Annual Report • Mar 23, 2015
Annual Report
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Klaveness Ship Holding AS ("KSH") was established 31 May 2005 and is fully owned by Rederiaksjeselskapet Torvald Klaveness. Klaveness Ship Holding AS is located in Oslo, Norway, and is the holding company of the shipowning activities in Rederiaksjeselskapet Torvald Klaveness. The consolidated financial statement of the Company as at year end 31 December 2014 comprises the Company and its subsidiaries.
Despite continued weak shipping markets Klaveness Ship Holding AS and subsidiaries (the Group) delivered a positive result and maintained a high solidity and satisfying liquidity in 2014. Three container vessels were delivered from yard, increasing the container fleet from five to eight vessels. Three specialised Cabu vessels were ordered from Zhejiang OuHua Shipbuilding Co. Ltd China with scheduled delivery in 2016 and 2017. Further, the Group exercised options for two Kamsarmax dry bulk vessels and resold two vessels, leaving the Group with a net order of two Kamsarmax vessels at Jiangsu Yangzijiang Shipbuilding Co. Ltd in China. The LR-tanker MV Baru, that was part of the Cabu fleet, was recycled in March.
The Group issued a new senior unsecured bond of NOK 400 million (KSH02) in the first half of 2014. This bond issue was listed on the Nordic ABM exchange. The currency and interest risk is partly hedged through a cross-currency interest rate swap. In connection with the placement of the new bond issue, the Group repurchased bonds with a total nominal value of NOK 100 million in the first bond issue (KSH01). In December 2014, NOK 10 million of the second bond issue was repurchased.
The market for the Group's specialised vessels was satisfactory in 2014. In the Cabu segment several contracts were renewed and new contracts were concluded, securing continuation of volumes carried in the past and contributing positively to the Cabu fleet's performance going forward. The company's fleet of selfunloading bulk carriers, which continued to be employed in the CSL International pool, performed well. The container market continued to be weak in 2014, but Klaveness' container vessels were employed throughout the year with consecutive renewals at rates above the general market due to their fuel efficiency.
The Group has implemented International Financial Reporting Standard (IFRS) for the consolidated accounts and for its subsidiaries from January 1, 2014. Comparative figures are retranslated to IFRS as adopted by EU.
Two mergers among subsidiaries took place in 2014. Klaveness Container Holding AS was merged into Klaveness Container AS, and Klaveness Bulk Holding AS was merged into its subsidiary Klaveness Bulk AS.
The Group has three 80,500 DWT Cabu carriers under construction at Zhejiang Ouhua Shipbuilding Co. Ltd. in China with delivery in 2016 and 2017. The vessels are intended to be part of the Cabu fleet of vessels.
The Kamsarmax newbuilding program consists of two 82,000 DWT vessels with delivery in 2015 2016. Project management and supervision is carried out by Klaveness Ship Management AS, a subsidiary of Rederiaksjeselskapet Torvald Klaveness.
All container newbuildings are now delivered, increasing the fleet to eight vessels in total.
Operating revenues of the Group for 2014 was USD 127.4 million (2013: USD 107.1 million) and operating expenses amounted to USD 55.1 million (2013: USD 39.5 million). EBITDA was USD 62.6 million (2013: 63.7 million) and net financial items were negative by USD 12.5 million (2013: negative USD 6.7 million). Net profit after tax was USD 15.5 million (2013: USD 30.6 million), whereof USD 2.3 million was minority interests related to external investors (2013: USD 3.8 million) in some of the Cabu vessels and in the subsidiary Klaveness Container AS.
The Group's result was positively impacted by sale of Kamsarmax newbuilding contracts with a gain of USD 3.4 million, and a reversal of impairments on the container vessels of USD 3.4 million. The reversal was related to reallocation of cost price in connection with delivery of the last three container vessels. This was partly offset by impairment on the container vessels MV Baro, MV Barry and MV Balsa of in total USD 1.9 million. The green recycling of MV Baru had limited impact on the result of the Group (net loss of USD 0.9 million).
The Group's results were negatively impacted by positioning costs and upstoring of new vessels, and the new container vessel earnings were also negatively impacted by low rates in the currently weak container market.
The financial costs have increased due to the increase in interest bearing debt, both related to delivery of newbuildings and the issuance of a bond loan to improve investment capacity. The interest rate exposure has been partly mitigated through fixed interest rate swaps and the USD/NOK exposure related to the bond loans has been partly fixed.
Total assets increased by USD 46.7 million in 2014, from USD 574.3 at year end 2013 to USD 621.0 at end of 2014. Non-current assets increased by USD 58.6 million mainly due to the delivery of three container newbuildings in the first quarter and payment of yard installments on vessels under construction. Deferred tax asset (USD 6.3 million) increased mainly due to temporary differences on financial assets. Cash and bank deposits were USD 81.7 million as per year end, down from USD 99.6 at year end 2013.
Total equity increased by USD 7.9 million during the year due to total comprehensive income of USD 13.0 million and payments to non-controlling interests of USD 5.1 million. The book equity ratio (including non-controlling interests) at year end 2014 was 46 % (2013: 49 %).
The interest-bearing debt rose by USD 35.3 million during 2014 and amounted to USD 316.4 million at year end 2014.
The Group's consolidated cash flow from operating activities is USD 53.0 million (2013: 72.8 million), while net cash flow from investment activities is negative by USD 86.3 million. The latter consists mainly of investments in newbuildings, delivery of vessels, upgrading of existing vessels and proceeds from recycling MV Baru and sale of Kamsarmax newbuilding contracts. Net cash flow from financing activities amounts to USD 15.6 million and consists of drawdown on mortgage loans in connection with delivery of vessels, issuance of bond loans, repayment of mortgage debt, debt to the shipyard and buy-back on bond loans.
Operating result of the standalone financial statements of the parent company Klaveness Ship Holding AS consists of administrative expenses of USD 1.2 million (2013: USD 0.3 million). The financial result consists mainly of dividends from subsidiaries (T Klaveness Shipping AS) of USD 51.5 million, net gain on foreign exchange of USD 3 million, interest expenses for bond loan of USD 5.6 million and impairment of shares in T Klaveness Shipping AS of USD 3 million. The impairment in shares is a result of an adjustment in shares used as contribution in kind (2013 transaction) measured at fair value in the restated 2013 IFRS financial statements for the parent company (transition effect – see note 1 in the statutory accounts). Fair value of the shares was estimated to be USD 346.6 million compared to cost price of the shares of USD 399k. Identified added values are related to vessels. Due to declining vessel values in 2014, an impairment of USD 3 million (2013: USD 9 million) has been identified in the income statement in 2014.
Net profit for the year is USD 43.6 million (2013: negative USD 11.5 million). Klaveness Ship Holding AS statutory balance sheet has an increase in total asset of USD 95.1 million from 2013 to 2014, due to increased ownership and investment in subsidiaries and loan to related parties, financed by the new bond loan.
Net operating cash flow from the parent company was negative in 2014, USD 12.2 million (2013: negative 4.9 million), mainly due to change in receivables due to loan given Klaveness Container AS for financing of the three container vessels delivered from yard in 2014. Net cash flow from investment activities was negative with USD 47.1 million (2013: negative USD 17.9 million) due to investment in subsidiaries. Net cash flow from financing activities amounted to USD 52.5 million in 2014, mainly due to placement of a bond issue (2013: USD 63.8 million).
Klaveness Ship Holding AS made a new senior unsecured bond issue of NOK 400 million (KSH02) in the first half of 2014. This bond issue was also listed on the Nordic ABM exchange. In connection with the placement of the new bond issue, Klaveness repurchased bonds with a total nominal value of NOK 100 million in the first bond issue (KSH01). In December 2014, NOK 10 million of the second bond issue (KSH02) was repurchased.
One Cabu refinancing was completed in the fourth quarter, and bank financing for all the newbuildings is estimated to be finalised in first quarter of 2015. The new bond issue and bank financing for the newbuildings has strengthened the company`s liquidity further.
The accounts are reported under the assumption of a going concern and the Board considers the financial position of Klaveness Ship Holding at year-end to be solid.
The dry bulk market weakened considerably during 2014 with both lower freight rates and vessel values. The weak freight markets were mainly driven by low coal imports to China and Indonesian bans on raw minerals exports. On the positive side, Chinese iron ore imports and steel exports rose by 12 and 50 percent respectively. The Group's fleet of specialized vessels were somewhat impacted by the weak dry bulk market, but still maintaining rates well above the average dry bulk rates.
The container market for feeder vessels stayed flat at low levels in 2014. A total of 7 sub-panamax container vessels were delivered in 2014 and 25 were scrapped, reducing the fleet from 661 to 645 vessels during the year. Containerized trade volumes grew about 6 percent. The total container vessel capacity increased by close to 5.5 percent. The total number of idle container vessels dropped from 235 to 118 vessels in 2014. The number of idle container vessels in the 2000-5000 TEU dropped significantly, whereas the number of idle vessels in the 500-2000 TEU segment fell slightly. The average time charter rate for sub-panamax 2.500 TEU standard type was USD 7.292/day in 2014 compared to USD 7.592/day in 2013.
After peaking in June, oil prices tumbled and ended up declining by more than 50 percent during 2014. After worries of weak demand and oversupply, the significant movements were triggered by OPEC's decision to not support oil prices by production cuts. Bunker prices followed oil prices, and bunkers with delivery in Singapore ended at USD 299 per metric tonne (2013: 616 \$/mt) at year-end.
By end of 2013 the fleet consisted of six cabu vessels, five selfunloaders and eight container vessels. In addition, the Group has two Kamsarmax and three Cabu vessels under construction.
Cabu: The Cabu earnings remained stable despite a weak dry bulk market. Several contracts of affreightment were renewed in 2014 and new contracts concluded, securing continued good working relationships with key customers and contributing positively to the Cabu fleet's performance going forward. One older LR tanker, which was part of the Cabu pool, was green recycled in 2014.
Selfunloader: The selfunloader net revenues from the CSL pool weakened somewhat towards the end of the year, due to a combination of weather related delays and temporary negative effects from falling bunker prices. Still, rates remained well above the general dry bulk market. The vessels "MV Baldock" and "MV Barkald" were docked in 2014. During the docking of "MV Baldock" earlier damages to the rudder were repaired, leading to longer time at the yard. "MV Balto" changed the main engine torsional vibration damper during the year.
Container: The container earnings were negatively impacted by weak charter rates but all eight vessels have been employed on short-term time charters throughout the year. While the new vessels have been earning rates above the general market due to their fuel efficiency, rates have in general been near operating cost in the segment. The two 10-year old vessels "MV Baro" (previously "MV Amundsen") and "MV Barry" both went through drydocking in 2014. The container vessels "MV Barry", "MV Bardu" and "MV Balao" experienced incidents in the port of Lagos, Nigeria. The most serious event occurred when the "MV Barry" touched ground near Lagos and got its propeller damaged in October 2014.
Operational risks are mainly related to the operation of vessels under the management of Klaveness Ship Management AS (sister company). The Group's vessels are on technical management to Klaveness Ship Management AS which ensures compliance with IMO, flag and port state regulations. Quality and safety audits are performed regularly and the crew and officers onboard are trained to ensure that regulatory requirements are met.
Operational risks are managed through quality assurance procedures and systematic training of seafarers and land based employees. All vessels sailing through piracy exposed areas take necessary steps to mitigate the risk of such attacks. Operational risks are also covered by insurance where relevant to cover loss of assets, revenues and contract commitments. The vessels are insured for loss of hire, protection and indemnity (P&I) and complete loss (hull and machinery). The latter is aligned with vessel values. The financial impact of a total loss of a vessel will not be material for the Group.
Ownership of vessels involves risks related to vessel values, future vessel employment, revenues and costs. These risks are partly managed through time charter contracts and contracts of affreightment covering a large part of the vessel capacity.
The Group's revenue and costs are denominated primarily in US Dollar (USD) which is the functional currency of most entities in the Group. No direct currency hedge has been made towards the small portion of costs incurred in foreign currencies. Fluctuations in USD against NOK may affect the company's tax payable, which will be calculated and paid in NOK. This effect is considered to be limited. The bonds issued in NOK are partly hedged with a cross currency interest rate swap, reducing the total currency and interest exposure of the Group.
The Group has long term interest bearing debt that is exposed to floating interest rate. In order to hedge the risk, the Group has entered into interest rate swaps.
At the end of 2014, the Group had five new-buildings on order, whereof four have steel cutting in 2015. Risk of delays and failure of the yards to deliver exists. Klaveness has dedicated on-site personnel who supervise the building processes. Tier one Chinese banks provide refund guarantees.
The Group is refinancing two loan facilities in the first quarter of 2015, one revolving credit facility (RCF) of USD 75 million and one term loan facility of USD 140 million. The RCF has a tenor of 6 years and will replace the capacity of the existing RCF and the term loans for MV Balto, MV Balchen and MV Baldock. The new RCF will be secured in all five selfunloader vessels. The new term loan facility has a tenor of 7 years and will replace the capacity of the term loan for MV Bangor and MV Banyias`s share of the existing RCF and secure financing for all the newbuildings. The new bond issue and bank financing for the newbuildings has improved liquidity and reduced the Groups' liquidity risk.
There have been no other major transactions or events subsequent to the closing date that would have a negative impact on the evaluation of the financial position of Klaveness Ship Holding AS.
The vessels that are owned directly or indirectly by the Group and its subsidiaries, participate in shipping pools for operation and chartering. The pools are taking technical and operational precautions to protect the environment as embodied in ISM and MARPOL. The pools are further seeking to reduce the strain on the environment through efficiency of the voyage execution and by reducing ballast voyages.
