Quarterly December 2011 - Odfjell

More documents

Recommendations

Info

chairman’s message ODFJELL QUARTERLY magazine 10 Laurence W. Odfjell ‘We are living in interesting times,’ my grandfather Bernt Daniel Odfjell was prone to say when the company was facing tough markets or uncertainty. We are heading toward the end of another challenging year and this is an opportune moment to reflect upon the macro picture and how we have been positioning ourselves for the future. Outlook for sustainable growth in the world economy is fraught with uncertainty in light of the continuously developing twists and turns of the sovereign debt crisis in Europe (and the US), the seeming shift of world economic power, and the political unrest in large parts of the world. As a global provider of transportation and storage services, our arena is global trade, so any impact on the demand side will only prolong the adverse effects we have been suffering from the supply overhang of ships. Many argue that the global economy never really exited the crisis of 2008/09. Of course, there was a seeming rebound in certain sectors during 2010, but no structural solutions to the fundamental challenges of an emerging new economic order (or call it reality) have yet been put forth. As the debt crisis has (re) entered center stage in Europe - social unrest is increasing. This unrest will probably only grow as unemployment levels in many mature economies are already at worryingly high levels. Some argue that the western world are at the end of a mega trend of continuous growth in prosperity since World War II. If so, how to adjust expectations? Taking away privileges or benefits is never popular and is something politicians only will do as a last resort. There should be no doubt that austerity measures in the public sector will hurt. They will also increasingly impact the private sector and the so-called ‘Main Street’ economy, usually a lagging but nevertheless predictable effect. One emerging threat is that politicians revert to protectionist measures in an effort to protect or promote employment at home, thus responding to the demands of their electorate. Of course, protectionism would lead to reduced global trade, thus having a direct impact on the demand for our services. With projections of sluggish growth at best in the OECD countries, one would have hoped that international bodies would lighten the ever increasing load of new regulations coming into force. In the long view, certainly many of the initiatives by the EU, the US, the IMO, etc., will arguably safeguard public interests. However, all these initiatives come with short term costs of implementation and compliance, something that appears not to be fully appreciated by eager regulators in this challenging business environment. Who will foot the bill? Conventional wisdom would say that this will ultimately be paid by all of us (so a ‘tax’ on society). Can we really afford all of this now? In shipping, the anemic growth of demand combined with oversupply of ships in the many sectors has produced a deep crisis. Trade journals are filled with news of struggling operators and bankruptcies. Counterparty risk for our charterers is increasing. Are ships being maintained to safe standards when the owners are bleeding cash? Or what is the risk of an operator’s ships being arrested in port? Or performing reliably according to contract of affreightment? Of course, in the backdrop of the debt crisis (which easily can translate into a full blown banking crisis), financing of shipping activities will become an increasingly expensive and challenging proposition for many operators. Needless to say, banks are essential participants in our capital intensive business. Even before the crisis, banks had a large exposure to shipping by financing the lion’s share of newbuildings, etc. Now with equity being wiped away after years of losses, many banks have by default become large ship-owners, something which is tenable for only a relatively short period. The issue is often more complex because of how the industry now often relies on groups of lenders for so-called syndicated loans. The result is a group of lenders (complicated ever further if there are bondholders in the mix), becoming ship-owners with potentially very different agendas or requirements. In the absence of a ‘group will’ or ability to write off losses, companies are artificially kept afloat, thus possibly also delaying any recovery in the shipping markets. And now with counterparty risk reemerging with gale force within the banking world (just note how shares in banks have fared over the last three months), how to syndicate new loans in an environment where you cannot readily trust your typical fellow group lenders? It is certainly reassuring for us not to have uncovered investment commitments in this scenario. As the global financial crisis evolves, we start seeing signs that ‘the invisible hand of the market’ (as described by Adam Smith) could increasingly be replaced by protectionism in the form of duties on imported goods. Never good for trade. Never good for those of us who live by transportation and related services. And what is the worst part of this? There are no quick fixes in sight to ensure sustainable global economic growth. Our hopes are tied to the fortunes of the increasingly important role of the emerging markets, but these are also suffering increasing pains of modernization. More specifically to our particular shipping business, the health of our chemical tanker industry is weak after three years of freight rates at loss generating levels. We continue to face unprecedented challenges due to the inefficiencies of our trade, exacerbated by lacking shore infrastructure, high (and