Annual Report • Apr 1, 2008
Annual Report
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The drawings in the annual report were made by children from the orphanage Maestral in Croatia. The drawings were auctioned off at a charity event in Split in aid of the orphanage. Shipbuilding is a large industry in Croatia and the orphanage is supported by several players from the shipping and shipbuilding industries.
| 2007 in brief | 1 |
|---|---|
| This is Concordia Maritime | 2 |
| Business Model | 4 |
| President's Views | 6 |
| THE MARKET | |
| Oil Market | 8 |
| Freight Market | 12 |
| Tanker Fleet and Shipbuilding Market | 14 |
| Competitors | 18 |
| Market Forces | 20 |
| AC TIVITIES | |
| The Fleet | 22 |
| The MAX Concept | 25 |
| Customers | 26 |
| The P-MAX – the brokers' | |
| point of view | 27 |
| Employees and Networks | 28 |
| Life Onboard | 30 |
| Safety and Environment | 32 |
| FINANCIAL REVIEW | |
| The Share | 36 |
| Risk and Sensitivity Analysis | 39 |
| 10-year Summary | 42 |
| Key Ratios | 44 |
| FINANCIAL INFORMATION | |
| Board of Directors' Report | 45 |
| GR O U P | |
| Income Statement | 48 |
| Balance Sheet | 49 |
| Change in Equity | 50 |
| Cash-fl ow statement | 51 |
| PARENT COMPANY | |
| Income Statement | 52 |
| Balance Sheet | 53 |
| Pledged assets and contingent liabilities |
54 |
| Change in Equity | 54 |
| Cash-fl ow statement | 55 |
| Notes to the Financial Statements | 56 |
| Audit Report | 73 |
| Corporate Governance | 74 |
| Board of Directors | 78 |
| Information on Annual General | |
| Meeting and senior management | 80 |
| Glossary and addresses | 81 |
Net sales for the full year were SEK 457.2 (381.2) million
The net profi t after tax was SEK 62.9 million
SEK 62.9 million (SEK 51.9 million)
SEK 1.32 The profi t per share was SEK 1.32 (1.09)
During the year Concordia Maritime's newbuilding program proceeded according to plan. Two new P-MAX tankers and two Panamax tankers were delivered, all built at Brodosplit Shipyard in Croatia.
A further time charter was signed with the French oil company TOTAL in June. This charter is for the P-MAX tanker Stena Progress with delivery set for the end of 2009. At the same time, the charters for the two sisters Stena Paris and Stena Provence were extended for a further two years.
The VLCC Stena Vision re-entered service during the year after spending a lengthy period at a shipyard following damage to its reduction gear. As a result of the lengthy period without employment, SEK 17.9 million was charged to the segment's operating result.
In the dispute between Concordia Maritime and Halliburton concerning the sale of a vessel in 2000, a fi nal agreement was reached in the fi rst quarter, which has resulted in SEK 9.8 million being charged to the segment's operating result.
| Key ratios | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | 1999 | 1998 |
|---|---|---|---|---|---|---|---|---|---|---|
| Net sales, MSEK | 457.2 | 381.2 | 254.0 | 354.0 | 649.7 | 768.6 | 1,334.6 | 1,327.6 | 773.6 1,102.9 | |
| whereof result from the sale of ships, MSEK | — | — | 56.2 | 646.6 | –15.1 | 11.1 | 1.5 | 16.6 | — | — |
| EBITDA, MSEK | 91.5 | 38.7 | –1,3 | 795.5 | 177.5 | 89.5 | 454.4 | 382.9 | 57.1 | 297.7 |
| Result before tax, MSEK | 48.0 | 52.5 | 42.7 | 740.2 | 35.1 | –142.4 | 251.9 | 227.7 | –72.0 | 114.0 |
| Net result, MSEK | 62.9 | 51.9 | 57.2 | 740.2 | 77.1 | –148.9 | 231.3 | 207.3 | –62.5 | 117.3 |
| Investments, MSEK | 836.7 | 767.2 | 492.8 | 86.3 | 61.6 | — | 513.6 | 351.1 | 295.7 | 259.3 |
| Equity ratio, % | 58 | 73 | 93 | 94 | 73 | 51 | 51 | 48 | 38 | 43 |
| Equity per share, SEK | 34.08 | 34.09 | 37.10 | 33.87 | 21.51 | 24.16 | 33.62 | 26.67 | 20.03 | 20.85 |
| Return on capital employed, % | 4 | 5 | 6 | 49 | 3 | –4 | 12 | 14 | –2 | 13 |
| Dividend as percentage of profi t, % | 76 | 92 | 83 | 19 | 31 | 0 | 12 | 22 | 0 | 12 |
| Profi t per share, SEK | 1.32 | 1.09 | 1.20 | 15.51 | 1.62 | –3.12 | 4.85 | 4.47 | –0.96 | 2.79 |
| Dividend per share, SEK | 1.001) | 1.00 | 1.00 | 3.00 | 0.50 | — | 0.60 | 1.10 | — | 0.50 |
| Share price at year end, SEK | 27.00 | 55.00 | 43.00 | 34.80 | 17.50 | 11.00 | 16.00 | 21.50 | 11.80 | 11.50 |
1) Proposed dividend
Result: SEK 50 million Result: SEK 75.7 million before expenses of a non-recurring nature USD 11 million profi t before tax before tax (SEK 1.05 per share) Reported result: SEK 48.0 million (SEK 1.01 per share) profi t before tax (corresponding to SEK 70 million)
USD 0.23 per share (approx. SEK 1.47)
Concordia Maritime is an international tanker shipping company, which develops, builds, mans and charters vessels to customers with exacting demands on transport economy, fl exibility and safety. The company's focus is on the transportation of refi ned petroleum products such as petrol, diesel fuel and jet fuel. Concordia Maritime was established in 1984 when its Series B share was listed on the OMX Nordic Exchange Stockholm. Its head offi ce is located in Gothenburg, Sweden.
To provide our customers with safe and costeffi cient tanker transportation based on innovation and performance.
To be our customers' fi rst choice for safety, innovation and performance in effi cient tanker transportation, which will result in good profi tability, steady growth and fi nancial stability.
Goal At least 10% per year, while maintaining profi tability Goal attainment 1998–2007 Average annual growth of 14% Goal attainment 2007 Growth of 0%
Goal Return on equity of at least 12% Goal attainment 1998–2007 Average return on equity of 11% Goal attainment 2007 Return on equity of 3%
Goal At least 50% over a business cycle Goal attainment 1998–2007 Equity ratio of 62% Goal attainment 2007 Equity ratio of 58%
Concordia Maritime has a small number of employees and sales of SEK 457.2 million. How is this possible? Concordia Maritime owns its vessels, but utilises service suppliers for chartering, commercial operation, manning and technical questions.