There are no employees in the company, hence no actions were planned or implemented to promote equality or prevent discrimination. The board consists of two men and one woman.
The consolidated and parent accounts are prepared under the assumption of going concern. Nothing has occurred after the balance date, which may significantly influence the result or the balance sheet. The Board of Directors finds that the accounts represent a true and fair view of the company's equity and debt, financial position and result.
The Board of Directors in Klaveness Ship Holding AS
Oslo, 31 December 2014 Oslo, 16 March 2015
_____________________ Lasse Kristoffersen Chairman of the Board
____________________ Bent Martini Board Member
____________________ Rebekka Glasser Herlofsen Board Member
____________________ Morten Skedsmo Managing Director
| Year ended 31 December | |||||
|---|---|---|---|---|---|
| USD '000 | Note | 2014 | 2013 | ||
| Operating revenue, vessels | Note 2 | 123 992 | 103 587 | ||
| Gain from sale of fixed assets | Note 3 | 3 381 | 2 400 | ||
| Other operating revenue | - | 1 104 | |||
| Total operating revenue | 127 372 | 107 091 | |||
| Operating expenses, vessels | Note 2, 4, 22 | (55 098) | (39 467) | ||
| Loss from sale of assets | Note 3, 20 | (3 076) | - | ||
| Group administrative services | Note 4, 22 | (5 369) | (3 362) | ||
| Tonnage tax | (213) | (198) | |||
| Other operating and administrative expenses | Note 5 | (1 047) | (411) | ||
| EBITDA | 62 569 | 63 653 | |||
| Ordinary depreciation | Note 8 | (34 266) | (29 698) | ||
| Impairment loss (-) / reversal | Note 8, 9 | 1 538 | 3 840 | ||
| EBIT | 29 842 | 37 795 | |||
| Finance income | Note 6 | 3 190 | 210 | ||
| Finance costs | Note 6 | (15 690) | (6 950) | ||
| Profit before tax | 17 342 | 31 055 | |||
| Income tax expenses | Note 7 | (1 843) | (471) | ||
| Profit after tax | 15 499 | 30 584 | |||
| Attributable to: | |||||
| Equity holders of the parent company | Note 20 | 13 161 | 26 812 | ||
| Non-controlling interests | 2 338 | 3 772 | |||
| Total | 15 499 | 30 584 | |||
| Earnings per share - basic and diluted (USD) | Note 20 | 13,16 | 26,81 |
| USD '000 | Note | 2014 | 2013 |
|---|---|---|---|
| Profit of the year | 15 499 | 30 584 | |
| Other comprehensive income to be reclassified to profit or loss | |||
| Net movement fair value on interest rate swaps | Note | (213) | 226 |
| Net movement fair value on cross-currency interest rate swap | Note | (18 392) | (3 152) |
| Reclassification to profit and loss of cash flow hedges | 15 118 | 2 920 | |
| Income tax effect | Note | 942 | 2 |
| Net other comprehensive income to be reclassified to profit or loss | (2 546) | (4) | |
| Other comprehensive income not to be reclassified to profit or loss Net other comprehensive income not to be reclassified to profit or loss |
- - |
- - |
|
| Other comprehensive income/(loss) for the period, net of tax | (2 546) | (4) | |
| Total comprehensive income/(loss) for the period, net of tax | 12 953 | 30 580 | |
| Attributable to: | |||
| Equity holders of the parent company | 10 615 | 26 808 | |
| Non-controlling interests | 2 338 | 3 772 | |
| Total | 12 953 | 30 580 |
| As at 31 December | ||||
|---|---|---|---|---|
| USD '000 | Note | 2014 | 2013 | 1 January 2013 |
| ASSETS | ||||
| Non-current assets | ||||
| Deferred tax asset | Note 7 | 6 308 | 296 | 283 |
| Goodwill | - | - | 42 | |
| Vessels | Note 8 | 477 515 | 423 593 | 209 413 |
| Newbuilding contracts | Note 9 | 27 725 | 28 355 | 77 140 |
| Investments in associated companies | - | - | 22 | |
| Financial assets | Note 12, 13 | 13 | 226 | - |
| Other long-term receivables | Note 10 | 1 920 | 2 400 | - |
| Total non-current assets | 513 481 | 454 870 | 286 900 | |
| Current assets | ||||
| Inventories | 1 992 | 1 745 | 383 | |
| Accounts receivable | 867 | 24 | 1 600 | |
| Receivables from related parties | Note 10 | 7 327 | 10 113 | 30 037 |
| Prepaid expenses | 790 | 1 126 | 2 058 | |
| Other short-term receivables | Note 10, 23 | 14 873 | 6 810 | 5 547 |
| Cash and cash equivalents | Note 11 | 81 690 | 99 612 | 39 429 |
| Total current assets | 107 538 | 119 430 | 79 055 | |
| TOTAL ASSETS | 621 020 | 574 300 | 365 955 |
| As at 31 December | ||||
|---|---|---|---|---|
| USD '000 | Note | 2014 | 2013 | 1 January 2013 |
| EQUITY AND LIABILITIES | ||||
| Equity | ||||
| Share capital | Note 19 | 1 817 | 1 817 | 1 654 |
| Share premium | 16 861 | 16 861 | 2 024 | |
| Other paid-in capital | 5 585 | 5 585 | 5 585 | |
| Other reserves | (2 550) | (4) | - | |
| Retained earnings | 243 621 | 233 796 | 205 131 | |
| Equity attributable to equity holders of the parent | 265 334 | 258 055 | 214 394 | |
| Non-controlling interests | 21 592 | 21 009 | 14 438 | |
| Total equity | 286 926 | 279 064 | 228 832 | |
| Non-current liabilities Mortgage debt |
Note 15 | 195 988 | 186 863 | 96 763 |
| Bond loans | Note 16 | 78 138 | 48 524 | - |
| Interest bearing debt to related parties | Note 15, 18 | - | - | 3 832 |
| Other non-interest bearing liabilities | - | - | 3 938 | |
| Financial liabilities | Note 12, 13 | 22 286 | 3 152 | - |
| Total non-current liabilities | 296 412 | 238 539 | 104 533 | |
| Current liabilities | ||||
| Short-term mortgage debt | Note 15 | 20 671 | 43 361 | 16 775 |
| Accounts payable | 1 245 | 1 654 | 5 236 | |
| Current debt to related parties | Note 15, 18 | 1 525 | 4 368 | 886 |
| Tax payable | Note 7 | 6 977 | 516 | 4 473 |
| Tonnage tax payable | 213 | 198 | 174 | |
| Other current liabilities | Note 18 | 7 051 | 6 600 | 5 046 |
| Total current liabilities | 37 682 | 56 697 | 32 590 | |
| TOTAL EQUITY AND LIABILITIES | 621 020 | 574 300 | 365 955 |
Oslo, 31 December 2014 Oslo, 16 March 2015
Lasse Kristoffersen Chairman of the Board
Bent Martini Board member
Rebekka Glasser Herlofsen Board member
Morten Skedsmo Managing Director
| Attributable to equity holders of the parent | ||||||||
|---|---|---|---|---|---|---|---|---|
| Share capital |
Share premium |
Other paid in capital |
Hedging reserve |
Retained earnings |
Total | Non controlling interests |
Total equity | |
| Equity at 1 January 2013 | 1 654 | 2 024 | 5 585 | - | 205 131 | 214 394 | 14 438 | 228 832 |
| Profit (loss) for the year | 26 812 | 26 812 | 3 772 | 30 584 | ||||
| Other comprehensive income for the year | (4) | (4) | (4) | |||||
| Total comprehensive income for the year | (4) | 26 812 | 26 808 | 3 772 | 30 580 | |||
| Payments to non-controlling interests | (9 522) | (9 522) | ||||||
| Issue of share capital 19 December 2013 | 163 | 14 837 | 15 000 | 15 000 | ||||
| Issue of share capital from non-controlling interests | - | 12 500 | 12 500 | |||||
| Adjustment equity | 1 759 | 1 759 | 1 759 | |||||
| Other changes | 94 | 94 | (179) | (85) | ||||
| Equity at 31 December 2013 | 1 817 | 16 861 | 5 585 | (4) | 233 796 | 258 055 | 21 009 | 279 064 |
| Profit (loss) for the year | 13 161 | 13 161 | 2 338 | 15 499 | ||||
| Other comprehensive income for the year | (2 546) | (2 546) | (2 546) | |||||
| Total comprehensive income for the year | (2 546) | 13 161 | 10 615 | 2 338 | 12 953 | |||
| Payments to non-controlling interests | (5 090) | (5 090) | ||||||
| Reallocation to non-controlling interests* | (3 335) | (3 335) | 3 335 | - | ||||
| Equity at 31 December 2014 | 1 817 | 16 861 | 5 585 | (2 550) | 243 621 | 265 334 | 21 592 | 286 927 |
*A capital increase from majority in container vessels diluted the shares owned by non-controlling interests. The dilution ratio was based on fair value which resulted in a reallocation from majority to non-controlling interests.
The reserve contains total net changes in the fair value of financial instruments recognized to fair value with changes through OCI.
| USD '000 | Note | 2014 | 2013 |
|---|---|---|---|
| Profit before tax | 17 342 | 31 055 | |
| Net gain/loss fixed assets | (304) | - | |
| Ordinary depreciation | Note 7 | 34 266 | 29 698 |
| Impairment loss/ reversal | Note 7, 8 | (1 538) | (3 840) |
| Interest income | Note 5 | (146) | (152) |
| Interest expenses | Note 5 | 12 115 | 6 035 |
| Taxes paid for the period | (714) | (178) | |
| Change in receivables | (5 550) | 18 769 | |
| Change in current liabilities | (2 801) | (9 293) | |
| Change in other working capital adjustments | 180 | 526 | |
| Interest received | 146 | 152 | |
| A: Net cash flow from operating activities | 52 994 | 72 772 | |
| Acquisition of tangible assets | (7 788) | (34 500) | |
| Installments and cost on newbuilding contracts | (87 246) | (143 984) | |
| Payment receieved disposal of vessels | 4 920 | - | |
| Payment received sale of newbuilding contracts | 3 766 | - | |
| Sale of subsidiaries, net of cash | - | 651 | |
| B: Net cash flow from investment activities | (86 349) | (177 833) | |
| Proceeds from mortgage debt | 65 500 | 131 513 | |
| Proceeds from bond loan | 67 161 | 52 250 | |
| Transaction costs on issuance of loans | (1 320) | (2 373) | |
| Repayment of mortgage debt | (65 997) | (27 963) | |
| Cash proceeds from buy back bond loans | (18 763) | - | |
| Repayment of debt to the yard | (13 783) | - | |
| Interest paid | Note 5 | (12 115) | (6 035) |
| Cash proceeds from issuing of shares | - | 15 000 | |
| Cash proceeds from issuing of shares non-controlling interests | - | 12 500 | |
| Dividends to non-controlling interests C: Net cash flow from financing activities |
(5 090) 15 593 |
(9 522) 165 370 |
|
| Change in liquidity in the period (A + B + C) | (17 761) | 60 309 | |
| Net foreign exchange difference | (161) | (126) | |
| Net change in liquidity in the period | (17 922) | 60 183 | |
| Cash and cash equivalents at beginning of period | 99 612 | 39 429 | |
| Cash and cash equivalents at end of period | Note 10 | 81 690 | 99 612 |
| Net change in cash and cash equivalents in the period | (17 922) | 60 183 | |
| Undrawn facilities | Note 13 | 41 500 | 24 500 |
Klaveness Ship Holding AS ( "parent company"/KSH) is a private limited company domiciled and incorporated in Norway. The parent company has headquarter and is registered in Drammensveien 260, 0212 Oslo. The parent company's consolidated accounts for the fiscal year 2014 include the parent company and its subsidiaries (referred to collectively as the Group) and associated companies.
The ultimate parent of the company is Rederiaksjeselskapet Torvald Klaveness. The consolidated financial statements for the ultimate parent is available at www.klaveness.com.
The consolidated financial statements for Klaveness Ship Holding AS for the fiscal year 2014 are approved in the board meeting at 16 March 2015.
The Group activities are described in note 2.
The consolidated financial statements of the Group and the financial statements for the parent company have been prepared in accordance with International Financial Reporting Standards ("IFRS") as endorsed by the European Union.
The consolidated financial statements are based on historical cost, except for derivative financial instruments which are measured at fair value.
An additional statement of financial position as at 1 January 2013 is presented in these consolidated financial statements and in the financial statements for the parent company due to first time adoption of IFRS. The effects of changes in accounting policies are presented in note 1.
The presentation currency for the Group is US Dollar (USD). The Group companies, including the parent company, have USD as their functional currency. Each entity in the group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.
Transactions in foreign currencies are recorded in the functional currency rate at the date of the transaction. Monetary assets and liabilities in foreign currency are translated at the functional currency rate prevailing at the balance sheet date. Exchange differences arising from translations into functional currency are recorded in the income statement.
Non-monetary assets and liabilities measured at historical cost in foreign currency are translated into the functional currency using the historical exchange rate. Non-monetary assets and liabilities recognized at fair value are translated using the exchange rate on the date of the determination of the fair value.
Income and expenses in NOK are converted at the rate of exchange on the transaction date. The average exchange rate was NOK/USD 6.3 in 2014 (2013: 5.8770). At year-end 2014, an exchange rate of NOK/USD 7.4299 (2013: 6.0815) was used for the valuation of balance sheet items.
The Group's consolidated financial statements comprise Klaveness Ship Holding AS (KSH) and companies in which KSH has a controlling interest. A controlling interest is normally obtained when the Group owns more than 50 % of the shares in the company or through agreements are capable of exercising control over the company. Non-controlling interests are included in the Group's equity.
Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and consolidation is continued until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same accounting period as the parent company, using consistent accounting principles for similar transactions and events under otherwise similar circumstances.
All intra-group balances, transactions, unrealized gains and losses resulting from intra-group transactions and dividends are eliminated in full.
Transactions between entities that are ultimately controlled by the same party are accounted for as common control transactions, excluded from the scope of IFRS 3 Business Combinations. Common control transactions are accounted for based on the pooling of interest method, with continuity on carrying amounts. Comparable figures are adjusted to reflect such structural changes.
An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over these policies. The considerations made in determining significant influence are similar to those necessary to determine control over subsidiaries.
The Group's investments in its associates are accounted for using the equity method. Under the equity method, the investment in an associate is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in the Group's share of net assets of the associate since the acquisition date.
The statement of profit or loss reflects the Group's share of the net results of operations of the associate. Any change in other comprehensive income) ("OCI") of those investees is presented as part of the Group's OCI. In addition, when there has been a change recognized directly in the equity of the associate, the Group recognizes its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate.
The Group treats transactions with noncontrolling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity.
Gains or losses on disposals of shares in subsidiaries to non-controlling interests are also recorded in equity.
If the Group loses control of a subsidiary during the reporting period, the assets and liabilities of the former subsidiary is derecognized from the consolidated accounts and recognized as an investment at fair value in accordance with relevant IFRSs. The carrying amounts of any non-controlling interests are also derecognized. Gains or loss associated with the loss of control is recognized in profit and loss.
Preparing financial statements in conformity with IFRS requires the management to make judgments, use of estimates and assumptions which affect the application of the accounting policies and the reported amounts of assets and liabilities, revenues and expenses.
The estimates are based on the actual underlying business, its present and forecast profitability over time, and expectations about external factors such as freight rates, interest rates, foreign exchange rates, oil prices and more which are outside the Group's and parent company's control. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities in future periods. Changes in accounting estimates are recognized in the period the changes occur. When changes to estimates also affect future periods the effect is distributed between of the current and future periods.
Management has made estimates and assumptions which have significant effect on the amounts recognized in the financial statements. In general, accounting estimates are considered significant if:
In addition to the purchase price, the carrying amount of vessels is based on management's assumptions of useful life and residual value of the vessels. Useful life may change due to change in technological developments, competition, environmental and legal requirements, freight rates and steel prices.
The residual value of the vessel is calculated as the light displacement of the vessel multiplied with the estimated steel prices minus the estimated cost in connection with the scrapping. Residual values are challenging to estimate given the long lives of the vessels, the uncertainty as to future economic conditions and the future price of steel, which is considered as the main determinant of the residual price.
When value in use calculations are performed, management estimates the expected future cash flows from the assets or cash-generating unit (defined in the section of "judgments") and determine a suitable discount rate in order to calculate the present value of those cash flows. This will be based on management's evaluations, including estimating future performance, revenue generating capacity, and assumptions of future market conditions and appropriate discount rates. Changes in circumstances and management's evaluation and assumptions may give rise to impairment losses. While management believes that the estimates of future cash flows are reasonable, different assumptions regarding such cash flows could materially affect the evaluations.
On a quarterly basis, management assesses indicators of impairment for non-financial assets and whether the assumptions in the value in use calculations are reasonable. Recoverable amount is set as the highest of broker values and value in use. If carrying value exceeds the estimated recoverable amount, impairment is recognized. Impairments are reversed in a later period if recoverable amount exceeds carrying amount.
At each reporting date, management assesses if there are contracts in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received. A provision is recorded by estimating the present obligation under the contract.
Deferred tax assets are only recognized if it is probable that future taxable profit will be
available against which the unused tax losses and unused tax credits can be utilized.
In the process of applying Klaveness Ship Holding's accounting policies, management has made the following judgments which have significant effect on the amounts recognized in the financial statements.
The Group has defined the fleet of combination carriers (Cabu) as one cash generating unit (" CGU"), due to the Group's operational strategy to manage the fleet as a portfolio and thereby optimizing the portfolios' cash flow and the earnings for the entire Group. The Cabu vessels are sister vessels. For container vessels and selfunloader vessels the Group has defined that each vessel is a separate CGU as the cash flows from these vessels can be separated on an individual level.
The Group owns 50 % of Banasol Inc and 50 % of Banastar Inc. The remaining shares are owned by one shareholder, Veronica Co Ltd. The entities own one vessel each; MV Banasol and MV Banastar. Management has assessed the investments against control criterias in IFRS 10 whether the Group has rights to direct the relevant activities. The management is of the opinion that power is embedded in one or more contractual arrangements for the main activities; chartering activity and ship-owning activity. The assessment shows that all elements of control are present. The Group is considered to control the entities Banasol Inc and Banastar Inc which have been consolidated as subsidiaries into the Group's financial statements.
The operating segments are reported in a manner consistent with the internal financial reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Group executive management who makes the strategic decisions.
The vessels are structured into segments based on type of freight the vessels transport. The internal financial reports are structured into five reporting segments with similar characteristics i) Combination Carriers (Cabu) ii) Selfunloader vessels iii) Container vessels iv) Dry bulk investments (Kamsarmax) and v) Other/administration. The shipping market in general offers a global service covering major trade routes. All segments have worldwide activities. Due to this, assets and liabilities is not allocated to geographical segments.
Revenue is recognized when it is probable that transactions will generate future economic benefits that will flow to the company and the amount can be reliably estimated, regardless of when payment is being made. Revenues are recognized at fair value and presented net of value added tax and discounts.
The Group's revenue in ship owning companies derives from chartering (hiring) out its vessels to operating companies. Vessels owned by the Group are either operated under time charter contracts or participate in a pool.
Revenues from time charters (TC) are accounted for as operating leases under IAS 17. The Group owns eight container vessels. The charter agreements are on time charter basis, implying chartering a complete vessel including crew. Revenues from predetermined time charters are recognized on a straight-line basis over the duration of the period of each
charter and adjusted for off-hire days, as the service is performed.
Net-revenues from the pool participation are recognized in accordance with revenue recognition in the co-sailing pool (charterer). Profit from the co-sailing pool is allocated to each vessel participating in the pool, based on allocation keys (vessel earning points) stipulated in pool participation agreements. Revenues and costs associated with the vessels' voyages are accrued according to the share of voyage days that occur before closing (percentage of completion method). Voyage accounting consists of actual figures for completed voyages and estimates for voyages in progress. Voyages are normally dischargeto-discharge. Except for any period a vessel is declared off-hire due to technical or other owner's matters, a ship is always allocated to a voyage.
Vessel operating expenses include crewing, repairs and maintenance, insurance, stores, lubricant oils and management fees. When vessels are on hire, the majority of vessel operating expenses are reimbursed from the charterer. When the vessel is off hire, vessel operating expenses are mainly for owners account.
All the companies within the Group, with the exception of Klaveness Ship Holding AS (parent company) and KCL AB, are organized in compliance with the Norwegian tonnage tax regime ("NTT"). KSH and KCL AB are subject to ordinary taxation. Company tax in Norway is 27 % (2013: 28 %). Subsidiaries outside of Norway are governed by the tax laws and tax rates in the local jurisdiction. Some companies in the Group are subject to taxation in Norway based on controlled foreign company (CFC) rules where tax is charged at the investor level. All of these companies are subject to the Norwegian tonnage tax regime and owned by a company subject for tonnage tax regime.
The NTT entails no tax on operating profits or tax on dividends from companies within the scheme. Net financials, allowed for some special regulations, are taxed on an ongoing basis, currently at a rate of 27 %. A tonnage fee is charged per vessel depending on the size of the vessel owned or leased by companies taxed under the NTT. This tonnage tax is classified as an operating cost.
Tax expenses in the profit and loss account comprise both tax payable for the accounting period and changes in deferred tax. Deferred tax is calculated at 27 % on the basis of temporary differences between tax and accounting values of assets and liabilities that exist at the balance sheet date. Deferred taxes are recognized using the liability method in accordance with IAS 12. Deferred tax is only calculated for assets and liabilities for which future realization will lead to tax payable.
Temporary differences, both positive and negative, are balanced out within the same period. Deferred tax liabilities/deferred tax assets within the same tax system are recorded on a net basis. Income tax relating to items recognized directly in equity is included directly in equity and not in the statement of income.
Non-current assets such as vessels, the cost of dry-docking and newbuildings are carried at cost less accumulated depreciation and impairment charges. Cost is defined as directly attributable cost plus borrowing cost during the construction period.
Depreciation is calculated on a straight-line basis over the estimated useful life of a vessel taking its residual value into consideration. Useful life is estimated to be 20-25 years for the Group's fleet. Certain capitalized elements like costs related to periodic maintenance/dry-docking have shorter estimated useful lives and are depreciated until the next planned dry-docking, typically
over a three to five years period. When newbuildings are delivered a portion of the cost is classified as dry docking.
Costs of day-to-day servicing, maintenance and repairs are expensed.
The useful life and residual values are reviewed at each balance sheet date. Residual Residual value is further described under "Significant estimates and assumptions".
Vessels under construction are classified as non-current assets and recognized at the cost incurred in relation to the non-current asset when paid. Newbuildings are not depreciated until delivery. Borrowing costs directely attributable to the construction of vessels are added to the cost of the vessels, until such time as the vessels are ready for their intended use.
On a quarterly basis the balances are assessed whether there is an indication that vessels and newbuilding contracts may be impaired. If the recoverable amount is lower than the book value, an impairment charge is recorded. Impairment losses are recognized in the profit and loss statement. An impairment loss recognized in prior periods for an asset is reversed if, and only if, there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognized. For further information regarding impairment considerations, refer to critical accounting estimates and judgments.
The Group differentiates between financial leasing and operational leasing based on an evaluation of the lease contract at the time of inception. A lease contract is classified as a financial lease when the terms of the lease transfer substantially all risk and rewards of ownership to the lessee. All other leases are
classified as operational leases. When a lease contract is classified as a financial lease where the Group is the lessee, the rights and obligations relating to the leasing contracts are recognized in the balance sheet as assets and liabilities. The interest element in the lease payment is included in the interest costs and the capital amount of the lease payment is recorded as repayment of debt. The lease liability is the remaining part of net present value of future payments. For operational leases, the rental amount is recorded as an ordinary operating cost.
The Group has leasing agreements related to the container vessels which all are classified as operational leases. Lease payments received are recognized in profit or loss on a straightline basis over the term of the lease, typically 3-9 months.
Financial instruments, such as, derivatives, are measured at fair value. The fair value of financial instruments traded in active markets is determined by reference to quoted market prices or dealer price quotations, without any deduction for transaction costs. The fair value of financial instruments not traded in active markets is determined using appropriate evaluation techniques.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair
value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 – Quoted (unadjusted) market prices in active markets for identical assets and liabilities
Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
The Group and the parent company classify financial assets in the following categories: financial assets at fair value through profit and loss, loans and receivables, held to maturity investments, available for sale financial assets, or as derivatives designated as hedging instruments in an effective hedge. The classification depends on the purpose of the asset. Derivatives are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.
The subsequent measurement of financial assets depends on their classification as described below:
Loans and receivables are non derivative financial assets with fixed or determinable payments which are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after balance sheet date. These are classified as non current assets. Loans and receivable are classified as other current assets or other non current assets in the balance sheet.
Loans and receivables are recognized initially at their fair value plus transaction costs and
subsequently measured at amortised cost. The interest element is disregarded if it is insignificant, which is normally the situation for the Group. Should there be objective evidence of a decline in value, the difference between the carrying amount and the estimated recoverable amount is recognized as a loss in the period they arise.
Financial assets are derecognized when the contractual rights to the cash flows from the financial assets expire or are transferred, and the group has transferred by and large all risk and return from the financial asset.
The Group uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge its foreign currency risks and interest rate risks that are within the scope of IAS 39.
Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when fair value is positive and as financial liabilities when the fair value is negative.
The effective portion of the gain or loss on the hedging instrument is recognized directly as other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognized immediately in profit and loss.
Amounts recognized as other comprehensive income are transferred to profit and loss when the hedged transaction affects profit and loss, such as when the hedged financial income or expense is recognized or when a forecast transaction occurs.
Derivative financial instruments that are designated as, and are effective hedging instruments are separated into a current and non-current portion consistent with the classification of the underlying item.
Interest bearing debt and bond loans are recognized at fair value when the proceeds are received, net of transaction costs. In subsequent periods, loans are stated at amortized cost using the effective rate method. Any difference between proceeds (net of transaction costs) and the redemption value is recognized in the income statement as finance costs over the term of the loan. Loans are classified as current liabilities unless the group or the parent company has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.
This category generally applies to interestbearing loans and borrowings. For more information refer note 15 and 16.
Inventories consist mainly of lubricant oil and are recognized at cost in accordance with the first in – first out method (FIFO). Inventories are valued at the lower of cost and net realizable value. Impairment losses are recognized if the net realizable value is lower than the cost price.
Cash includes cash in hand, bank deposits and other highly liquid investments with original maturities of three months or less.
Transaction costs related to an equity transaction are recognized directly in equity, net of tax.
Dividend payments are recognized as a liability in the Group's financial statements from the date when the dividend is approved by the general meeting.
A provision is recognized when the Group has a present obligation (legal and constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation and a reliable estimate can be made of the amount.
Provisions usually relate to legal claims.
Provisions for loss-making contracts are recognized when the Group's estimated revenues from a contract are lower than unavoidable costs which were incurred to meet the obligations pursuant to the contract (ref description of onerous contracts in section "Significant estimates and assumptions").
Parties are related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the party in making financial and operating decisions. Parties are also related if they are subject to common control or common significant influence. Related parties transactions are recorded to estimated fair value. Transactions with related parties are disclosed in note 22.
