Great Lakes Dredge & Dock's 1Q Profit, Revenue Rise
Great Lakes Dredge & Dock Corporation reported a first-quarter net income of 11.1 million in the first quarter of 2022 an increase compared to first-quarter 2021 income of $8.8 million.
Revenue for the quarter was $194.3 million, an increase of $16.7 million from the first quarter of 2021. The higher revenue in the first quarter of 2022 was due to higher domestic capital and coastal protection revenue, offset partially by a decrease in revenue from maintenance dredging, rivers and lakes, and foreign projects.
The income increase was driven by higher operating income and lower interest expense, offset partially by higher income tax expense, the company said.
While the income and revenue numbers increased, Lasse Petterson, President and Chief Executive Officer said the result was a solid one, but still below expectations.
He said: "Although we reported solid results in the first quarter of 2022, we did not fully meet our expectations as we experienced delays from abnormal weather events, production impacts, and some lingering costs from the COVID-19 pandemic that diminished as the quarter progressed."
"As previously discussed on our last earnings call, two bomb cyclones brought heavy snow and coastal flooding to the Northeastern United States in January and strong sustained winds impacted several projects in the Southeastern United States pushing production into later quarters. Climate change continues to impact our nation, and our coasts continue to see damage that is a result of severe storms and rising waters. Although these weather events have short-term impacts to our operations, we expect the resulting damage to add to the recurring nature and increased long-term demand for dredging-related projects."
In addition to the unusual weather impacts, Petterson said that its Liberty Island Trailing Suction Hopper Dredge was in scheduled dry dock the entire first quarter and two of the company's cutter dredges were partially idle during the quarter due to project start delays.
Strong Dredging Bid Pipeline
As for the dredging market outlook, the company said: "At the end of 2021 the domestic dredging bid market reached $1.8 billion in projects bid. We expect the 2022 bid market to be as strong as 2021 as the market continues to be driven by the large-scale port deepening projects along the east and gulf coasts.
"We ended the quarter with a 50% bid market share, consisting of several coastal protection projects that will added to our total backlog. In 2022, we expect to see the continuation of port deepening bids in the ports of Norfolk, Freeport, Mobile, Sabine and additional phases in the Houston Ship Channel. In addition, our nation’s coasts are subject to climate change, increasing severe weather events like Hurricane Ida, and sea-level rise, which can cause an increase in beach erosion and other damage that adds to the recurring nature of our business and the need for more frequent coastal protection and port maintenance projects," the company said.
U.S. Administration's support for Dredging and Wind
The company also hailed strong support from the Biden Administration for the dredging industry as well as for the nascent offshore wind industry.
On March 15, 2022, the Omnibus Appropriations Bill for the fiscal year 2022 was signed into law, which included funding for the U.S. Army Corps of Engineers totaling $8.3 billion for fiscal year 2022. This is an increase of $548 million above the fiscal year 2021 level and an increase of $1.6 billion above the President’s original budget request. Appropriations included $4.57 billion for Operation & Maintenance, $2.49 billion for the Harbor Maintenance Trust Fund in accordance with the Coronavirus Aid, Relief and Economic Security Act and the Water Resource Development Act, and $35 million for the Flood Control and Coastal Emergencies account including $19.8 million for the construction of shore protection projects.
In April, after the quarter close, Empire Offshore Wind, a joint venture between Equinor and BP p.l.c., awarded to Great Lakes, in consortium with Van Oord, a contract to perform the offshore subsea rock installation work for the Empire Wind I and II wind farms off the east coast of the United States. This project is estimated to provide over 2 gigawatts (“GW”) of renewable energy for the State of New York. The renewable power generated by the two wind farms is expected to power more than one million households in New York. This project is considered a flagship offshore wind development, shaping the future of this industry in the United States.
"This award is significant for our entry into this new market. The offshore subsea rock installation will start in 2025 and this award will provide a solid foundation as we build the backlog for our new subsea rock installation vessel from 2025 and onwards. Great Lakes will be generating local content, employment, and economic activity in the State of New York by purchasing rock from domestic New York quarries, and using its marine logistics base in Staten Island for its site operations," Great Lakes Dredge & Dock Corporation said.
Offshore wind to create thousands of jobs
The company also noted strong support for offshore wind from the Biden Administration.
"We believe the Biden Administration’s commitment to offshore wind will create thousands of jobs, and help our country transition to a cleaner, more diverse energy future," the company said.
In March 2021, the White House announced new initiatives that will advance the Administration’s goals to expand the nation’s offshore wind energy capacity in the coming decade by opening new areas of development, improving environmental permitting, and increasing public financing for projects.
As part of that initiative, the Departments of the Interior, Energy, and Commerce committed to a shared goal of installing 30 GW of offshore wind power generation capacity in United States waters by 2030. In addition, in January 2022 the Biden Administration announced plans to auction more than 480,000 acres in the New York Bight for six new offshore wind energy leases, the Biden Administration’s first wind sale, and the largest lease area ever offered, with potential build-out capacity up to 7 GW.