Concordia Maritime's customers include some of the world's largest oil and energy companies. Customer relations are characterised by partnership, cooperation and a long-term perspective.
Concordia Maritime conducts its business activities in close cooperation with several companies in the Stena Sphere. This means that the company's business activities can be conducted cost-effectively at the same time as its customers have access to the Stena Sphere's knowledge base.
At Concordia Maritime, a deep understanding of the individual customer is combined with cuttingedge competence in the development and design of ships, shipbuilding, manning, chartering and commercial operation. The result is safe and effi cient transportation.
The downturn in the market, which began in 2006, continued in 2007. Compared with 2006, freight rates in both the large tanker and product tanker markets were lower. The freight rates fell most in the spot market while in the time charter market they were only slightly lower than in 2006.
The change in business activities implemented in recent years has resulted in a shift in focus from the transportation of crude oil to the transportation of refi ned petroleum products. The twelve tankers ordered in the last few years, and which are now in the process of being delivered, are all designed primarily to transport refi ned petroleum products such as petrol, diesel fuel and jet fuel. In addition to our own vessels, we have also chartered two crude oil tankers from the US shipping company Arlington Tankers. At the end of 2007, Concordia Maritime had ten vessels at its disposal.
The business model for tanker shipping companies is relatively standardised. Either the vessels are employed on the spot market, i.e. they are contracted for one voyage at a time, or by means of different types of contracts. These contracts can vary in length, from a few days up to – as in the case of Concordia Maritime – several years.
For a shipping company with its vessels employed in the spot market, revenues depend solely on how the market develops. If the market goes up, revenues increase, and vice versa when the market goes down.
When vessels are chartered out for a longer period, as in the case of Concordia Maritime, the shipping company's revenue consists of a freight rate agreed on in advance, which applies for the duration of the charter period. Revenue level (and cash fl ow) is thus not affected by shortterm fl uctuations in the market. The basic
freight rate level is determined by the length of the charter and the market situation when the charter was signed. Most shipping companies use a combination of employment on the spot market and charters for their fl eet.
At the end of 2007, Concordia Maritime's vessels so far delivered were signed to charters of
between fi ve and ten years. The charters for some of the vessels include a profi t-split clause in addition to the freight rate agreed on. Put simply, this means that the customer's revenue over and above certain predetermined levels is shared between the customer and Concordia Maritime.
The largest costs are normally daily running costs, capital costs and voyage costs.
The vessels' daily running costs include costs for crews, insurance, periodic (dry-dock) and dayto-day maintenance and repairs. The quality of the ships and how they are maintained by their crews have the largest impact on the daily running costs. A major factor affecting profi tability is the level of control the shipping company has over the daily running costs. For vessels signed to
long-term charters, there are sometimes clauses that regulate the freight rate if daily running costs increase.
Voyage costs consist of fuel consumption and port dues. For vessels in the charter market, like Concordia Maritime's vessels, the contracting party pays all the voyage costs.
Capital costs, depreciation and interest payments, can vary considerably depending on the company's capital structure and debt equity ratio.
Ship prices, both of second-hand tonnage and newbuildings, vary together with fl uctuations in the freight market and the shipbuilding market.
Timing is therefore extremely important and has a large impact on the ship's capital costs and thus the shipping company's profi tability over a long
period of time. As a consequence of this, most shipping companies' business concepts also include purchases and sales.
1) owned 100% 2) owned 50% 3) chartered
As a result of a larger tonnage surplus, Concordia Maritime's sales during the past year increased by about 20 per cent, from SEK 381.2 million to SEK 457.2 million. In 2007, all the delivered vessels in the fl eet were signed to long-term charters with fi xed freight rates. This meant that the downturn on the market only had a minor impact on the earnings.
Any impact on the result was due to lower revenues generated by the profi t-split clauses included in some of the vessels' charter agreements. These profi t-split clauses have contributed positively to total revenues during the strong market in the last few years.
The construction of our new fl eet continued during the year. A total of four new tankers, two P-MAX and two Panamax, were delivered from Brodosplit Shipyard in Croatia. This means that all the vessels ordered in 2003 have now been delivered. It is worth noting that these vessels were ordered at a favourable point in time. Newbuilding prices have since risen 40–50 per cent.
Our newbuilding program in Croatia has now been given a well-deserved breathing space before work on the remaining four P-MAX tankers begins in a few months time. These vessels were ordered at a later date and will be delivered at the end of 2009 and the end of 2010, respectively.
The vessels so far delivered have performed well during the year. In summer, 2007, yet another time charter agreement was signed with the French oil company TOTAL covering one of the tankers to be delivered at the end of 2009, the Stena Progress. At the same time, the charters for the two sisters, Stena Paris and Stena Provence, were each extended two years. This means that we now have four vessels on charter to TOTAL with a total remaining charter period of 21 years.
The result for the full year was SEK 48 million, which is lower than we had anticipated at the beginning of the year. The profi t generated by our new product tanker fl eet was in line with expectations. The lower result was mainly a consequence of additional costs of a non-recurring nature in the large tanker segment, in particular the repair costs relating to the tanker Stena Vision. The whole repair process was both complex and time-consuming but the vessel re-entered service in June and is functioning smoothly.
The repair costs were a heavy burden but they have not had any appreciable effect on the company's position, either operatively or fi nancially. They are, however, a reminder that ship operation is exposed to operational disruptions and stoppages.
At present, about 160 persons are employed on our vessels. Recruiting, training and also retaining competent crews is a critical success factor in our business. It is also one of the largest challenges since the demand for seagoing personnel in all categories has increased dramatically and will continue to increase as a result of strong markets in pra ctically all the shipping segments. Together with our ship manager Northern Marine Management, we are investing considerable resources in this area. This work will continue.
Generally speaking, the cost of ship operation, which largely consists of personnel costs, is rising in shipping. This also applies in our case. Our revenue fl ows are secured and keeping the vessels' operating costs under control will be one of our most important tasks in the next few years.
We do not strive to be the largest, but we do strive to be best in the areas and segments where we are active." Hans Norén, President "
Since the record years 2004/2005, the tanker market has fallen back overall, although from high levels. This is no surprise to us and we expect the tanker market to weaken still further in 2008 and 2009. Even though downward adjustments are being made to the growth fi gures in some parts of the world, the demand for oil and thus the transportation of oil is still high. However, in the next couple of years, a very large number of new vessels will be delivered. In our size segment, between 300 and 350 new tankers will be delivered in 2008 and 2009, which represents about 40 per cent of the existing fl eet. Our assessment is that it will not be possible for the market to absorb these tankers without considerable downward pressure on freight rates.
IMO's ban on the transportation of oil by single-hull tankers will come into force in 2010. This will force a number of tankers out of the market and the market will
then be able to begin to move towards a state of balance again.