New information on the Group's financial position at the balance sheet date is taken into account in the annual financial statements. Subsequent events that do not affect the Group's position at the balance sheet date, but which will affect the Group's position in the future, are disclosed if significant.
Current assets and short-term liabilities include items due less than one year from the balance sheet date, as well as items due more than one year from the balance sheet date, that are related to the operating cycle.
Liabilities with maturity less than one year from the balance sheet date are classified as current. All other debt is classified as longterm debt. The first year's repayment of longterm debt is classified as current.
The cash flow statements are based on the indirect method.
The financial statements have been prepared based on standards, amendments and interpretations effective for the year ending 31 December 2014. IASB has issued the following standards/amendments to the following standards that are not yet effective which may have an impact of these financial statements:
IFRS 9 Financial Instruments (effective date 1 January 2018)
IFRS 15 Revenue from contract with customers (effective date 1 January 2017)
The Group has not yet completed it's assessment if IFRS 9 Financial instruments or IFRS 15 Revenue from contracts with customers will have significant impact on the financial statements. Other issued standards and interpretations, that are not yet effective, are not applicable for the Group, and will not have an impact on the financial statements.
| Contents | Page |
|---|---|
| Consolidated Income Statements | |
| Consolidated Statements of Other Comprehensive Income | |
| Consolidated Balance Sheet Statements | |
| Consolidated Statement of Changes in Equity | |
| Consolidated Statement of Cash Flows | |
| Accounting principles | |
| Note 1: Effects of changes in accounting policies | |
| Note 2: Segment reporting | |
| Note 3: Gain/loss sale of fixed assets | |
| Note 4: Operating expenses | |
| Note 5: Other operating and administrative expenses | |
| Note 6: Finance income and finance costs | |
| Note 7: Taxes | |
| Note 8: Vessels | |
| Note 9: Newbuildings | |
| Note 10: Receivables | |
| Note 11: Cash and cash equivalents | |
| Note 12: Financial assets and liabilities | |
| Note 13: Financial Risk Management | |
| Note 14: Fair value measurement | |
| Note 15: Interest bearing debt | |
| Note 16: Bond loans | |
| Note 17: Commitments and guarantees | |
| Note 18: Other liabilities | |
| Note 19: Share capital, shareholders, dividends and reserves | |
| Note 20: Earnings per share | |
| Note 21: List of subsidiaries | |
| Note 22: Transactions with related parties | |
| Note 23: Contingent liabilities |
Note 24: Events after the balance sheet date
The Group applies IFRS as accounting policy for the first time for the 2014 financial statements. For all periods up to and including the year ended 31 December 2013, the Group has prepared its financial statements in accordance with Norwegian Generally Accepted Accounting Principles (NGAAP).
The Group has elected to apply the following exceptions to the retrospective application of other IFRS:
The company has elected not to apply the current IFRS 3 in retrospect to business combinations before 1 January 2013. All business combinations before 1 January 2013 have been accounted for in accordance with applicable accounting policy (NGAAP) at the time of the particular business combination.
Change in accounting policy has no effect on the Financial Statements as of 1 January 2013.
Change in accounting policy has the following effects on the Financial Statements as of 31 December 2013: - Recognition of derivatives to fair value with changes in fair value through OCI.
A) Recognition of fair value of interest rate swaps treated as cash flow hedge in accordance with IFRS (increase total comprehensive income by USD 226k)
B) Derecognition of currency adjustment of cross-currency interest rate swaps treated as cash flow hedge in accordance with IFRS (increase profit before tax by USD 2 920k)
C) Recognition of fair value of cross-currency interest rate swaps treated as cash flow hedge in accordance with IFRS (decrease total comprehensive income by USD 3 152k). The effect from change in exchange rate is reclassified from OCI to P&L (increase total comprehensive income/decrease profit before tax by USD 2 920k).
D) Net effect on fair value through other comprehensive income (decrease total comprehensive income by USD 4k, net after tax).
Reconciliation between previous GAAP and IFRS is presented below:
| USD '000 | Reference | NGAAP | Remeasurement | IFRS |
|---|---|---|---|---|
| Profit after tax | 30 584 | - | 30 584 | |
| Other comprehensive income | D) | - | (4) | (4) |
| Total comprehensive income | 30 584 | (4) | 30 580 |
| USD '000 | Reference | NGAAP | Remeasurement | IFRS |
|---|---|---|---|---|
| Deferred tax asset | E) | 294 | 2 | 296 |
| Fair value interest rate swap | A) | - | 226 | 226 |
| Other non-currnet assets | 451 948 | - | 451 948 | |
| Non-current assets | 452 242 | 228 | 452 470 | |
| Current assets | 121 830 | - | 121 830 | |
| TOTAL ASSETS | 574 072 | 228 | 574 300 | |
| Paid-in capital | 22 717 | - | 22 717 | |
| Other reserves | D) | - | (4) | (4) |
| Retained earnings | 235 343 | 235 343 | ||
| Non-controlling interests | 21 009 | 21 009 | ||
| Equity | 279 069 | (4) | 279 064 | |
| Bond loan | B) | 51 444 | (2 920) | 48 524 |
| Fair value cross currency interest rate swap | C) | - | 3 152 | 3 152 |
| Other non-current liabilities | 186 863 | - | 186 863 | |
| Non-current liabilities | 238 307 | 232 | 238 539 | |
| Current liabilities | 56 697 | - | 56 697 | |
| TOTAL EQUITY AND LIABILITIES | 574 073 | 228 | 574 300 |
Remeasurements made have no material effect on the consolidated cash flow statement for the period ended 31.12.13.
The operating segments are reported in a manner consistent with the internal financial reporting provided to the executive management (chief operating decision-maker).
The financial reporting is divided into the following five operating segments:
All segments have worldwide activities. The Group operates in an open international market where the various geographical areas are connected. The fleet has the flexibility to operate in all markets and are employed in a comprehensive pattern inside and between the regions in order to optimize income. Consequently, the Group's operating shipping activities are not attributed to specific geographical markets.
Cabus are spesialized vessels constructed to carry caustic soda and dry bulk. The Group owns six Cabu vessels which participate in a pool operated by Cabu Chartering AS (sister company). The Group has three cabu newbuildings under construction scheduled for delivery in 2016 and 2017.
SUL vessels are specialized bulk carriers equipped with a conveyor belt for discharging the cargo. The Group owns five SUL vessels which are part of a co-sailing pool managed by Canadian Steamship Lines Inc. (CSL).
The Container vessels are standard vessels which are operated on short term time-charter (TC) agreements.The Group owns eight container vessels.
The Group has invested in two 82,000 dwt standard dry bulk newbuilding contracts with delivery in 2015 and 2016.
The remaining of the Group's activities, eliminations and intra group transactions are shown in the "other/administration" column. The Group's administration costs and other shared costs have been allocated to segments. Transfer prices between operating segments are on arm's length basis in a manner similar to transactions with third parties.
Information regarding the Group's reportable segments is presented below. Interest income and interest expense have not been allocated to segments, as the financing is managed on a group basis.
The Group had one customer in 2014 (2013: one) that represented more than ten percent of operating revenue in the Group.
| Combination | Selfunloader | Container | Dry bulk | Other/ | Total | |
|---|---|---|---|---|---|---|
| (USD'000) | carriers | vessels | vessels | investments | admin | consolidated |
| Operating revenue, vessels | 53 218 | 47 510 | 23 265 | - | (2) | 123 991 |
| Gain from sale fixed assets | - | - | - | 3 381 | - | 3 381 |
| Other operating revenue | - | - | - | - | - | - |
| Total operating revenue | 53 218 | 47 510 | 23 265 | 3 381 | (2) | 127 372 |
| Operating expenses, vessels | (16 028) | (17 316) | (22 025) | - | 271 | (55 098) |
| Loss from sale fixed assets | (3 076) | - | - | (3 076) | ||
| Group administrative services | (1 109) | (1 007) | (2 598) | (506) | (149) | (5 369) |
| Ordinary depreciation | (12 364) | (13 668) | (8 341) | - | 107 | (34 266) |
| Impairment | - | - | 1 538 | - | 1 538 | |
| Other operating and adm expenses | - | (100) | (500) | (660) | (1 260) | |
| Total operating expenses | (32 577) | (32 091) | (31 427) | (1 006) | (431) | (97 530) |
| Operating profit/EBIT | 20 641 | 15 420 | (8 162) | 2 375 | (433) | 29 842 |
| Combination | Selfunloader | Container | Dry bulk | Other/ | Total | |
|---|---|---|---|---|---|---|
| (USD '000) | carriers | vessels | vessels | investments | admin | consolidated |
| ASSETS | ||||||
| Vessels | 168 968 | 98 598 | 209 949 | - | 477 515 | |
| Newbuilding contracts | 21 946 | - | - | 5 944 | - | 27 890 |
| Other non-current assets | - | - | 13 | 1 920 | 193 | 2 126 |
| Total non-current assets | 190 914 | 98 598 | 209 962 | 7 864 | 193 | 507 531 |
| Cash Current assets |
24 586 8 874 |
15 965 8 807 |
2 186 5 043 |
4 194 2 663 |
34 759 495 |
81 690 25 881 |
| Total current assets | 33 460 | 24 772 | 7 229 | 6 856 | 35 254 | 107 572 |
| TOTAL ASSETS | 224 374 | 123 370 | 217 191 | 14 720 | 35 447 | 615 103 |
| EQUITY AND LIABILITIES | ||||||
| Total equity | 163 817 | 67 002 | 106 929 | 14 720 | (64 623) | 287 846 |
| Interest bearing debt | 50 535 | 48 453 | 97 603 | - | - | 196 591 |
| Bond loans | - | - | - | - | 78 138 | 78 138 |
| Other non-current financial liabilities | 772 | - | - | - | 21 514 | 22 286 |
| Total non-current liabilities | 51 307 | 48 453 | 97 603 | - | 99 652 | 297 015 |
| Short-term interest bearing debt | 6 342 | 4 826 | 9 504 | - | - | 20 672 |
| Other current liabilities | 2 908 | 3 089 | 3 156 | - | 418 | 9 571 |
| Total current liabilities | 9 250 | 7 915 | 12 660 | - | 418 | 30 242 |
| TOTAL EQUITY AND LIABILITIES | 224 374 | 123 370 | 217 191 | 14 720 | 35 447 | 615 103 |
| Capital exp. Vessels | (1 419) | (3 109) | (3 260) | (7 788) | ||
| Capital exp. NB | (21 462) | - | (61 150) | (2 770) | - | (85 382) |
| Cash from operation | 31 586 | 25 978 | (4 619) | 2 375 | (540) | 54 781 |
Cash from operation is reported excluding capital expenditures on newbuildings and acquisition of second hand vessels, as this is considered not part of normal operation, and including minority interests.
| Combination | Selfunloader | Container | Dry bulk | Other/ | Total | |
|---|---|---|---|---|---|---|
| USD'000 | carriers | vessels | vessels | invstments | admin | consolidated |
| Operating revenue, vessels | 58 393 | 38 938 | 6 264 | - | (8) | 103 587 |
| Gain from sale of fixed assets | - | - | - | 2 400 | - | 2 400 |
| Other operating revenue | - | - | - | - | 1 104 | 1 104 |
| Total operating revenue | 58 393 | 38 938 | 6 264 | 2 400 | 1 096 | 107 091 |
| Operating expenses, vessels | (16 968) | (15 248) | (10 170) | - | 2 919 | (39 467) |
| Group administrative services | (840) | (1 103) | (1 676) | - | 257 | (3 362) |
| Ordinary depreciation | (16 131) | (10 831) | (3 814) | - | 1 078 | (29 698) |
| Impairment | - | - | 3 840 | - | 3 840 | |
| Other operating and adm expenses | - | 3 097 | - | - | (3 706) | (609) |
| Total operating expenses | (33 939) | (24 085) | (11 820) | - | 548 | (69 296) |
| Operating profit/EBIT | 24 454 | 14 853 | (5 556) | 2 400 | 1 644 | 37 795 |
Balance sheet by segments 1 January - 31 December 2013
| USD'000 | Combination carriers |
Selfunloader vessels |
Container vessels |
Dry bulk investments |
Other/ admin |
Total consolidated |
|---|---|---|---|---|---|---|
| Vessels | 117 561 | 179 478 | 126 517 | - | 37 | 423 593 |
| Newbuilding contracts | - | - | 23 015 | 5 340 | - | 28 355 |
| Other non-current assets | - | 226 | 0 | 294 | 520 | |
| Total non-current assets | 117 561 | 179 478 | 149 758 | 5 340 | 331 | 452 468 |
| Cash | 53 860 | 2 462 | 1 074 | 700 | 41 517 | 99 612 |
| Current assets | 18 731 | 2 077 | 1 400 | - | 10 | 22 218 |
| Total current assets | 72 591 | 4 538 | 2 474 | 700 | 41 527 | 121 830 |
| TOTAL ASSETS | 190 152 | 184 016 | 152 232 | 6 040 | 41 858 | 574 298 |
| EQUITY AND LIABILITIES Total equity |
121 334 | 93 149 | 70 271 | 6 040 | (11 733) | 279 062 |
| Long-term interest bearing debt | 42 645 | 85 606 | 58 078 | - | 534 | 186 863 |
| Bond loan | - | - | - | - | 48 524 | 48 524 |
| Other non-current financial liabilities | - | - | - | - | 3 152 | 3 152 |
| Total non-current liabilities | 42 645 | 85 606 | 58 078 | - | 52 210 | 238 539 |
| Short-term interest bearing debt | 19 675 | 3 981 | 19 705 | - | - | 43 361 |
| Other current liabilities | 6 498 | 1 279 | 4 178 | 0 | 1 381 | 13 336 |
| Total current liabilities | 26 173 | 5 261 | 23 883 | 0 | 1 381 | 56 697 |
| TOTAL EQUITY AND LIABILITIES | 190 152 | 184 016 | 152 232 | 6 040 | 41 858 | 574 298 |
| Capital exp. Vessels | (3 800) | - | (34 500) | - | (38 300) | |
| Capital exp. Newbuildings | - | (51 463) (130 609) | (5 300) | (187 372) | ||
| Cash from operation | 36 785 | 25 684 | (5 582) | 2 400 | 566 | 59 853 |
Cash from operation is reported excluding capital expenditures on newbuildings and acquisition of second hand vessels, as this is considered not part of normal operation, and including minority interests.
| USD'000 | 2014 | 2013 |
|---|---|---|
| Sale of Kamsarmax newbuildings contracts | 3 381 | 2 400 |
| Gain from sale of fixed assets | 3 381 | 2 400 |
| USD'000 | 2014 | 2013 |
| Green recycling MV Baru | (3 076) | - |
| Loss from sale of fixed assets | (3 076) | - |
The kamsarmax newbuildings represent a newbuilding programme of in total eight vessels, whereas the Group at year end 2014 is in ownership of two of the vessels under construction (see note 9).
