of financing solutions. Based on customer feedback
Q: In summary, would it be fair to say that 2014 is somewhat of a consolidation year after a sustained period of growth?
René comments: “Yes, I think that is fair comment… we admit we didn’t always get it right in 2013 and there were occasions when our customers had to wait longer for vessels than we would have liked and suppliers had to wait rather longer for payment. But we took action, increased our stock and are improving management of working capital. We have undertaken many improvement initiatives to shorten engineering and production cycle times. Additionally, large investment projects were successfully completed, such as our new Joint-Venture yard in Vietnam together with SBIC, Damen Song Cam Shipyard, a state-of-the-art facility which will eventually increase production to 80 vessels a year. We have also built a new yard in the Middle East: Damen Shipyards Sharjah, our second joint venture with Albwardy Marine.”
Q: And currently, what are all three of you concentrating on?
René says: “We always want to improve on production and efficiency. We have taken the feedback from our customers on board and upgraded the quality of our logistics. Without this feedback we cannot improve, which is why Arnout, Frank and I, like to visit clients whenever we can.”
“We know what we have to do to improve and are determined to make steps in the right direction,” Frank adds. “We will continue to have a listening ear to make sure we listen to our partners and how we can make the most relevant products at the right cost point. There is a strong sense of engagement and pride in the Group – through good teamwork across the globe, we can unlock the full ‘blue’ potential.”
Arnout summarises: “We will continue our relentless focus on customers and their need for quality products and services at an attractive cost of ownership. Our services organisation is one of the key focal points and opening Service Hubs in for example Australia and South Africa is proof of that. We want to be close to our clients.
Overall, in 2014 we will continue to work hard to further strengthen the foundation for sustained growth; this will enable us to continue to satisfy our current and new customers and outperform the competition.”