When we talk about the market trend and the weak prospects for the years immediately ahead, it is very important to point out that it is just this scenario for which we positioned ourselves quite some time ago. All the vessels in service are signed to fi xed long-term charters, which means that we have secured a base for our revenue fl ows, irrespective of the market. Our strong balance sheet and secured cash fl ows give us opportunities and the ability to act as regards new business deals, not least in weak shipping markets.
Concordia Maritime is a niche player in terms of the market as a whole. We do not strive to be the largest, but we do strive to be best in the areas and segments where we are active. Satisfying our customers' need for safe and cost-effective tanker transportation based on innovation and performance has been our business concept for many years.
We are now entering a period with shipping markets that could be very interesting and we have a solid business concept and the ability to act resulting from stable fi nances and a long-term approach.
We also have our highly competent employees ashore and at sea in our own organisation as well as our partners' employees. In the fi nal analysis, it is these employees who are our greatest asset and strength in our work on continuing the positive development of the company's business activities.
Gothenburg, March, 2008 Hans Norén, President
The demand for oil continued to be high in 2007. Overall demand increased by about 1.5 per cent, largely due to the high demand from China and India.
Since the mid-19th century, when it became possible to extract oil in a rational way, oil has played a central role in the development of modern society. Since then, and with a few exceptions, total global consumption has risen continuously. With the development of the auto industry and aviation, the 20th century became known as the "oil century". Between 1965 and 2005, total global consumption of oil and petroleum products almost tripled, from about 30 million barrels of oil per day to more than 85 million barrels per day.
Today, oil and petroleum products are the single largest commodity group in international trade. Although global dependence on oil is decreasing relatively speaking, it still meets about 40 per cent of the total global energy requirements. A high energy content in combination with the fact that it is relatively easy to transport and store has made oil the leading global energy raw material.
In 2007, the global demand for oil followed more or less the same pattern as in recent years. In the US and Europe, demand continued to fall somewhat while it rose steeply in several developing countries, not least China and India. Total demand was 85.7 million barrels per day, an increase of about 1.5 per cent compared with 2006. A downturn in the world economy, a record high
oil price and the abolition of price subsidies in Asia had only a limited impact on demand.
The average price of oil was USD 69 per barrel, more than 16 per cent higher than in 2006. At the beginning of November, the price went over USD 90 per barrel for the fi rst time ever and at the end of the month, the price rose to a record USD 91.91 per barrel. Oil prices remained at this high level in December and at the beginning of 2008. For the fi rst time ever, the oil price rose over USD 100, on 19 February it reached USD 100.01.
High oil prices in recent years are largely a consequence of high global demand for oil in combination with a lack of investments in new production capacity. During the "oil crises" in the 1970s, large price hikes resulted in lower demand. For the oil-producing countries in OPEC, this meant that much of their production capacity was idle for long periods. At the end of the 1990s, history repeated itself when OPEC decided to raise production capacity at the same time as Asia slid into a deep recession and the demand for oil fell once again. These two events have contributed to a large degree to a cautious attitude towards investments in overcapacity.
To this can be added a new phenomenon; a shortage of refi nery capacity. As a
result of tough environmental regulations and large investments costs, the construction of new refi neries is no longer keeping pace with the rising consumption of oil.
When demand is high and extraction capacity is limited, every threat of disruption in the global supply of oil tends to result in large price movements. In 2007, the price of oil was driven up by several oilrelated geopolitical events, such as the threat of a Turkish invasion of Iraq and instability in Nigeria and the Middle East.
The markets for petroleum products are connected by several international oil exchanges, where a large proportion of the prices of crude oils and petroleum products between buyers and sellers is determined. The two largest oil exchanges are the London International Petroleum Exchange (IPE) and the New York Mercantile Exchange (Nymex). The oil market is similar to other international commodity and fi nance markets. Most of the trade on the exchanges consists of forward quotations and option contracts. The volume is several times larger than the physical deliveries of crude oils and products. Forward quotations are dominated by contracts for immediate delivery or with a validity of a month or so.
In recent years, the debate about how long the oil will last has intensifi ed and has been presented as an argument for the price of oil remaining high in the future. An important issue in the debate has been when global oil production will reach its maximum, i.e. Peak Oil. This is the point in time after which maximum crude oil production will gradually decline until the oil recoverable from a cost and environmental perspective has run out.
The fact that Peak Oil will occur sooner or later is incontestable since oil is a fi nite resource. When this will happen is, however, the subject of intense debate. The discovery of new oil deposits reached a peak at the beginning of the 1960s. Oil production in several countries outside OPEC and the former Soviet Union reached its peak in about 2000. This was when, for example, the North Sea reached its maximum production of 6 million barrels per day.
Estimates of when Peak Oil will occur vary between different players. The OECD's expert body IEA, the International Energy Agency, believes that the peak will occur between 2020 and 2030 while others, including BP – British Petroleum – think the peak will be reached sometime between 2015 and 2020. The expert group ASPO, The Association for the Study of Peak Oil and Gas, is much more pessimistic in its assessment of the supply of unexploited oil reserves and expects the peak to be reached before 2010.
Irrespective of one's position in the debate about Peak Oil, the demand for transportation will continue to be large in the future. The expansion of refi ning capacity is currently taking place in locations far from the majority of the end users. For a niche player such as Concordia Maritime, with vessels designed for specifi c needs, this represents continuing good opportunities for business in the future.
During the fi rst few decades of the 20th century, the oil industry was dominated by a small number of large oil companies, the so-called "Seven Sisters"1 . These companies' control of the oil supplies was based on oil concession agreements signed with the governments in the oilproducing nations, mainly in the Middle East. OPEC, Organization of the Petroleum Exporting Countries, was formed by the oil exporting countries Iran, Iraq, Kuwait, Saudi Arabia and Venezuela in 1960. The reason for this was growing dissatisfaction with how the oil revenues were distributed. OPEC's power became visible for the fi rst time during the Yom Kippur War between Israel and a number of Arab states in October, 1973, when the price of oil rose sharply after the
organisation's decision to halt deliveries of oil to, among others, the US and Europe.
Even if oil production in other parts of the world has increased sharply since the 1970s, OPEC still accounts for more than 40 per cent of the total global production. In terms of total oil reserves, this share is even larger; the cartel controls more than 75 per cent of the world's total oil reserves.