In Q4 2013, the Group sold two Kamsarmax newbuilding contracts to an external. The net gain on this transaction was USD 2.4 million.
In Q1 2014, one newbuilding contract was sold to an external party with a gain of USD 0.5 million. Another contract was sold to an external party with a net gain of USD 2.9 mill recognized in 2014.
MV Baru was recycled in Q1 2014 which resulted in a loss of USD 3.1 million. As compensation for the cancelled TC-contract the Group has received USD 2.2 million from Cabu Chartering AS (sister company) which has been recognized as operating revenue.
| USD '000 | 2014 | 2013 |
|---|---|---|
| Technical expenses | 16 746 | 12 297 |
| Crew costs | 20 965 | 14 804 |
| Insurance | 5 093 | 3 080 |
| Crewing agency fee to Klaveness Ship Management AS (note 22) | 1 679 | 1 170 |
| Ship management fee to Klaveness Ship Management AS (note 22) | 4 048 | 2 876 |
| IT fee to AS Klaveness Chartering (note 22) | 562 | - |
| Commission fee | 873 | - |
| Other operating expenses | 5 133 | 5 239 |
| Total operating expenses | 55 098 | 39 467 |
Costs related to technical management, maintenance and crewing services are recognised as operating expenses. Technical expenses are costs related to spare parts, consumables, cargo handling, power supply, navigation and communication. Crew costs include sea personnel expenses such as wages, social costs, travel expenses and training.
| USD '000 | 2014 | 2013 |
|---|---|---|
| Commercial management fee to Klaveness Chartering AS (KC) (note 22) | 4 717 | 1 499 |
| Accounting fee and other administrative fees to KC (note 22) | 652 | 1 863 |
| Group administrative services | 5 369 | 3 362 |
The Group has no employees and has thus no wage expenses or pension liabilities. Services including management, technical, commercial and crewing are acquired from other companies within Rederiaksjeselskapet Torvald Klaveness (RASTK), see note 22. The managing director and members of the Board of Directors are employees of other companies within RASTK. No special remuneration has been paid to the various members of the Board of Directors, beacuse such positions of office are a part of their
| USD'000 | 2014 | 2013 |
|---|---|---|
| Statutory audit | 155 | 115 |
| Other assurance services | 13 | 26 |
| Tax advisory fee | - | - |
| Other assistance | - | - |
| Total expensed audit fee | 168 | 141 |
Auditor's fees are stated excluding VAT.
| USD'000 | 2014 | 2013 |
|---|---|---|
| Interest received from related parties | 1 | 1 |
| Other interest income | 145 | 151 |
| Other financial income | 115 | 58 |
| Gain / (loss) on foreign exchange | 2 930 | - |
| Total finance income | 3 190 | 210 |
| USD'000 | 2014 | 2013 |
|---|---|---|
| Interest paid to related parties | 1 | 64 |
| Interest expenses mortgage debt | 6 471 | 3 895 |
| Interest expenses bond loan | 5 643 | 2 076 |
| Fair value changes interest rate swaps (note 12) | 742 | - |
| Other financial expenses | 2 800 | 645 |
| Gain / (loss) on foreign exchange | - | 270 |
| Total finance costs | 15 657 | 6 950 |
Interest expenses of USD 0.9 million is capitalized as borrowing costs into newbuildings in 2014 (2013: USD 2.5 million) (see note 9). Refer to note 15 and note 16 for further disclosures of the Group's debt.
Companiessubject to tonnage tax regimes are exempt from ordinary tax on their shipping income. All the Norwegian companies within the Group, with the exception of the parent company, are subject to tonnage taxation. The companies within this system have to pay a tonnage fee based on the size of the vessels. The fee is recognized as an operating expense. Financial income is taxed according to the ordinary Norwegian tonnage tax regime, and it is only a portion of the interest and currency expenses that gives the right to tax deductions.
The ordinary rate of corporation tax in Norway is 27 % for 2014 (2013: 28 %). Subsidiaries outside of Norway are governed by the tax laws and tax rates in the local jurisdiction (Klaveness Cement Logistics AB subject to tax rate of 22 % in Sweden). Tax expenses outside Norway is not material.
Some companies in the Group are subject to taxation in Norway based on controlled foreign company (CFC) rules where tax is charged at the investor level. All of these companies are subject to the Norwegian tonnage tax regime and owned by a company subject for tonnage tax regime.
| USD '000 | ||
|---|---|---|
| Income taxes for the year | 2014 | 2013 |
| Income taxes payable | 6 977 | 516 |
| Change in deferred tax | (4 219) | (11) |
| Adjustment correction of last year's tax expense | (851) | - |
| Tax adjustments - others | (65) | (34) |
| Total tax expense / income (-) reported in the income statement | 1 843 | 471 |
| Net (gain)/loss on revaluation of cash flow hedges | (942) | (2) |
| Deferred tax charged to OCI | (942) | (2) |
| USD '000 | 2014 | 2013 | ||
|---|---|---|---|---|
| Tax payable | Income | Tax effect | Income | Tax effect |
| Profit / loss (-) before taxes | 17 342 | 4 682 | 31 055 | 8 695 |
| Income from shipping activity, tonnage tax system | (14 811) | (3 999) | (32 044) | (8 972) |
| Increase in income due to high equity | - | - | 36 | 10 |
| Change in temporary differences | 13 410 | 3 621 | 817 | 229 |
| Permanent differences | - | - | (31) | (9) |
| Change in tax losses carried forward | 2 218 | 599 | 895 | 251 |
| Exchange rate differences | 7 408 | 2 074 | 1 148 | 321 |
| Group contribution | - | - | (31) | (9) |
| Tax payable in the balance sheet** | 25 567 | 6 977 | 1 844 | 516 |
| Effective tax rate | 40 % | 2 % |
| USD '000 Temporary differences - ordinary taxation |
Temporary difference |
2014 Tax effect |
Temporary difference |
2013 Tax effect |
|---|---|---|---|---|
| Gains and losses accounts | (489) | (132) | (747) | (202) |
| Currency gain/loss not realised | 5 938 | 1 603 | 754 | 204 |
| Unrealised gain/loss IRS | (424) | (114) | 36 | 10 |
| Unrealised gain/loss CCIRS | (21 544) | (5 817) | (3 152) | (851) |
| Deficit carried forward | (3 348) | (904) | (1 130) | (305) |
| Net temporary differences - deferred tax liability/asset (-) | (19 867) | (5 364) | (4 239) | (1 146) |
| Tax (income)/expense during the period recognised in OCI | (944) | (2) | ||
| Deferred tax liability/asset (-) in balance sheet* | (6 308) | (1 148) |
*At year-end 2014 the Group has recorded a deferred tax asset of USD 6.3 million. At year-end 2013 the company recorded a defered tax asset of USD 296k. Temporary difference related to the CCIRS for 2013 has been adjusted in 2014 (USD 3 152k). Recognised deferred tax asset is expected to be utilized in the future upon realisation of the financial asset/liability.
**Group contribution of USD 22.3 million from Klaveness Ship Holding AS to Klaveness Finans AS (sister company) has not been recognised as a liability in the financial statements as of 31.12.2014 as the group contribution is not yet approved by the company's shareholders. The group contribution is provided with tax effect and will decrease tax payable by USD 6 million for 2014.
| Selfun- | Cabu | Total | ||
|---|---|---|---|---|
| 2014 | loaders | carriers | Container | vessels* |
| Cost price 1.1 | 244 437 | 244 758 | 161 157 | 650 352 |
| Delivery of newbuildings | - | - | 88 269 | 88 269 |
| Additions (mainly upgrading and docking of vessels) | 3 109 | 1 419 | 5 230 | 9 758 |
| Disposals | (4 798) | (39 511) | (377) | (44 686) |
| Costprice 31.12 | 242 748 | 206 666 | 254 279 | 703 693 |
| Acc. Depreciation 1.1 | 61 298 | 113 618 | 2 338 | 177 254 |
| Depreciation for the year | 13 620 | 12 364 | 8 282 | 34 266 |
| Reclass/disposal | (4 798) | (17 914) | (377) | (23 089) |
| Acc. depreciation losses 31.12 | 70 120 | 108 068 | 10 243 | 188 431 |
| Acc. impairment losses 1.1 | 3 660 | 13 578 | 32 266 | 49 504 |
| Impairment for the year | - | - | (1 538) | (1 538) |
| Impairment reclassed from newbuildings | - | - | 3 398 | 3 398 |
| Disposal | - | (13 578) | - | (13 578) |
| Acc. impairment losses 31.12 | 3 660 | - | 34 126 | 37 786 |
| Carrying amounts 31.12.2014 168 968 |
98 598 | 209 910 | 477 476 | |
|---|---|---|---|---|
| No. of vessels | 5 | 6 | 8 | |
| Useful life | 20 | 20 | 25 | |
| Depreciation schedule | Straight-line | Straight-line | Straight-line |
| Selfun- | Cabu | Total | ||
|---|---|---|---|---|
| 2013 | loaders | carriers | Container | vessels* |
| Cost price 1.1 | 129 630 | 243 881 | - | 373 511 |
| Additions (mainly upgrading and docking of vessels) | 114 807 | 3 844 | 161 157 | 279 808 |
| Disposals | - | (2 967) | - | (2 967) |
| Costprice 31.12 | 244 437 | 244 758 | 161 157 | 650 352 |
| Acc. depreciation losses 1.1 | 50 242 | 100 281 | - | 150 523 |
| Depreciation for the year | 11 056 | 16 304 | 2 338 | 29 698 |
| Disposal | - | (2 967) | - | (2 967) |
| Acc. depreciation losses 31.12 | 61 298 | 113 618 | 2 338 | 177 254 |
| Acc. impairment losses 1.1 | - | 13 578 | - | 13 578 |
| Impairment for the year | 3 660 | - | - | 3 660 |
| Impairment reclassed from newbuildings | - | - | 32 266 | 32 266 |
| Acc. impairment losses 31.12 | 3 660 | 13 578 | 32 266 | 49 504 |
| Carrying amounts 1.1.2013 | 79 389 | 130 024 | - | 209 413 |
|---|---|---|---|---|
| Carrying amounts 31.12.2013 | 179 479 | 117 562 | 126 553 | 423 593 |
| No. of vessels | 5 | 7 | 8 | |
| Useful life | 20 | 20 | 25 | |
| Depreciation schedule | Straight-line | Straight-line | Straight-line |
*Carrying value of vessels includes dry-docking. Carrying amounts at year end of dry-docking was USD 12.1 million (2013: USD 10.4 million, 1.1.13: USD 8.8 million).
All owned vessels are pledged to secure the various loan facilities (refer to note 15 for further information).
The tanker MV Baru was green recycled in March 2014 which resulted in a loss of MUSD 3.1 million. As compensation of the cancelled TC-contract the Group has received USD 2.2 million from Cabu Chartering AS (sister company) which has been recognized as operating revenue.
In Q1 2014 the Group took delivery of the last three identical container vessels (Baleares class) that were part of the newbuilding contract with Yangzijiang. The two last vessels included a discount in contractprice. As these three vessels (MV Baleaeres, MV Bardu and MV Banak) were negotiated based on the same contract and are identical container vessels, the Group has considered the vessels as one contract and cost price has been reallocated accordingly for each vessel with no effect on total vessel values, depreciation and impairment. As broker values for the vessels are higher than booked value, the previous impairment on Baleares of USD 3.4 million has been reversed in 2014.
The Group has performed an impairment test where the value in use is calculated using estimated cash flows.
The estimated cash flows are based on management's best estimate and reflect the Group's expectations of the market in the different segments. The net present value of future cash flows is based on a pre-tax weighted average cost of capital (WACC) of 8.5 % in 2014 (2013: 8.5 %) Cash flows are estimated over the remaining life of the vessel, with an estimated residual value at the end of the economic life based on USD 400 per light displacement ton. If scenario's of sale of a vessel before end of useful life is used, estimated salesprice is based on average 10-years salesprice of identical vessel types of same age. From 2019 and onwards, the cash flows are based on a zero-growth scenario, however an escalating factor of an in average 2.6 % inflation rate has been included for all operating expenses for all years until scrapping/sale.