volatile) fuel costs, increasingly complex vetting regimes and the continued onslaught of regulations. A perfect storm is the joining of many adverse forces. Such a storm has been the backdrop for our activities in 2009, 2010, 2011 and probably will be for 2012 and onwards. Last year, we announced we would have to take measures to secure our business in face of turbulent waters. Our focus was to ensure control of our own fate, by taking measures to shore up our balance sheet, particularly to build cash and reduce forward commitments. In the course of a relatively short period, we have actually turned around our position (albeit still producing losses in the underlying operations of shipping). We have built up a war chest to survive a possible delay in the recovery of our markets. We have also entered into new partnerships that will allow us to invest in some of the many opportunities that appear on our radar screen. All this has been the fruit of dedication and hard work by many of you. I would therefore like to take this opportunity to recognize and express gratitude for the extraordinary efforts of many of you in these processes. In light of an outlook clouded by uncertainty and therefore lacking visibility, let me end this rather somber message by reassuring you that we are now better fit for fight. From a position of certain vulnerability at the end of last year, we are now, a year later, in a position of relative strength amongst our peers. Our main financing is secured, we have plenty of cash in our accounts and, importantly, we have not taken shortcuts affecting safety in our operations. We are, indeed, prepared for continued interesting times ahead. Stay safe. www.odfjell.com
LANDMARKS ODFJELL QUARTERLY magazine Carbon Disclosure Project - Nordic Summary 2011 By Bjørn Ydse Carbon Disclosure Project (CDP) is the leading international not-for-profit organisation focusing on response to climate change. It secures the disclosure of climate change related data from major global corporations on behalf of 551 of the world’s leading investment institutions with more than USD 71 trillion in assets under management. Odfjell reported to CDP in May 2011. The largest shipping respondents were A. P. Moller – Maersk, Frontline, D/S Norden and Odfjell SE. Our CDP score was 65, which is considered a good score since this was our first year of a full reporting. Maximum score is 100 and the average 2010 figures were 64 for the Nordic companies. Facts from Odfjell’s report: • Limited to our shipping business and the main office in Bergen. • The survey delivered in 2011 is based on 2010 figures. • Reported figures are only related to the emissions of CO 2 . • CO 2 emissions: - Scope 1 1, 841,000 tonnes (from sources owned or controlled by Odfjell). - Scope 2 487 tonnes (from purchased electricity and heating at the office in Bergen) - Scope 3 7,880 tonnes (from business travel (incl. seafarers), waste and employees commuting to the office in Bergen). • KPIs emissions of CO 2 related to tonnes miles, revenue and employees have been reduced over the last years. NR.04/ 11 11 Third quarter results: Moderate improvements in earnings By Margrethe Gudbrandsen Sale of 49% shares in tank terminals in Rotterdam, Houston and Charleston, solid tank terminal earnings and marginally increased time charter results gave a third quarter net result of USD 261 million for Odfjell SE. Earnings before interest, tax, depreciation and amortisation (EBITDA) the first nine months of 2011 was USD 82 million, compared to USD 66 million for the first nine months in 2010. The operating result (EBIT) was USD 22 million for the first nine months 2011, compared to a loss of USD 29 million for the same period last year. The historical figures have been restated as a consequence of reduced ownership percentage in the tank terminals. High bunker costs still impact trading results negatively, but the time charter result still increased a little compared to the second quarter. In the quarter we signed a Letter of Intent to take an equity share in the Noord Natie Terminals in Belgium. With the purchase of the vessel ‘Holly Galaxy’, two additional vessels on time charter and the joint venture with Crystal Pool our fleet has increased to 100 vessels in total. – Due to the negative financial situation in Europe and US, the uncertainty remains as to when we can expect to see a significant and necessary recovery of the chemical tanker market. However despite the economic turmoil, our cargo volumes have increased recently. But our result might be challenged as we are not being fully compensated for the increase in bunker cost. We expect our tank terminal results to remain stable due to our solid contract base. We estimate our overall results in fourth quarter to show a moderate improvement compared to third quarter, says Terje Iversen, CFO Odfjell SE. odfjell quarterly magazine
Page 1 and 2: ODFJELL DECEMBER 2011 www.odfjell.c
Page 3 and 4: ODFJELL QUARTERLY magazine Jan A. H
Page 5 and 6: sions and use of fuel NR.04/ 11 5 K
Page 7 and 8: NR.04/ 11 7 Picking the low hanging
Page 9: NR.04/ 11 9 odfjell quarterly magaz
Page 13 and 14: NR.04/ 11 13 This figure illustrate
Page 15 and 16: PORTRAIT ODFJELL QUARTERLY magazine
Page 17 and 18: Triple ISO certification at OOT By
Page 19 and 20: iefings ODFJELL QUARTERLY magazine
Page 21 and 22: The Odfjell and Lindsay Goldberg Jo
Page 23 and 24: QHSE ODFJELL QUARTERLY magazine Mak
Page 25 and 26: SEA AND SHORE ODFJELL QUARTERLY mag
Page 27 and 28: personnel ODFJELL QUARTERLY magazin
Page 29 and 30: PERSONELL ODFJELL QUARTERLY magazin
Page 31 and 32: ON ORDER YARD DELIVERY DWT OWNER SL

Quarterly December 2011 - Odfjell

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?