1) Standard Oil of New Jersey (Esso), Royal Dutch Shell, British Anglo-Persian Oil Company (APOC) (today, Anglo-Dutch), Standard Oil of New York (Socony) (today, BP), Standard Oil of California (Socal) (today, Chevron), Gulf Oil (today, primarily Chevron), Texaco (today, Chevron).
| Region | % | Production Change 96–06 |
% | Consumption Change 96–06 |
% | Reserves Change 86–06 |
|---|---|---|---|---|---|---|
| North America | 16.5 | –2.5 | 28.9 | 13.6 | 5.0 | – 41.0 |
| Central and South America | 8.8 | 11.7 | 6.1 | 13.4 | 8.5 | 60.2 |
| Europe and Eurasia | 21.6 | 25.4 | 24.9 | 4.7 | 12.0 | 88.0 |
| Middle East | 31.2 | 23.8 | 7.2 | 35.5 | 61.5 | 38.4 |
| Africa | 12.1 | 34.3 | 3.4 | 24.6 | 9.6 | 102.1 |
| Pacifi c Asia | 9.6 | 4.3 | 29.5 | 29.7 | 3.4 | 2.0 |
| Total | 100.0 | 16.7 | 100.0 | 17.1 | 100.0 | 37.7 |
| The largest oil producers |
'000 barrels /day |
Share (%) |
Largest oil consumers |
'000 barrels /day |
Share (%) |
Five largest oil reserves |
Billion barrels |
Share (%) |
|---|---|---|---|---|---|---|---|---|
| Saudi Arabia | 10,859 | 13.1 | USA | 20,589 | 24.1 | Saudi Arabia | 264.3 | 21.9 |
| Russia | 9,769 | 12.3 | China | 7,445 | 9.0 | Iran | 137.5 | 11.4 |
| USA | 6,871 | 8.0 | Japan | 5,164 | 6.0 | Iraq | 115.0 | 9.5 |
| Iran | 4,343 | 5.4 | Russia | 2,735 | 3.3 | Kuwait | 101.5 | 8.4 |
| China | 3,684 | 4.7 | Germany | 2,622 | 3.2 | United Arab Emirates | 97.8 | 8.1 |
The fi gures are based on percentage of total global production, consumption and proven reserves. Source: BP Statistical Review of World Energy, June, 2007 and Sjöfartens Bok 2008.
The downturn, which began in 2006, continued in 2007. Compared with 2006, the freight rates in both the large tanker and product tanker markets were lower. The sharpest drop was in the spot market while freight rates in the time-charter market were only slightly below the levels in 2006.
The fi rst half of the year was characterised by high rates in both the large tanker and product tanker segments.
The third quarter was characterised by the customary seasonal downturn. However, the downturn was deeper than it had been for several years. Hardest hit was the product tanker segment, where freight rates more than halved compared with the same period in 2006. For the fi rst time in several years, there were cases where the freight rate did not cover the vessel's operating costs.
The drop in market rates during the third quarter can in part be explained by mild weather in both North America and Europe, the absence of hurricanes in the Gulf of Mexico and a large addition of tonnage.
In November, the market improved somewhat as a result of the impending winter season in the northern hemisphere. However, the VLCC market experienced a rapid and sharp improvement, which surprised analysts and pundits. In December, individual charters in excess of USD 300,000 per day were signed for VLCCs.
The strong beginning and end of the year did not compensate for the very weak third quarter. For the year as a whole, the market rates on the spot market for transportation of refi ned petroleum products were somewhat lower than in 2006. Freight rates fl uctuated between USD 7,000 and USD 40,000. In the case of the period market, freight rates were about the same as they were in 2006. The market rate for a 3-year time charter was in the region of USD 22,800 (22,000) per day.
Despite the downturn in the market, the underlying demand for transportation of both crude oil and refi ned petroleum products remained high in 2007. One of the main driving forces was the continuing large US and Asian imports. During the fi rst half of the year, the product tanker market, for example, benefi ted from a number of disruptions at US refi neries and continuing low stock levels of petrol in the
| VLCC | Spot | Timecharter |
|---|---|---|
| The VLCC market in the fi rst half of the year was stable with freight rates of around USD 55,000 per day. The summer was very weak with freight rates below USD 30,000 per day. The expected winter upswing did not come until the end of Novem ber. The average freight rate for the fourth quarter was just over USD 90,000 per day. |
||
| Product | Spot | Timecharter |
The fi rst and second quarter of 2007 were strong with freight rates of between USD 20,000 and USD 25,000 but weakened during the summer. The spot market for product tankers in the third and fourth quarter was weak.
With the exception of the sharp upswing in November, the time-charter rates remained at a stable level of about USD 42,000 per day for a 1-year charter and around USD 37,000 per day for a 3-year charter.
Freight rates in the time charter market for product tankers remained stable throughout the year and did not suffer the same downturn as in the spot market during the second half of the year. The freight rate for a 3-year time charter was around USD 22,800 per day.
tanker /MR
US, which resulted in high freight rates for transportation of petrol across the Atlantic. In China too, the demand for oil and petroleum products continued to increase. During the year, Chinese imports rose by about 15 per cent.
Price fl uctuations on the spot market are mainly due to supply and demand in the oil energy sector being more or less in balance. Put somewhat simply, this means that the oil produced is consumed and not stockpiled. This state of balance means that small disruptions in the production, refi ning and distribution chains have a rapid and large impact on the freight market and its pricing.
The downturn in 2006 and 2007 must be seen in the light of the very strong market in recent years. In the last four years, the demand for transportation of oil and petroleum products has been extremely high. This is a consequence of a growing world economy, a global boom and high demand for oil. In combination with regional imbalances in the supply of and demand for different petroleum products, this has resulted in a high demand for transport capacity, which, in turn, has resulted in sharply rising freight rates.
Like the price of oil, the price of transporting oil and petroleum products has been at record high levels in recent years. Since 2002, the average freight rate on the spot market for both large tankers and product tankers has risen steeply. In the last four years, the average freight rate for a product tanker was USD 24,750. This can be compared with the average for the 1990s, which was just under USD 12,000 per day. In the product tanker segment, the highest freight rates were recorded at the end of 2004, around USD 50,000 per day.
Product tanker/MR freight rates, 1999–2007
At the end of 2007, all Concordia Maritime's vessels so far delivered were signed to long-term charters at fi xed freight rates and with stable cash fl ows. The long-term charters reduce the dependence on the trend of the spot market. In combination with a strong balance sheet, this gives fi nancial ability to act, not least in a weakening market, which could open the way for new business opportunities.
An important component of pricing on the tanker market is the supply of vessels. The size of the fl eet is, in turn, dependent on the balance between newbuildings delivered and the scrapping rate of older tonnage. When the demand for tonnage is high, the number of newbuildings produced tends to increase at the same time as the scrapping rate decreases. When, instead, demand is low, the opposite occurs.
The strong market in recent years has also left its mark in the order statistics. In 2007, the global order book increased for the fi fth year in a row. All in all, the order book in creased by nearly 30 per cent and consisted of 2,425 tankers totalling more than 160 million deadweight tons. In relation to the world fl eet, this is equivalent to a record-high 48 per cent.
The total order book of vessels for the transportation of refi ned oil, Concordia Maritime's segment, is equivalent to almost 40 per cent of the existing fl eet, i.e. 33 million deadweight tons. The majority of these vessels will be delivered in the next few years.