The Group has calculated value in use of each vessel by discounting expected future cash flows. Recoverable amount has been calculated by weighing different scenarios in line with the Groups business strategy. Dependent on how the market develops, the different scenarios include 1) ownership of the vessels over the remaining lifetime; 2) sale of vessels in five years; and 3) sale of the vessels in ten years. The management is of the opinion that this method will take into account uncertainties in the estimates used in the cash flow model and the fact that shipping is a cyclical industry.
Recoverable amount has been set as the highest of estimated value in use and broker values. Recoverable amount has been compared to booked values.
In 2014, impairment of USD 0.3 million and USD 0.7 million are recognized respectively for Baro and Barry and an impairment of USD 0.9 million for Balsa. As decribed above (reallocation of cost price) the Group recognized a reversal of impairment of USD 3.4 million in 2014, which results in net reversal of USD 1.5 million for 2014.
A negative shift in the estimated TC rate from 2015 and onwards of USD 1 000 per day, all other factors held constant, would not result in any impairment loss. A negative shift in the estimated TC rate from 2015 and onwards of USD 2 000 per day, all other factors held constant, an impairment of USD 1.8 million would be recognised for one of the container vessels. A 1.0 per cent point increase in the estimated cost of capital would not result in any impairment loss (each vessel considered as a seperate cash generating unit).
Cash flow projections for the cabu vessels over the remaining economic life of the vessels show a net present value which is higher than the booked value of the fleet (considered as one cash generating unit). Broker values are obtained, however the valuation is based on standard dry bulk vessels so that specialized features of the cabu vessels are not taken into account. No impairment has been recognized for the cabu vessels at 31 December 2014 (2013: 0).
A negative shift in the estimated TC rate from 2015 and onwards of USD 1 000 per day, all other factors held constant would not result in any impairment loss. A negative shift in the estimated TC rate from 2015 and onwards of USD 2 000, all other factors held constant, would not result in any impairment loss. A 1.0 per cent point increase in the estimated cost of capital, from 8.5 % to 9.5 % would not result in any impairment loss.
Cash flow projections for the selfunloader vessels over the remaining economic life of the vessels show a net present value which is higher than the booked value of each vessel (considered as one cash generating unit). Broker values are obtained, however the valuation is based on standard dry bulk vessels so that specialized features of the selfunloader vessels are not taken into account. No impairment has been recognized for the selfunloader vessels at 31 December 2014 (2013: USD 3.7 million).
A negative shift in the estimated TC rate from 2015 and onwards of USD 1 000 per day, all other factors held constant, would result in an impairment loss of USD 0.9 million for one of the vessels. A negative shift in the estimated TC rate from 2015 and onwards of USD 2 000 per day, all other factors held constant ,would result in an impairment loss of USD 3.7 million for one of the vessels. A 1.0 per cent point increase in the estimated cost of capital, from 8.5 % to 9.5 % would not result in any impairment loss.
The below summarizes the total impairment cost/reversal:
| Impairment loss (-)/ reversal | 2014 | 2013 |
|---|---|---|
| Impairment of vessels | (1 860) | (3 660) |
| Reversal impairment newbuildings (see note 9) | 3 398 | 7 500 |
| Total impairment loss (-) / reversal | 1 538 | 3 840 |
As of 31 December 2014, the Group has a newbuilding programme consisting of construction of three identical combination carriers (Zhejiang OuHua Shipbuilding Co. Ltd in China) and two identical kamsarmax bulk carriers (Jiangsu Yangzijiang Shipbuilding Co. Ltd. in China). The combination carriers are scheduled for delivery in 2016 and 2017, and the kamsarmax vessels in 2015 and 2016.
The kamsarmax newbuildings are part of a newbuilding programme of in total eight vessels. One of the contracts have been sold in 2014, whereas five contracts has been novated to other companies (see note 3), leaving the Group with an ownership of in total two newbuilding contracts at year-end 2014.
During 2013 and 2014, the Group has taken delivery of in total six container vessels. The last three was delivered during the first quarter of 2014. The original newbuilding contract for one of these vessels was swapped against a different newbuilding contract with an earlier delivery and a further option to decleare two more vessels. The transaction resulted in a reversal of impariment of USD 7.5 million in 2013 (see note 8).
The selfunloader vessels Balto and Balchen were delivered to the Group in March 2013 and in September 2013 respectively. The vessels are employed in the spot co-sailing pool CSL.
As per year end 2014, no indicators of impairment was identified, and no impairment is recognized in the financial statements.
| 2014 | ||||
|---|---|---|---|---|
| Investments in newbuildings | Container | Cabu | Kamsarmax Total | |
| Cost 1.1 | 23 015 | - | 5 340 | 28 355 |
| Borrowing cost | 927 | - | - | 927 |
| Yard installments paid | 61 153 | 21 462 | 2 770 | 85 385 |
| Other capitalized cost | 876 | 484 | 504 | 1 864 |
| Impairment loss (-)/reversal | 3 398 | - | - | 3 398 |
| Sale of newbuilding contracts | - | - | (2 670) | (2 670) |
| Transfered to vessels under operation | (89 369) | - | - | (89 369) |
| Net carrying amount at 31 December | - | 21 946 | 5 944 | 27 890 |
| 2013 | ||||
|---|---|---|---|---|
| Investments in newbuildings | Container | SUL | Kamsarmax Total | |
| Cost 1.1 | 13 797 | 63 343 | - | 77 140 |
| Borrowing cost | 1 299 | 1 194 | - | 2 494 |
| Yard installments paid | 119 770 | 45 923 | 5 340 | 171 033 |
| Other capitalized cost | 9 540 | 4 346 | - | 13 886 |
| Impairment loss (-)/reversal | 7 500 | - | - | 7 500 |
| Transfered to vessels under operation | (128 891) (114 807) | - | (243 698) | |
| Net carrying amount at 31 December | 23 015 | - | 5 340 | 28 355 |
| USD'000 | |||
|---|---|---|---|
| Other long-term receivables | 2014 | 2013 1 Jan 2013 | |
| Sale of newbuilding contracts | 1 920 | 2 400 | - |
| Other long-term receivables | 1 920 | 2 400 | - |
| USD'000 | |||
|---|---|---|---|
| Receivables from related parties | 2014 | 2013 1 Jan 2013 | |
| Klaveness Ship Management AS | 198 | 190 | 770 |
| Cabu Chartering AS | 7 129 | 9 923 | 11 040 |
| Klaveness Finans AS (group contribution without tax effect) | - | - | 18 227 |
| Receivables from related parties | 7 327 | 10 113 | 30 037 |
| USD'000 | |||
|---|---|---|---|
| Other short-term receivables | 2014 | 2013 1 Jan 2013 | |
| Accrued income | 2 845 | 3 822 | 2 345 |
| Accrued interest income | 302 | 482 | 148 |
| Claims | 6 167 | 609 | 765 |
| Related party | - | 399 | - |
| Sale of newbuilding contracts | 480 | - | - |
| Other short-term receivables | 5 113 | 1 499 | 2 289 |
| Other short-term receivables | 14 907 | 6 810 | 5 547 |
The Group has bank deposits in the following currencies:
| USD'000 | 2014 | 2013 | 1 Jan 2013 |
|---|---|---|---|
| Bank deposits, NOK | 1 525 | 104 | 2 796 |
| Bank deposits, USD | 79 611 | 99 007 | 34 399 |
| Bank deposits, SEK | 94 | 115 | 236 |
| Cash | 459 | 386 | 1 998 |
| Total cash and cash equivalents | 81 690 | 99 612 | 39 429 |
The equivalent of USD 94k of the bank deposit in SEK is restricted (2013: USD 112k).
The Group has entered into interest rate swap agreements designated as cash flow hedges to partly hedge interest rate exposure related to the Group's long term mortgage debt. The purpose of these interest rate swaps is to limit the interest rate exposure related to the loans. When interest rate swaps qualify for hedge accounting, the fair value movement is recognised in other comprehensive income until realization of the hedged transaction, ref note 13 for further information. Fair value of interest rate swaps which qualify for hedge accounting is USD 13k (asset) as of year end 2014 (2013: USD 226k).
The Group has in 2014 entered into some interest rate swaps for speculative purposes. Fair value of these amounts to USD -742k (liability) as of year end 2014. Fair value movement in these swaps are recognized through P&L (note 6).
To hedge the Group's bond loans in NOK, the Group has entered into three cross currency interest rate swap agreements to secure the loan amount into USD. The interest rate and currency swap agreements are designated as cash flow hedges and are effective hedging instruments. Changes in fair value are recognised in other comprehensive income and will affect profit and loss upon maturity of the bond loans in 2018 and 2020.
Interest rate swap agreements on mortgage loans have a duration until 2018 when the underlying loans expire. Interest rate swap agreements for speculative purposes have a duration until 2023. The cross currency interest rate swaps are a full hedge on both exchange rate and interest rate for the duration of the bond loans, which mature in May 2018 and March 2020. Hence all swap agreements have been classified as non-current.
| Non-current financial assets at 31 December | |||
|---|---|---|---|
| 2014 | 2013 | 1 Jan 2013 | |
| Financial instruments at fair value through OCI | |||
| Interest rate swaps | 13 | 226 | - |
| Financial assets | 13 | 226 | - |
| Non-current financial liabilities at 31 December | |||
| 2014 | 2013 | 1 Jan 2013 | |
| Financial instruments at fair value through OCI | |||
| Cross currency interest rate swap | 21 544 | 3 152 | - |
| Financial instruments at fair value through P&L | |||
| Interest rate swaps | 742 | - | |
| Financial liabilities | 22 286 | 3 152 | - |
For further information on interest rate swaps and cross-currency interest rate swaps see note 13.
The capital structure of the Group is intended to ensure financial stability for the purpose of reducing its cost of capital and maintain sufficient financial stability to reach its strategic goals. The target for the Group's capital structure states that cash should always be adequate to cover all ongoing business, liquidity fluctuations due to market volatility and investment needs. Targets has been defined for the ratio of net interest-bearing debt to EBITDA (adjusted EBITDA for vessels delivered or sold) and equity ratio. The gearing ratio, i.e. net interest-bearing debt to EBITDA was 3.9 at 31 December 2014 (2013: 2,64) and equity ratio as of 31 December 2014 was 45 % (2013: 50 %). Net interest bearing debt is calculated as all interest bearing debt less cash and cash equivalents, however restricted cash and money market fund is not included as cash or cash equivalents.The Group's covenants are described in note 15.
The capital structure composition and dividend payments are considered in view of debt service ability, capital commitments and expectations of future cash flows. Available cash, loan covenants and the balance sheet composition is monitored to make sure that the company has the necessary financial strength to continue as a going concern.
The Group aims to spend free cash flows as follows:
Investments in developing new and existing business.
Repayment of net interest-bearing debt in periods when financial gearing ratio of the Group is above the capital structure target.
Distribution to the Company's shareholders by means of dividends.
The main priority of maintaining a strong financial position is to secure the ongoing business activity of the Group and the ability to do new business and to ensure access to funding at favourable terms. The Group's capital structure consists of mortgage debt (note 15), bond loans listed at Nordic ABM (note 16), cash and cash equivalents (note 11) and equity attributable to the shareholders.
The Group is exposed to operational risk, market risk (including but not limited to, currency risk, freight rate and vessel values), credit/counterparty risk and liquidity risk. The Group's excecutive management oversees the management of these risks, and is supported by a risk department and a treasury department that advise on market risks and financial risks and the appropriate financial risk governance framework for the Group. The risk department provides assurance to the excecutive management that the Group's financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Group's policies and risk objectives. All derivative activities (FX/IR) for financial risk management purposes (incl. hedging) are carried out by the treasury department that have the appropriate skills, experience and supervision. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.
Operational risks are mainly related to the operation of vessels under the management of Klaveness Ship Management AS (sister company). The Group's vessels are on technical management to Klaveness Ship Management AS which ensures compliance with IMO, flag and port state regulations. Quality and safety audits are performed regularly and the crew and officers onboard are trained to ensure that regulatory requirements are met.
Operational risk is managed through quality assurance procedures and systematic training of seafarers and land based employees. All vessels sailing through piracy exposed areas take necessary steps to mitigate the threat of such attacks. Operational risk is also covered by insurance where relevant to cover loss of assets, revenues and contract commitments. The vessels are insured for loss of hire, protection and indemnity (P&I) and complete loss (hull and machinery). The latter is aligned with vessel values. The financial impact of a total loss of a vessel will not be material for the Group.
Ownership of vessels involves risks related to vessel values, future vessel employment, revenues and costs. These risks are partly managed through short-term/long-term time charter contracts and contracts of affreightment covering a large part of the vessel capacity.
The Group's revenue and costs are denominated primarily in US Dollar (USD) which is the functional currency of most entities in the Group. No direct currency hedge has been made towards the small portion of costs incurred in foreign currencies. Fluctuations in USD against NOK may affect the company's tax payable, which will be calculated and paid in NOK. This effect is considered to be limited. The bonds issued in NOK are partly hedged with a cross currency interest rate swap, reducing the currency and interest exposure.
