COVID-19 Impacts GLDD Profitability In First Quarter
Great Lakes Dredge & Dock Corporation, the largest provider of dredging services in the United States, on May 4 reported net income of $8.8 million for the first quarter of 2021, on revenue of $177.6 million. A year ago, Great Lakes reported net income of $34 million on revenue of $217.7 million.
The company reported lower coastal protection and capital dredging revenue, offset by an increase in revenue from maintenance dredging projects. Two of the company’s dredges, the Carolina and Dredge 55, were in drydock for the entire quarter, but are expected to return to work in the second quarter. A year ago, there were no vessels in drydock during the first quarter.
Great Lakes reported $486 million backlog at the end of the first quarter, a decrease of $73.4 million from December 31, 2020. “This decrease was expected as bidding activity is historically low in the first quarter of the year,” the company release stated.
Capital expenditures for the first quarter of 2021 were $16.5 million, which includes $5.4 million for a new hopper dredge, $1 million for a rock installation vessel, and $1.4 million for new multicats, the company reported.
“During 2020 as the COVID-19 pandemic hit our nation, Great Lakes was able to adjust and navigate the difficulties and challenges the pandemic posed to our operations,” said Lasse Petterson, president and CEO. “However, as the third wave of the pandemic spread through our population, we started to see significant additional direct costs and operational interruptions in the first quarter of 2021. Several of our vessel crews were infected despite our extensive testing and isolation protocols. Vessels were required to go to shore for crew changes and the vessels had to be disinfected before returning to work. This impacted the vessels’ scheduling and availability, which impacted our productivity on several projects and led to delays which pushed revenue from the first quarter into remaining quarters of 2021.
“Today the projects and vessels that were impacted are back in operation and with our solid backlog, vaccinations increasing, and stronger performance expectations in the third and fourth quarters, we do not see adjusting our full year expectations at this time.
“Approximately 23 revenue days were lost due to COVID outbreaks,” Petterson continued. “Downtime for the vessels impacted directly by COVID delays equated to $3.9 million of revenue and $1.2 million of gross margin. The direct COVID costs of at-home and on-site testing and costs of quarantining were $4.3 million in the quarter. We have initiated an extensive vaccination effort of our crews and staff and, as of today, we have approximately 20 percent of our staff either fully vaccinated or partially vaccinated. Our target is to have the majority of all staff and crew vaccinated in the second quarter of 2021, which we hope will greatly reduce or even potentially eliminate further impacts on our operations.”
Petterson said the company expects the domestic bid market to be just as strong as it was last year.
“In the first quarter, Great Lakes announced awards for the Boston Phase 3 Deepening Project and the Panama City beach renourishment totaling $90.3 million,” he said. “We also were the low bidder on the Mobile Deepening Phase 3 project that was pending award for $53.9 million at the end of the first quarter but has since been awarded. In addition, in April of this year we were awarded the Golden Triangle Marsh Creation Project in Louisiana for $32.4 million and we were the low bidder on the Captiva Island Project for $15.6 million.
“In the offshore wind market, the Biden administration has pushed to accelerate wind energy development and has set a target to install 30GW of offshore wind energy by 2030,” Petterson continued. “This target confirms our plans and determination to evaluate future investments in the offshore wind market. In December of last year, we announced the design and development of the first U.S.-flagged, Jones Act-compliant, inclined fall-pipe vessel for subsea rock installation for wind turbine foundations, and in March we awarded the integration engineering and detail design package to Ulstein. This vessel would represent a significant critical advancement in building the U.S. logistics infrastructure to support the future of the new U.S. offshore wind industry. Delivery of the vessel is expected in late 2023.”
Great Lakes said that, at the end of 2020, the domestic bid market for the year had reached $1.8 billion in projects bid. The bid market continues to be driven by large-scale port deepening projects along the East and Gulf coasts, the company said, adding that it expects bids soon for multiple-phase projects in Corpus Christi, Norfolk and the Houston Ship Channel that will continue for the next several years. Together with coastal protection and marsh creation projects, and the increased federal funding through the Corps of Engineers’ budget and Harbor Maintenance Trust Fund, the company said it was optimistic the 2021 domestic market will remain strong.