The second-hand market was also very active. Normally, the market follows the trend and price level in the newbuilding market. In 2007, about 190 product tankers changed owners, an increase of more than 25 per cent compared with 2006.
The scrapping rate is very dependent on three factors: the age of the vessels, the economic climate in the freight market and new laws and regulations. A consequence of the high freight rates is that the scrapping rate in recent years has been very low and this was also the case in 2007. During the year, only tankers totalling approx. 10 million deadweight tons were scrapped (2.8 per cent of the fl eet), which is in line with the previous year.
A large volume of new orders together with low scrapping levels meant that the total world fl eet continued to grow in 2007. At the beginning of September, the active tanker fl eet consisted of about 4,578 vessels totalling more than 385 million deadweight tons, an increase of just under seven per cent com-
Newbuilding prices, product tankers/MR
ULCC Ultra Large Crude Carrier over 320,000 dwt
V-MAX (VLCC-MAX) 313,000 dwt
VLCC Very Large Crude Carrier 200,000–320,000 dwt Suezmax 120,000–165,000 dwt
Aframax 80,000–120,000 dwt
pared with the previous year. There were a total of 1,759 product tankers totalling approx. 77 million tons deadweight, an increase of six per cent.
With the vessels ordered in recent years beginning to be delivered, the fl eet will continue to grow in the years ahead. Not until 2010 will growth fall off as a result of IMO's decision to ban single-hull vessels.
Not only will the fl eet consist of more vessels in the future, the vessels themselves will also be larger. The product tankers currently being built are on average 6 per cent larger than the existing vessels.
Developments in the shipbuilding industry usually follow developments in the freight market, but with a delay of some years. After the weak years at the beginning of this century, many shipyards took a cautious approach to new investments in increased capacity. The situation has now changed. The good market situation and the decision to ban single-hull vessels have resulted in very high capacity utilisation at the shipyards in the last few years.
At present, shipbuilding capacity continues to expand at a rapid rate. Growth is fastest in China where existing shipyards are being enlarged and new yards built at a
very rapid rate. In the last fi ve years, the shipbuilding industry has grown 25 per cent per year on average. If this trend continues, China will overtake Japan in the next couple of years as the second largest shipbuilding nation in the world. The Chinese government's goal is for China to be the largest shipbuilding nation by 2015.
As a consequence of the increased demand for vessels, both yard and second-hand prices have rocketed. Between 2003 and 2007, the price of a new product tanker more than doubled. Prices continued to rise in 2007. At the end of the year, the price of a new product tanker reached a new record level of about USD 52 million, an increase of about 12 per cent compared with 2006.
At the end of 2007, a downturn in prices for the fi rst time in several years was re corded on the second-hand market. The number of fi xtures was, however, limited and it is diffi cult to determine whether this should be regarded as a consequence of the weakening freight market.
How prices will develop in the future will depend partly on the future demand for transport capacity and partly on the rate at which the yards increase their capacity, but above all on how the freight rates develop in the different segments.
| Country | 1,000 CGT* |
|---|---|
| 1. South Korea | 55,998 |
| 2. China | 40,000 |
| 3. Japan | 30,182 |
| 4. Germany | 3,963 |
| 5. Italy | 2,762 |
| * Compensated gross tons |
Source: Sjöfartens bok 2008
The growth in shipbuilding capacity in recent years has, in principle, taken place exclusively in South Korea and China. Although productivity is still far higher in South Korea, China is expected to account for the greater part of growth in the future. In recent years, the shipbuilding industry in China has expanded very heavily.
The global market for transportation of oil and petroleum products is highly fragmented with a large number of players. With the exception of the very smallest classes of vessels, mobility in the market is high and tonnage can easily be moved to the markets where the demand is largest.
There is a limited number of players who, like Concordia Maritime, primarily transport refi ned petroleum products. Competition comes mainly from large international tanker shipping companies transporting both crude oil and refi ned petroleum products. Concordia Maritime's principal competitors include Danish Torm and Canadian Teekay.
As a result of the high freight rates in recent years, several of these players have been able to expand heavily by ordering newbuildings and buying up other shipping companies.
There has been a sharp increase in capacity in the product tanker segment. In the last ten years alone, total available deadweight in the segment has increased more than 35 per cent. The fl eet's growth rate will continue to be high in the years immediately ahead.
A clear trend is that shipping companies are consolidating into increasingly large units while the smaller, family-owned shipping companies are decreasing in number. It is also becoming increasingly common for smaller shipowners to try to achieve advantages of scale by means of different forms of collaboration, e.g. operation, manning and chartering.
The many different ways of operating a fl eet and the customers' in many cases specifi c requirements and mobility in the market
make it diffi cult to describe the market in terms of market shares. The shipping companies on the list below operate about 23 per cent of the global existing tanker fl eet, which totals 385 million deadweight tons.
Concordia Maritime is a typical niche company, which focuses on cost-effective and safe transportation of refi ned petroleum products.
| Market segment | ||||||||
|---|---|---|---|---|---|---|---|---|
| Company | Country | No. of ships | Ships on order | Average age of fl eet |
Crude oil | Refi ned products |
Natural gas |
Refi ned gas |
| Concordia Maritime | Sweden | 14 | 4 | 2.8 | ||||
| Broström | Sweden | 84 | 5 | 7.0 | ||||
| D/S Norden | Denmark | 45 | 18 | 2.7 | ||||
| Frontline | Bermuda | 79 | 12 | 11.2 | ||||
| General Maritime Corp. | USA | 21 | 1 | 10.0 | ||||
| Maersk Tankers | Denmark | 101 | 39 | 4.0 | ||||
| Overseas Shipholding Group (OSG) | USA | 151 | 43 | 10.3 | ||||
| Teekay | Canada | 171 | 29 | 9.8 | ||||
| Top Ships Inc | Greece | 25 | 6 | 15.0 | ||||
| Torm | Denmark | 157 | 38 | 6.5 | ||||
| Sovcomfl ot | Russia | 47 | 9 | 5.5 |
Number = Owned + chartered + ships on order Age = age of existing fl eet DWT = Existing vessels + ships on order
| 1,426,315 Public (OMX Nordic Exchange Stockholm) www.concordia-maritime.se 2,019,078 Public (OMX Nordic Exchange Stockholm) www.brostrom.se 2,145,970 Public (Copenhagen Stock Exchange) www.ds-norden.com 18,515,900 Public (Oslo Stock Exchange och New York Stock Exchange) www.frontline.bm 2,485,000 Public (New York Stock Exchange) www.generalmaritimecorp.com 7,606,064 Part of Maersk A/S, Public (Copenhagen Stock Exchange) www.maersktankers.com 15,738,337 Public (New York Stock Exchange och Pacifi c Stock Exchange) www.osg.com 19,875,000 Public (New York Stock Exchange) www.teekay.com 2,313,453 Public (New York Stock Exchange) www.topships.org 10,404,000 Public (Copenhagen Stock Exchange och Nasdaq) www.torm.com 5,117,842 Unlisted www.sovcomfl ot.ru |
Market value, USD 11-02-2008 |
|---|---|
| 180.9 | |
| 473.0 | |
| 4,338.4 | |
| 3,167.3 | |
| 809.7 | |
| 41,582.5 | |
| 1,999.0 | |
| 3,304.0 | |
| 85.6 | |
| 2,164.2 | |
Number = Owned + chartered + ships on order Age = age of existing fl eet DWT = Existing vessels + ships on order This list gives only examples of players in the industry and does not claim to be complete. There may be deviations in the fi gures.