The Group has long term interest bearing debt that is exposed to floating interest rate. In order to hedge the risk, the company has entered into interest rate swaps. At year end 2014, 14 % (2013: 13 %) of the floating interest loans are hedged. Long term mortgage debt bear interest at LIBOR plus a fixed margin. The following table sets out the outstanding swapped amounts as of 31 December 2014. The Group evaluates on an ongoing basis the need to further hedge interest rate exposure.
| 31.12.2014 | ||||
|---|---|---|---|---|
| USD'000 | Outstanding notional | Swapped portion of | Fixed | |
| Loan facilities | amounts of the swap | credit facilities | Maturity | interest |
| Balao/Ballenita (SEB) | 15 000 | 56 % | 27.06.2018 | 1,370 % |
| Balsa/Baleares (DNB/Danske Bank) | 7 500 | 50 % | 24.09.2018 | 1,505 % |
| Balsa/Baleares (DNB/Danske Bank) | 7 500 | 50 % | 24.09.2018 | 1,437 % |
| Outstanding notional amounts | 30 000 |
| USD'000 | Outstanding notional | Swapped portion of | Fixed | |
|---|---|---|---|---|
| Loan facilities | amounts of the swap | credit facilities | Maturity | interest |
| Balao/Ballenita (SEB) | 15 000 | 79 % | 27.06.2018 | 1,370 % |
| Balsa/Baleares (DNB/Danske Bank) | 7 500 | 96 % | 24.09.2018 | 1,505 % |
| Balsa/Baleares (DNB/Danske Bank) | 7 500 | 96 % | 24.09.2018 | 1,437 % |
| Outstanding notional amounts | 30 000 |
| Other comprehensive income / (loss) for the period, net of tax | 2014 | 2013 |
|---|---|---|
| Net movement fair value on interest rate swaps | (213) | 226 |
| Net movement fair value on CCIRS | (18 392) | (3 152) |
| Reclassification to profit and loss | 15 118 | 2 920 |
| Income tax effect | 941 | 2 |
| Other comprehensive income / (loss) for the period, net of tax | (2 546) | (4) |
| USD '000 | Change in interest rate | 2014 | 2013 |
|---|---|---|---|
| USD LIBOR | +1,50% | 2 809 | 2 945 |
| + 0,75% | 1 404 | 1 472 | |
| - 0,75% | (1 404) | (1 472) | |
| - 1,50% | (2 809) | (2 945) | |
| NIBOR | +1,50% | 197 | - |
| + 0,75% | 99 | - | |
| - 0,75% | (99) | - | |
| - 1,50% | (197) | - |
Counterparty risk is generated by service deliveries to customers (CoA's) and risk related to the charterers of the vessels will not meet its obligations under the charter party contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily trade receivables). The permitted exposure for each contractual partner is defined through a rating process in the risk department. The Group recognize claims to the extent the Group has legal right to insurance coverage or it is highly probable that the claim will result in cash inflows from the insurance company. Counterparty risk against insurance institutions exists.
Although all container vessels are currently on short-term charter parties, the commercial manager monitors the counterparties regularly and assesses whether any provisions for future losses should be made as per end of the reporting period.
Further, the Group is exposed to credit risk through its deposits. Deposits are made with financial institutions that have A/AA rating.
Total credit risk at year-end 2014 amounts USD 98 million (book value of receivables and bank deposits).
As of 31 December 2014, fair value of the interest rate swaps (IRS)which qualify for hedge accounting was positive by USD 13k (2013: USD 226k) and fair value of cross currency interest rate swap (CCIRS) negative by USD 21.5 million (2013: USD 3.2 million). Changes in the fair values of the IRS and CCIRS are recognized as other comprehensive income (OCI).
Below table sets out the split of other comprehensive income for the years ended 31 December 2014 and 2013, respectively:
The table below shows estimated changes in profit before tax for the Group from reasonable possible changes in interest rates in 2014 and 2013, with all other variables held constant. The changes are estimated based on given capital structure as of year end.
| Maturity profile financial liabilities at 31 Dec 2014 | < 1 year | 1-3 years | 3-5 years | > 5 years | Total |
|---|---|---|---|---|---|
| Mortgage debt (incl interests) | 25 594 | 71 208 | 131 297 | 8 154 | 236 253 |
| Bond loan (incl interests) | 5 882 | 11 764 | 43 458 | 63 307 | 124 411 |
| Accounts payable | 1 245 | - | - | - | 1 245 |
| Current debt to related parties | 1 525 | - | - | - | 1 525 |
| 34 246 | 82 972 | 174 755 | 71 461 | 363 434 |
| Maturity profile financial liabilities at 31 Dec 2013 | < 1 year | 1-5 years | > 5 years | Total |
|---|---|---|---|---|
| Mortgage debt (incl interests) | 36 179 | 216 567 | - | 252 746 |
| Bond loan | 3 322 | 67 202 | - | 70 524 |
| Debt to shipyard | 14 242 | - | - | 14 242 |
| Accounts payable | 1 654 | - | - | 1 654 |
| Current debt to related parties | 4 368 | - | - | 4 368 |
| 59 765 | 283 769 | - | 343 534 |
| Remaining installments at 31 December 2014 | 2015 | 2016 | 2017 | Total |
|---|---|---|---|---|
| Combination carriers | 14 337 | 50 392 | 39 810 | 104 538 |
| Kamsarmax | 24 030 | 24 030 | - | 48 060 |
| Total commitments newbuildings | 38 367 | 74 422 | 39 810 | 152 598 |
Liquidity risk is the risk that the Group may not be able to fulfill its liabilities when they fall due. The Group has capital commitments relating to borrowings and newbuildings. Liquidity risk is managed by the Group's treasury department. The Group keeps its liquidity reserves mainly in cash and bank deposits. The liquidity risk is considered to be limited as the deposits are considered sufficient for all needs in the forseeable future. The Group's bank financing and bonds are subject to financial and non-financial covenant clauses.The table below illustrates the timing and magnitude of the Group's financial liabilities.
The commitments related to newbuildings are set out below. The combination carriers are scheduled for delivery in 2016 and 2017, and the kamsarmax vessels in 2015 and 2016 (see note 9).
The table below summarises the maturity profile of the Group's financial liabilities based on contractual undiscounted payments. Interest bearing debt and bond loan includes interest payments and interest and currency hedge. Maturity profile for loan facilities that are refinanced during the first quarter of 2015 (note 24) are included in line with original loan agreement.
* including restricted cash (note 11)
| Carrying amount | Fair value | ||||||
|---|---|---|---|---|---|---|---|
| 2014 | 2013 1 Jan 2013 | 2014 | 2013 1 Jan 2013 | ||||
| Financial assets at | |||||||
| fair value through OCI | |||||||
| Derivates in effective cash flow hedges | 13 | 226 | - | 13 | 226 | - | |
| Total financial instruments at fair value | 13 | 226 | - | 13 | 226 | - | |
| Loans and receivables at amortised cost | |||||||
| Other long-term receivables | 1 920 | 2 400 | - | 1 920 | 2 400 | - | |
| Accounts receivable | 867 | 24 | 1 600 | 867 | 24 | 1 600 | |
| Receivables from related parties | 7 327 | 10 113 | 30 037 | 7 327 | 10 113 | 30 037 | |
| Total loans and receivables | 10 114 | 12 537 | 31 637 | 10 114 | 12 537 | 31 637 | |
| Cash and cash equivalents* | 81 690 | 99 612 | 39 429 | 81 690 | 99 612 | 39 429 | |
| Total | 91 817 | 112 375 | 71 066 | 91 817 | 112 375 | 71 066 | |
| Total current | 89 884 | 109 749 | 71 066 | 89 884 | 109 749 | 71 066 | |
| Total non-current | 1 933 | 2 626 | - | 1 933 | 2 626 | - |
| Carrying amount | Fair value | |||||
|---|---|---|---|---|---|---|
| 2014 | 2013 1 Jan 2013 | 2014 | 2013 1 Jan 2013 | |||
| Financial liabilities at | ||||||
| fair value through OCI | ||||||
| Derivates in effective cash flow hedges | 21 544 | 3 152 | - | 21 544 | 3 152 | - |
| Financial liabilities at | ||||||
| fair value through P&L | ||||||
| Other derivatives | 742 | - | - | 742 | - | - |
| Total financial liabilities at fair value | 22 286 | 3 152 | - | 22 286 | 3 152 | - |
| Other financial liabilities at amortised cost | ||||||
| Accounts payable | 1 245 | 1 654 | 5 236 | 1 245 | 1 654 | 5 236 |
| Other financial liabilities | 1 525 | 4 368 | 8 656 | 1 525 | 4 368 | 8 656 |
| Interest bearing debt | 217 473 | 230 224 | 113 538 | 230 678 | 230 224 | 113 538 |
| Bond loan | 78 138 | 48 524 | - | 75 903 | 49 682 | - |
| Total financial liabilities at amortised cost | 298 381 | 284 770 | 127 430 | 309 351 | 285 928 | 127 430 |
| Total | 320 667 | 287 922 | 127 430 | 331 637 | 289 080 | 127 430 |
| Total current | 81 895 | 49 383 | 22 877 | 81 895 | 49 383 | 22 877 |
| Total non-current | 238 772 | 238 539 | 104 553 | 249 742 | 239 697 | 104 553 |
Set out below is a comparison by class of the carrying amounts and fair value of the Group's financial assets included in the financial statements.
| Assets | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Derivatives used for hedging | ||||
| Derivates in effective cash flow hedges | 13 | 13 | ||
| Liabilities | Level 1 | Level 2 | Level 3 | Total |
| Financial liabilities at fair value through profit or loss | ||||
| Interest rate swaps | 742 | 742 | ||
| Financial liabilities not measured at fair value, but for which fair value is disclosed | ||||
| Bond | 75 903 | 75 903 | ||
| Mortgage debt | 230 678 | 230 678 | ||
| Derivatives used for hedging | ||||
| Derivates in effective cash flow hedges | 21 544 | 21 544 |
The fair value of the financial assets and liabilities is recognised as the value at which they could be exchanged in a transaction between willing parties other than in a forced or liquidation transactions. The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Cash and restricted cash, trade receivables, trade payables and other current liabilities are recognized at their carrying amounts largely due to the short term maturities of these instruments.
Fair value of loans from banks and other financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities.
Since the NOK 300 mill and NOK 400 mill bonds are listed on Nordic ABM (ticker KSH01 PRO, KSH02 PRO), fair value of the bonds is disclosed based on traded information.
The Group enters into derivative financial instrument with various counterparties, principally financial institutions with investment grade credit ratings. Derivatives valued using valuation techniques with market observable inputs are mainly interest rate swaps and foreign exchange forward contracts. The most frequently applied valuation techniques include forward pricing and swap models, using present calculations. The models incorporate various inouts including the credit quality of counterparties, forein exchange spot and forward rates and interest rate curves. Valuation is performed by banks.
The Group use financial hierarchy for determining and disclosing the fair value of financial instruments by valuation techniques. Below table presents fair value measurements to the Group's assets and liabilities at 31 December 2014:
| Assets | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| Derivatives used for hedging | ||||
| Derivates in effective cash flow hedges | 226 | 226 | ||
| Liabilities | Level 1 | Level 2 | Level 3 | Total |
| Financial liabilities not measured at fair value, but for which fair value is disclosed | ||||
| Bond | 49 682 | 49 682 | ||
| Mortgage debt | 227 304 | 227 304 | ||
| Derivatives used for hedging | ||||
| Derivates in effective cash flow hedges | 3 152 | 3 152 |
The table below presents fair value measurements to the Group's assets and liabilities at 31 December 2013:
The fair value of financial instruments traded in active market is based on quoted market prices at the balance sheet date and are included in level 1.
The fair value of financial instruments that are not traded in an active market (for example over -the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity sepcific estimates. If all significant inputs required to fair value an instrument are observable, the instruments are included in level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. During the reporting periods of 2013 and 2012, there were no transfers between any of the levels. Refer to Note 12 and 13 for the disclosures of non-current and current portion of the liabilities measured at fair value.
The below table presents the Group's carrying amount of interest bearing debt by non-current and current portions for year ended 31 December 2014 and 2013, respectively. All debt except for the bond loans (NOK) are denominated in USD, ref note 16 for further information on bond loans.
As of 31 December 2014, the Group had a total of USD 317.2 million in interest bearing debt (incl capitalized fees, interest hedge and currency hedge) of which USD 296.5 million was classified as non-current debt and USD 20.7 million was classified as current debt. An overview of the loan facilities in the Group is presented below. Mortgage debt are subject to an interest rate of 3M LIBOR plus a margin of in range 0.7-3.25. Loan facilities that are subject to refinancing in Q1-2015 are described in note 24.
| Carrying | ||||
|---|---|---|---|---|
| Mortgage debt | Description | Maturity | amount | Fair value |
| Baldock | DnB/USD 13.5 mill | Oct 2016* | 7 000 | 7 000 |
| Revolving credit facility | DnB/USD 52.5 mill | March 2015* | - | - |
| Balto/Balchen | DnB/ING/USD 75 mill | March 2018* | 46 279 | 46 279 |
| Barry/Baro/Bardu/Banak | DnB/USD 54.6 mill | March 2019 | 55 236 | |
| Balao/Ballenita | SEB/USD 30.158 mill | June 2018 | 26 950 | 29 018 |
| Balsa/Baleares | DnB/Danske Bank/USD 35 mill | Sept 2018 | 30 056 | 32 601 |
| Banasol | SEB/USD 12 mill | April 2018 | 8 500 | 9 093 |
| Banastar | SEB/USD 12 mill | April 2018 | 8 500 | 9 093 |
| Bangor | Danske Bank/USD 16 mill | March 2017* | 11 600 | 11 600 |
| Bantry | Danske Bank/18.9 mill | March 2017 | 14 569 | 15 249 |
| Bakkedal | Nordea/USD 16 mill | July 2021 | 13 708 | 15 509 |
| Mortgage debt 31 December 2014 | 167 163 | 230 678 |
* Loan facility refinanced Q1-2015 (see note 24 for further information).
