Company Magazine for the Odfjell Group - March 2005

Dear Colleagues...
On March 7th, Odfjell held a Board
Meeting. For a CEO, Board Meetings
are like passing an exam... The main
topic for this particular meeting was
to approve the final Financial
Statements for 2004 and for the
Board to finalize the Directors’
Report. Before so doing, the Board
again addressed the issue of
“Safety”, which is the first item on
the agenda when the Odfjell Board
convenes. This time I was happy to
report that we have had no serious
incidents or spills since the last
meeting. The Odfjell Board of
Directors supports the decision to
concentrate, indeed to strengthen
our work within HSSE, establishing
Risk Management and Quality as a
separate function; another strong
signal that we give HSSE high
priority.
I have previously described 2004 as
one of the most dramatic years in the
history of Odfjell. Seen against this
background, I think it is fair to say
that we turned in a decent financial
result. Our shareholders enjoyed a
trebled share price, not at all because
of particularly good results, but rather
because of the promising market
outlook.
In this edition of Odfjell Quarterly,
our Chairman makes some reflections
on the increased newbuilding prices.
Shipping has always been a fascinating
industry; a competitive industry
where freight rates are driven by supply
and demand. No charterer asks
about your costs, be that cost of capital
or of operation. An example: At
the peak of the tanker boom following
the Suez crisis in 1973, a VLCC
earned some US$ 400,000 per day in
the spot market. Two years later the
same ship earned around US$ 3,000
daily, owners went bankrupt and the
ships were laid up. In neither case
did anybody ask about the owner’s
cost. Admittedly, our risk profile is
different from that of the VLCCowner
referred to. Although a significant
part of the cargoes carried by
our chemical tankers is fixed in the
spot market, we normally have a
portfolio of contracts of affreightment,
securing a certain income and,
importantly, a planned-for trading
pattern. On the other hand, in addition
to our industry being as capital
intensive, our operations are generally
much more complex than that of
a VLCC-owner. Safe, reliable and
efficient handling of more than 20
million tonnes of cargo annually by
about 9,000 parcels, requires qualified
and trained people on board and
on shore. It goes without saying that
this costs lots of money.
I know we have a lot of skilled people
in our organization worldwide. Still
it is a fact, however, from time to
time we make mistakes that are
causing extra costs. What is more
concerning and disappointing is that
the reported LTIF (Lost Time Injury
Frequency) increased last year, after
several years of steady improvement.
Hence, our goals and objectives were
not met. With the corrective actions
taken, including the Corporate Safety
Initiative, I trust we will turn around
any such tendency. The ultimate and
clear ambition for Odfjell is to be a
zero-accident company!
I believe we are well positioned to
meet future challenges. Let us make
year 2005 the year of improvements
in all respects. Each and all of us can
contribute towards achieving these
goals. The market outlook is promising,
the more so since safer and
operationally less challenging cargoes,
such as clean petroleum products
and even vegoils, are good
alternatives to chemicals. In its
Report for 2004 the Board of
Directors expresses an optimistic
view: “We expect a strong chemical
tanker market the next few years as
well as continued solid results in our
tank terminal business.”
Have a safe voyage!
Bergen, March 8th 2005
Terje Storeng, President/CEO
ODFJELL Quarterly March 2005 3