Growth in world economy
6100 The global economy in recent years has posted record growth fi gures. Growth has been both stronger and spread over more countries than during previous historical economic booms.
4500 4900 5300 On average, the global economy has grown approx. 5 per cent per year in the last fi ve years. The reasons for this include an expansive monetary policy with high liquidity and low real interest rates, a sharp increase in demand in China and other emerging markets and relatively low global infl ation.
According to IMF (International Monetary Fund), the growth in the global economy in 2007 was 5.2 (5.1) per cent. China, India and Russia recorded the highest growth. These three countries together accounted for half the global growth during the year. China's economic growth is estimated to have been as much as 11.5 per cent, while Russia's estimated growth was 7.5 per cent and India's 8.8 per cent. With the exception of Japan, all the Asian economies continued to perform strongly and several developing countries in Africa posted strong economic growth. In Euroland, growth slowed somewhat towards the end of 2007 and was estimated to be 2.6 per cent. In the US, estimated growth was a more modest 2.2 per cent, mainly due to lower housing prices.
Despite new record levels, the growth rate was somewhat lower than predicted. A more restrictive monetary policy and growing concern in the fi nancial markets were among the main reasons.
IMF predicts a continued strong global economy in 2008. Growth is expected to be 4.8 per cent, which is a high fi gure historically but nevertheless lower than the growth in recent years and also lower than had been predicted earlier.
Global trade also continued to grow, although at a somewhat lower rate, with a growth rate of 6.6 (9.6) per cent. Emerging markets and developing countries accounted for most of the growth in both imports and exports. Trade is expected to grow at about the same rate in 2008.
The strong growth of the Chinese economy is one of the most important forces behind the strong global economy. Today, the Chinese economy is the second largest in the world after the US.
The rapid Chinese growth is one of the foremost driving forces behind the increased demand for transportation of oil and petroleum products. With increasing prosperity, consumption of oil and petroleum products has risen sharply. In 2007, global oil consumption increased 1.5 per cent.
In the last ten years, China's oil requirements rose on average 8 per cent per year. Despite higher oil consumption, domestic production of oil has remained at steady level of about 3.7 million barrels/day. China thus needs to import large and steadily increasing volumes of oil. Today, nearly 50 per cent of its needs are met by imports and it is estimated that this fi gure will rise to
nearly 65 per cent by 2010. It is calculated that China accounts for about 25 per cent of the increased total global demand.
The increasing trade in Russian oil across the Baltic Sea is one factor behind the rising demand for tankers. Russian oil production has increased sharply in recent years. In 2006, an average of 9.8 million barrels of oil per day were produced, which is equivalent to about 12.3 per cent of global production. Russia has been the most important source of new oil on the world market for several years and has contributed heavily to meeting the increased demand, not least from China.
In principle, there are four export routes for Russian oil, of which transportation across the Baltic Sea is one. In the Gulf of Finland, several existing ports are being enlarged and new ports are being built. When this work has been completed, it is estimated that oil equivalent to more than 12 per cent of Europe's total consumption will be shipped across the Baltic Sea. In 2004, IMO (International Maritime Organisation) classed the Baltic Sea as a "Particularly Sensitive Sea Area", which means that the tankers transporting oil have to satisfy special requirements.
Shortage of refi nery capacity and regional imbalances increase transportation demand The industry-specifi c forces include insuffi cient refi nery capacity, particularly in the US but also in the rest of the world. Total global refi nery capacity has not been increased at the same rate as the rising demand for petroleum products and, as a result, refi nery production is now concentrated to a small number of locations. Insuffi cient capacity is mainly due to the enormous costs and comprehensive environmental measures involved when building new facilities.
In addition to the shortage of capacity, the refi neries' different specialisations also result in regional imbalances as regards specifi c products. For example, high-octane petrol is transported from the refi neries in Europe to the US. At the same time, diesel fuel is transported from the refi neries in the US to Europe. In 2007, the situation was made worse when a number of US refi neries were hit by production stoppages, which meant that they were only able to operate at sharply reduced capacity.
Refi nery specialisation also means that there is a greater risk of disruptions in the fl ows. For example, during the year, instability in Nigeria contributed to regional imbalances in West Africa.
Refi nery capacity is being increased, but in locations far from the consumers. For tanker shipping, this means a continuing high demand for the transportation of refi ned petroleum products between different markets.
The shortage of refi nery capacity in combination with high demand and a clear consolidation trend in the oil and chemical industries have resulted in ever lower stock levels in recent years. Until summer, 2007, the oil price was in "contango", which means that the forward price was higher than the spot price (the price for immediate delivery). Consequently, it was profi table to buy oil and store it. Since mid-July, the market has been in a state of "backwardation", which means that the spot price is higher than the forward price, thus giving all the players on the market a strong incentive to empty their stocks.
New laws and regulations have a large impact on both the demand for vessels and the composition of the world fl eet. Increasingly stringent environmental regulations have contributed considerably to the increase in the demand for vessels built to high environmental and safety specifi cations. For example, the double hull requirement, which will come into force in 2010, has resulted in expectations that the rate at which single-hull vessels are phased out will increase. Demands from the customers are also behind the trend towards safer and more environmentally friendly transportation. The ongoing consolidation in the oil industry has resulted in fewer and large oil companies with a small number of important brands with global coverage. The general public's trust is crucial for continued success.
Concordia Maritime's business activities consist of developing and offering competitive transport solutions to customers with exacting demands on transport economy, fl exibility and safety. The company's focus is on the transportation of refi ned petroleum products such as petrol, diesel fuel and jet fuel.
For Concordia Maritime, the last few years have been characterised by change and, to some extent, a new focus. After the sale of the last large tankers in 2004, the company has shifted its focus from the transportation of crude oil to the transportation of refi ned petroleum products. This segment is one of the most expansive in tanker shipping and offers large opportunities.
A fundamental component of the strategy is the new product tankers, which have been ordered from Brodosplit Shipyard in Croatia. So far, ten P-MAX and two Panamax tankers have been ordered, eight of which had been delivered by the end of 2007. Based on the philosophy of the MAX concept – transport economy, fl exibility, safety and environmental consideration – these vessels are in a class of their own as regards cost effectiveness and safety. Compared with a traditional product tanker of the same size, a P-MAX tanker can transport about 30 per cent more cargo. At the same time, double main engines, propellers and control systems make the vessels far safer.