| 2014 - Interest bearing debt | Non-current | Current | Total |
|---|---|---|---|
| Mortgage debt | 146 492 | 20 671 | 167 163 |
| Transaction costs mortgage debt | (604) | - | (604) |
| Bond loan | 79 409 | - | 79 409 |
| Transaction costs bond loan | (1 271) | - | (1 271) |
| Cross currency interest rate swap | 21 544 | - | 21 544 |
| Total interest bearing debt | 245 570 | 20 671 | 266 241 |
| 2013 - Interest bearing debt | Non-current | Current | Total |
|---|---|---|---|
| Mortgage debt | 188 191 | 29 578 | 217 769 |
| Transaction costs mortgage debt | 786 | - | 786 |
| Bond loan | 49 330 | - | 49 330 |
| Transaction costs bond loan | (2 920) | - | (2 920) |
| Cross currency interest rate swap | 3 152 | - | 3 152 |
| Debt to shipyard | - | 13 783 | 13 783 |
| Total interest bearing debt | 238 539 | 43 361 | 281 900 |
| 1 Jan 2013 - Interest bearing debt | Non-current | Current | Total |
|---|---|---|---|
| Mortgage debt | 96 763 | 16 775 | 113 538 |
| Transaction costs mortgage debt | - | - | - |
| Total interest bearing debt | 96 763 | 16 775 | 113 538 |
The Group has undrawn committed borrowing facilities available at 31 December, for which all conditions have been met, as follows:
| Credit | Drawn up | Available | |||||
|---|---|---|---|---|---|---|---|
| 2014 | NOK mill | USD mill | NOK mill | USD mill | NOK mill | USD mill | |
| Revolving credit facility | 41,5 | - | 41,5 | ||||
| Bond loan KSH01 | 500 | 300 | 200 | ||||
| Buy back KSH01 | -100 | ||||||
| Bond loan KSH02 | 600 | 400 | 200 | ||||
| Buy back KSH01 | -10 | ||||||
| Total | 1100 | 41,5 | 590 - |
400 | 41,5 |
| Credit | Drawn up | Available | ||||||
|---|---|---|---|---|---|---|---|---|
| 2013 | NOK mill | USD mill | NOK mill | USD mill | NOK mill | USD mill | ||
| Revolving credit facility | - | 57,5 | - | 33,0 | - | 24,5 | ||
| Bond loan KSH 01 | 300 | 49,0 | 300 | 49,0 | - | - | ||
| Total | 300 | 106,5 | 300 | 82,0 | - | 24,5 |
Existing credit facilitiesimpose restrictions which may limit or prohibit the ability for some of the entities in the Group to incur additional indebtness, sell shares in subsidiaries, commit to new capital expenditure, pay dividends, engage in mergers and de-mergers or purchase and sell vessels without the consent of lenders (non-financial covenants). In addition, lenders may accelerate the maturity of the indebtness under financing agreements and foreclose upon the collateral securing the indebtness upon the occurence of certain events of defaults. Various debt agreements of the Group contain covenants which require the compliance of certain financial covenants. With regards to such covenants, the Group has to maintain a minimum market value of the vessels relative to outstanding loan amount, in the range 110-130 %, minimum equity on Group level of USD 125 mill, a minimum equity ratio of 30 %, maximum gearing ratio measured by net interest-bearing debt/EBITDA of 5.0 and a minimum free cash position of USD 10 mill. Certain crossdefaults exists.
The Group was in compliance with these covenants at 31 December 2014 and 31 December 2013.
As a security for the mortgage debt, the company has included a first priority security in all vessels ,and insurances in the vessels and assignment of the earnings of the vessels in favour of the debtors.
| Book value of collateral, mortgaged and leased assets: | 2014 | 2013 | 1 Jan 2013 |
|---|---|---|---|
| Vessels | 477 515 | 423 593 | 209 413 |
| Total book value of collateral, mortgaged and leased assets | 477 515 | 423 593 | 209 413 |
The Group has entered into two bond agreements in May 2013 and in March 2014.
The bond loans are listed on Nordic ABM and has a bullet structure with no repayment until maturity in respectively May 2018 and March 2020. Bond loans are subject to an interest rate of 3M NIBOR plus a margin of in range 4.25-4.75. Both bond loans are issued by Klaveness Ship Holding AS and the company has the right to call the entire/or parts of the bonds at any time as follows:
As the Group's base currency is USD, cross currency interest rate swaps (CCIRS) from NOK to USD, and from floating to fixed interest rate of the range 6,01% - 6,39 %, has been entered into. The CCIRS covers 100 % of the NOK 300 mill bond and 75 % of the NOK 400 mill bond at 31 December 2014.
The bond entered into in May 2013 has a borrowing limit of NOK 500 million and bond entered into in March 2014 has a borrowing limit of NOK 600 million.
Covenants are described in note 15.
| Face value | Year of | Carrying amount (USD'000) | ||
|---|---|---|---|---|
| Bond loan | NOK'000 | maturity | 2014 | 2013 |
| KSH01 | ||||
| Original loan amount | 300 000 | 08.05.2018 | 52 250 | 52 250 |
| Buy back | (100 000) | (17 417) | - | |
| Exchange rate adjustment | (7 915) | (2 920) | ||
| Capitalized expenses | (423) | (806) | ||
| 26 495 | 48 524 | |||
| KSH02 | ||||
| Original loan amount, fixed | 300 000 | 20.03.2020 | 50 500 | - |
| Original loan amount, unfixed | 100 000 | 20.03.2020 | 16 828 | |
| Buy back | (10 000) | (1 355) | ||
| Exchange rate adjustment | (13 482) | - | ||
| Capitalized expenses | (848) | - | ||
| 51 644 | - | |||
| Debt as of 31 December | 590 000 | 78 138 | 48 524 |
The Group has capital commitments relating to borrowings and newbuildings. For information of maturity profile for mortgage debt and bond loan, see note 13. Commitments related to newbuildings are presented in note 13. Available facilities is presented in note 15.
The Group has its container vessels on short-term time charter parties (3-9 months) accounted for as operational leases. The Group enters into a time charter contract with a charterer, to charter out a vessel for a stated period of time against a stated rate of hire per day.
The company's future operating net lease revenue from the time charter contracts are shown in the table below:
| Operational lease | 2014 | 2013 |
|---|---|---|
| Due in < 1 year | 6 100 | 25 000 |
| 1-5 years | - | - |
| From 5 years | - | - |
| Future net lease TC revenue | 6 100 | 25 000 |
Guarantees Below is a list of guarantees given.
Guarantee to Description Amount YZJ Yard Two gurantees for second and third installments for Each of USD 5.340k + interest shipbuilding contracts YZJ2013-1116/1117
In connection with the sale of one of the Kamsarmax newbuilding contracts, the Group (represented by Klaveness Bulk AS) is responsible part in respect to the yard, Jiangsu New Yangzi Shipbuilding. A payment guarantee for outstanding installments is given by the parent company of the buyer. The Group has provided a re-payment guarantee acceptable to the buyers for the refund of any installments paid prior to delivery in case of termination/recission of the contract.
| Non-current liabilities related parties | 2014 | 2013 1 Jan 2013 | |
|---|---|---|---|
| Klaveness Finans AS | - | - | 3 832 |
| Non-current liabilities related parties | - | - | 3 832 |
| Current liabilities related parties | 2014 | 2013 1 Jan 2013 | |
| Klaveness Ship Management AS | 1 248 | 1 705 | 57 |
| AS Klaveness Chartering | 175 | 2 294 | 521 |
| Cabu Chartering AS | 103 | 360 | 308 |
| Klaveness Finans AS | - | 9 | - |
| Current liabilities related parties | 1 525 | 4 368 | 886 |
| Other current liabilities | 2014 | 2013 1 Jan 2013 | |
|---|---|---|---|
| Accrued expenses | 1 068 | 1 653 | 1 107 |
| Crew accrued wages | 2 494 | 1 995 | 2 177 |
| Accrued interest | 1 218 | 1 079 | 467 |
| Other | 1 771 | 1 873 | 1 295 |
| Total other current liabilities | 6 551 | 6 600 | 5 046 |
| Shares | Notional | Share capital (NOK) | ||
|---|---|---|---|---|
| 01.01.2013 | 1 000 | 10 000 | NOK 10 million | |
| 13.03.2013 | Increase notional | 1 000 | 11 000 | NOK 11 million |
| 19.12.2013 | Increase notional | 1 000 | 12 000 | NOK 12 million |
| 31.12.2013 | 1 000 | 12 000 | NOK 12 million | |
| 31.12.2014 | 1 000 | 12 000 | NOK 12 million |
All shares are issued and fully paid.
All shares are owned by Rederiaksjeselskapet Torvald Klaveness.
No dividends are paid or proposed for the years 2014 and 2013. However, group contribution of USD 22.3 million from Klaveness Ship Holding AS to Klaveness Finans AS has not been recognised as a liability in the financial statements as of 31.12.2014 as the group contribution is not yet approved by the company's shareholders. The group contribution of USD 22.3 is provided with tax effect (see note 7). Klaveness Ship Holding AS will receive USD 17.2 in group contribution without tax effect from Klaveness Finans AS (not recognised as receivable as of 31.12.14 as not yet approved by the general meeting).
The Group has no financial instruments or issued share options with a future dilution effect.
| 2014 | 2013 |
|---|---|
| 15 080 | 26 812 |
| 1 000 | 1 000 |
| 15,08 | 26,81 |
Earnings per share is based on a weighted average number of ordinary shares outstanding during the year.
Klaveness Ship Holding AS comprises several subsidiaries. Presented below is a list of all subsidiaries. Unless otherwise stated, the companies are located in Oslo, Norway.
| Ownership interest | Ownership interest | |
|---|---|---|
| Company name | per 31 Dec 2014 | per 31 Dec 2013 |
| T Klaveness Shipping AS | 100 % | 100 % |
| Klaveness Selfunloaders AS | 100 % | 100 % |
| Klaveness Cement Logistics AB (Sweden) | 100 % | 100 % |
| Klaveness Container Holding AS | - | 86,20 % |
| Klaveness Container AS | 86,20 % | - |
| Klaveness Bulk Holding AS | - | 100 % |
| Klaveness Bulk AS | 100 % | - |
| Banasol Inc (Liberia) | 50 % | 50 % |
| Cabu Bangor Inc. (Liberia) | 100 % | 100 % |
| Banastar Inc. (Liberia) | 50 % | 50 % |
| Cabu V Investment Inc. (Liberia) | 95 % | 95 % |
| Cabu VI Investment Inc. (Liberia) | 81 % | 81 % |
For companies listed above, no changes in owner structure in 2014 or 2013 except:
* Klaveness Container Holding AS (2013: 100 %) has merged with Klaveness Container AS in 2014
** Klaveness Bulk Holding AS (2013: 86.2 %) has merged with Klaveness Bulk AS in 2014
The Group has a 50 % share in Banasol Inc and Banastar Inc, however the Group has power to direct the relevant activities based on contractual agreements for the main activities; chartering activity and ship-owning activity.
The share capital of T Klaveness Shipping AS was on 19 March 2013 paid as a contribution in kind from the parent company Rederiaksjeselskapet Torvald Klaveness (RASTK) to Klaveness Ship Holding AS. The accounts for T Klaveness Shipping AS has for the year 2013 been included from 1 January 2013 in accordance with the continuity principle as the contribution in kind took place as part of an internal restructuring within the RASTK Group.
In June 2013, the Group realised its interest of 60 % ownership in the German company Baltrader Schiffahrtsgesellschaft GmbH & Co. The investement was consolidated as a subsidiary at Group level, and a gain on the sale of USD 0.3 million is included in other operating revenue.
The ultimate owner of the Klaveness Ship Holding AS Group is Rederiaksjeselskapet Torvald Klaveness (RASTK), which owns 100 % of the shares in Klaveness Ship Holding AS.
The Group has undertaken several agreements and transactions with related parties in the RASTK Group. The level of fees are based on market terms and are in accordance with the arm's length principle.
AS Klaveness Chartering (KC) delivers services to the Group performed by corporate functions like management, legal, accounting & controlling, risk management and commercial management. All of the corporate functions in KC will be demerged to Klaveness AS with effect from 1 January 2015.
Klaveness Ship Management AS delivers ship management services for all of the vessels in the Group. Ship Management fees cover services like technical management, crewing management, IT and energy management. For the newbuildings in the Group, Klaveness Ship Management performs supervision and project management services.
| USD'000 | |||
|---|---|---|---|
| Supplier | Type of agreement | 2014 | 2013 |
| AS Klaveness Chartering (sister company) | Business administration fee | (652) | (1 863) |
| AS Klaveness Chartering (sister company) | Commercial management fee | (4 717) | (1 499) |
| AS Klaveness Chartering | IT fee | (562) | - |
| Klaveness Ship Management AS (sister company) | Ship Mangement fee | (5 727) | (4 046) |
Regular claims are made against the Group as a result of its ordinary operations. Provisions are made in the financial statements whenever the probable outcome of these disputes are expected to be in disfavour of the Group.
Claims consists of insurance claims for incidents, and yard claims related to the new buildings delivered in 2013 and 2014. Of the total claim of USD 6.1 million, USD 4.5 million is related to insurance claims, and USD 1.6 million is related to yard claims. The majority of the claims is expected to be settled before year end
The Group has refinanced two loan facilities in the first quarter of 2015. One revolving credit facility (RCF) of USD 75 million and one term loan facility of USD 140 million. The RCF has a tenor of 6 years and will replace the capacity of the existing RCF and the term loans for MV Balto, MV Balchen and MV Baldock. The new RCF will be secured in all five selfunloader vessels. T Klaveness Shipping AS, Klaveness Selfunloaders AS and Klaveness Ship Holding AS will be joint borrowers.
The new term loan facility has a tenor of 7 years and will replace the capacity of the term loan for MV Bangor and MV Banyias`s share of the existing RCF and secure financing for all the newbuildings. T.Klaveness Shipping AS, Klaveness Bulk AS and Cabu Bangor Inc. will be joint borrowers.
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