Since the fi rst P-MAX tanker, the Stena Paris, was delivered at the end of 2005, a further seven vessels have entered service
– fi ve P-MAX tankers and two Panamax tankers with a high ice class. When all the vessels ordered have been delivered at the end of 2010, Concordia Maritime will have one of the most modern tanker fl eets in the world.
In recent years, the freight market has developed extremely positively. The demand for transport capacity has been high and freight rates on both the spot and the time-charter market have been at historically very high levels. However, as a result of the large-scale construction of newbuildings, the supply of vessels is ex pected to increase sharply in the years ahead. This will be felt most on the volatile spot market where prices are determined solely on the basis of supply and demand.
Concordia Maritime is well positioned in the event of a market downturn. Operationally, the majority of the vessels on order have been signed to charters of between fi ve and ten years. These long-term charters give the company stability in terms of revenue, which is not affected by short-term developments in the market. In part as a result of the sale of the two V-MAX tankers in 2004, Concordia Maritime is now in a
strong fi nancial position. This creates good opportunities for taking advantage of the business opportunities that arise in a falling market.
Although the market may weaken still further, there is considerable long-term potential in the transportation of refi ned petroleum products. As a result of increasingly tough environmental regulations and the enormous investment costs, refi nery capacity is no longer being built in the Western World at the same rate at which consumption is rising. Instead, new refi neries are being built in the Middle East or Asia, which means that distances from the refi neries to the end consumers are longer. At the same time, growing demands are being made on cost-effectiveness, fl exibility, safety and environmental consideration. For Concordia Maritime, this translates into excellent opportunities for good business deals. The company is working continuously to identify and evaluate both general market and specifi c customer requirements. Its goal is to continue to expand, while maintaining good profi tability, together with both existing and new customers.
| Name | Dwt | Ice class | Delivery date |
|---|---|---|---|
| Stena Paris | 65,200 | 1B | December, 2005 |
| Stena Provence | 65,200 | 1B | March, 2006 |
| Stena Primorsk | 65,200 | 1B | May, 2006 |
| Stena Performance | 65,200 | 1B | June, 2006 |
| Stena President | 65,200 | 1B | September, 2007 |
| Stena Perros | 65,200 | 1B | December, 2007 |
| Stena Progress | 65,200 | 1B | 4th quarter, 2009 |
| Stena Polaris | 65,200 | 1A | 4th quarter, 2009 |
| Stena Penguin | 65,200 | 1A | 4th quarter, 2010 |
| Stena Premium | 65,200 | 1B | 4th quarter, 2010 |
| Name | Dwt | Ice class | Delivery date |
|---|---|---|---|
| Stena Poseidon (50%) | 74,900 | 1A | January, 2007 |
| Palva (50%) | 74,900 | 1A | February, 2007 |
| Name | Dwt | Ice class | |
|---|---|---|---|
| Stena Vision | 313,000 | — | Time-chartered until 2009 |
| Stena Victory | 313,000 | — | Time-chartered until 2009 |
The vessels built in accordance with the MAX concept are among the safest tankers in the world. They unite the market's need of greater fl exibility and better transport economy with society's demands for safety and environmental consideration.
Behind the development of the MAX concept is a need for vessels able to operate in waters and ports with draft limitations and loading substantially more cargo than had previously been possible. To meet this need, the vessels designed according to the MAX concept are much wider than other vessels in the same size class. Their larger beam gives them a much larger loading capacity on a limited draft. The unique design of the hull and the twin skeg give both fuel economy and speed characteristics that are as good as or better than standard tonnage.
The MAX concept takes safety to a new level. The vessels are built with double systems for propulsion and manoeuvring, just like an aircraft. They have two separate engine rooms separated by fi reproof and watertight bulkheads. All control systems are separated and each engine has its own fuel system. Additionally, double rudders and propellers provide better manoeuvrability, which is also a major advantage in terms of effi ciency and safety. The bridge is designed to provide a 360o view and is equipped with a co-pilot system, i.e. double control systems, which enhances safety and facilitates training.
The MAX concept has been developed in close cooperation with primarily Stena Bulk, Stena Teknik and Northern Marine Management. Since the concept began to be developed at the end of the 1990s, three ship types have been produced; V-MAX, P-MAX and C-MAX. Several other MAX vessels are under development.
Ship construction can be likened to art, which, with a large portion of experience and know-how, results in the best possible vessel. Stena's desire to invest in research to promote the development of the optimum vessel is an inspiration for us technicians." "
Per-Olof Källberg, Stena Teknik
Concordia Maritime's P-MAX tankers combine transport economy and fl exibility with the very highest safety. Thanks to the hull design, the vessels can carry about 30 per cent more cargo than a standard tanker with the same draft at little extra cost. They have been designed to transport both crude oil and refi ned products. Effective tank cleaning and the design of the
cargo tanks mean that switching between different petroleum products is fast with a minimum risk of contamination. With their double hulls, optimum corrosion control, two engine rooms and two separate propulsion systems, the P-MAX tankers are also the safest product tankers ever built. Flexible cargo capacity and high safety make the P-MAX a profi table investment.
The V-MAX tankers Stena Vision and Stena Victory were the fi rst to be built in accordance with the MAX concept. They were delivered in 2001 and with a deadweight of 313,000 tons, they are classed as VLCCs. Their design gives
them a 20–40 per cent higher loading capacity compared with a conventional VLCC and 70–100 per cent higher than a Suezmax tanker. Their shallower draft enables the vessels to call at ports that were previously limited to Suezmax tonnage.
Satisfying our customers' transport and logistics requirements requires a deep understanding of both the forces driving the market and the individual customer's business. At Concordia Maritime, this knowledge is combined with cutting-edge competence in naval architecture and fi rstclass manning and chartering.
Concordia Maritime's customers include some of the world's leading energy companies, each with its own specifi c requirements. Customer relations are characterised by a long-term perspective, cooperation and partnership. The goal in every project is to create effective transport solutions that generate value for both parties.
A long-term perspective creates stability At the end of 2007, all Concordia Maritime's six wholly-owned vessels and
the vessels so far delivered were signed to charters of between 5 and 10 years. This long-term perspective creates stability in the customers' transport fl ows and fi nancial stability for Concordia Maritime. With the charters signed, the company expects the product tanker fl eet to generate a cash fl ow (EBITDA) of approx. USD 26 million in 2008.
| Company description | Vessel | Type | DWT | Year delivered | Time chartered until |
Principal route/trade | |
|---|---|---|---|---|---|---|---|
| www.total.com | With operations in 130 countries and 95,000 employees, French TOTAL is the world's fourth largest oil and gas company. Sales in 2007 totalled EUR 158,752 million. |
Stena Paris Stena Provence Stena Perros Stena Progress |
P-MAX P-MAX P-MAX P-MAX |
65,200 65,200 65,200 65,200 |
2005 2006 2007 2009 |
2012 2013 2012 2014 |
Worldwide |
| Argo Shipping |
A newly established small logistics company focusing on the Russian oil export market. |
Stena Primorsk Stena President |
P-MAX P-MAX |
65,200 65,200 |
2006 2007 |
2016 2017 |
Worldwide |
| www.hess.com | A leading global energy company with 11,600 employees and sales of USD 23,255 million in 2007. |
Stena Performance |
P-MAX | 65,200 | 2006 | 2011 | Refi ned products on the Caribbean–US East Coast trade. |
| www.nesteoil.com | A leading oil company with 4,528 employees and sales of EUR 12,103 million in 2007. |
Palva (50%) Stena Poseidon (50%) |
Panamax Panamax |
74,900 74,900 |
2007 2007 |
2017 2017 |
Refi ned petroleum products between the Baltic Sea and North America. |
| www.sunoco.com | One of the largest refi nery companies in the US with 14,200 employees. |
Stena Vision (chartered) |
V-MAX | 313,000 | 2001 | 2010 | Crude oil from Africa's west coast to the US. |
| www.lukoil.com | A leading gas and oil company with activities in 19 countries. The company's extraction and production operation is based in Russia. |
Stena Victory (chartered) |
V-MAX | 313,000 | 2001 | 2009 | Worldwide |
It has for us at BRS been a great experience and challenge to assist one of the world's most demanding shipowners to order the P-MAX series and to charter them out to one of the world's leading oil majors with the highest safety criteria for ship operation.
It all started out when the French oil major TOTAL informed us in 2002 of their need for a shallow draft wide beam and fully redundant product tanker with a larger intake than that of conventional medium range (MR) tankers but still with a length not exceeding the standard length of MR tankers.
For us at BRS it was a natural choice to contact Stena for this task as Concordia Maritime and Stena Bulk had recently developed the innovative V-MAX and C-MAX concepts.
A strong and experienced technical department was necessary to develop the concept design to be presented to the charterer and the shipbuilder. With Stena Teknik this was made possible and together with the input of Stena Bulk's commercial team the P-MAX took shape.
What the Stena/Concordia Maritime and TOTAL team did not know in 2002, was
that in addition to designing a ship with huge commercial and safety advantages, they were actually projecting an "avant garde" MR design of what probably will be the new standard of MR tankers with the enlarged Panama Canal as per the announ ce ment of the Panama Canal Company in 2007. The completion of this enlargement is planned for 2014 at the earliest.
A shipyard ready to work for tailor-made projects and demanding customers was needed to build these ships and the answer was Brodosplit in Croatia. We are as brokers extremely satisfi ed that Brodosplit have this year completed in time the fi rst "six pack" of P-MAXes and "two pack" ice-strengthened Panamax tankers, which are jointly owned by Finnish Neste Shipping and Concordia Maritime.
The ships have been well received on the market and especially the P-MAX design is much envied by several oil majors and competitor shipowners. With the limited intake in many ports due to draft restrictions, a lot of MR tankers are not optimized and therefore it is not surprising that attention is focused on these wide beam vessels that are able to lift 10,000 tons more cargo on the same draft.
Charterers are pleased and some of them have increased their commitment to additional units.
Nowadays, more and more public attention is also being focused on tanker movements in narrow waters and rivers, where only a brief power failure could cause a
severe grounding with extensive pollution as a result. In this context the P-MAX with enhanced maneuvering and fully redundant machinery is clearly leading the way for others to follow. We are pleased to see that this has been noticed and appreciated by several environment protection profi les such as the Mayor of Perros Guirrec on the French Atlantic coast who also lent the name of his town to the sixth P-MAX.
I grew up on a tiny island off the east coast of Sweden, which is still my secret paradise. I know what a catastrophe could mean for fl ora and fauna and the local people in the event of a large oil spill occuring in the Baltic or other enclosed or partly enclosed seas. I am therefore very proud of having been involved as broker (a minor component) in the P-MAX project and in addition to the additional four P-MAXes to come, I hope that many more will be built and I trust that Stena's commercial and technical teams will plan, design and charter out many more successful MAX tanker designs for Concordia Maritime over the years to come.
Gilbert Walter, Barry Rogliano Salles (BRS), Geneve
Concordia Maritime's activities are conducted in close cooperation with several of the companies in the Stena Sphere. This gives the company access to cutting-edge competence in all areas of shipping; from shipbuilding and manning to technical operation, commercial management, fi nancing and marketing. Like most shipping companies, Concordia Maritime can be divided into a shore-based and a seagoing organisation.
Concordia Maritime's shore-based organisation consists of only a small number of employees; in 2007 two persons were employed in the parent company.
With the vessels ordered now beginning to enter service, the seagoing organisation is expanding. In 2007, a further four vessels were deployed, mainly with crews and technical management contracted via Stenaowned Northern Marine Management (NMM). Each vessel is normally manned by a crew of 22, which meant that at the end of 2007, Concordia Maritime had 161 seagoing employees.
All seafarers are employed under the terms of ITF agreements (International Transport Workers' Federation) or the Collective Bargaining Agreement for Deep Sea Trades. Personnel turnover was about 15 per cent.
Shipping is very much an international market, in terms of both business and competition, but it is also an international labour market for seafarers. The supply of trained and experienced seafarers is limited. A consequence of the good market in recent years is that the demand for experienced seafarers has risen sharply, which has resulted in salaries on the world market having risen more than expected. The supply of trained and experienced seafarers is limited and is expected to shrink still further due to, among other things, the large number of seafarers retiring in the next few years but also because it is estimated that some 1,500 vessels will be added to the number of vessels worldwide in the next four years. Consequently, being able to attract the best offi cers and most experienced ratings is dependent on having a long-term approach and a good reputation as an employer.
In addition to comprehensive international regulations, there are also strict internal requirements and routines for ensuring safety on board. In order to ensure that the customers' quality, environmental and safety demands are met, the company works continuously on developing competence in both the shore-based and the seagoing organisation. Northern Marine Management has well-developed routines and processes for training and education, not least in issues involving safety and the environment.
The training activities it provides are both general and specially adapted for a specifi c vessel. The work on education during the year has, among other things, been focused on training the offi cers and ratings in the operation of the new ship type. The total cost of competence development during the year amounted to SEK 680,000, which is equivalent to SEK 4,000 per employee.
Stena Bulk provides services for both companies in the Stena Sphere and external customers in the form of marketing, chartering and commercial operation. Stena Bulk operates a total of 70 vessels worldwide. Its customers include major oil companies and refi ning companies as well as in dependent trading houses.
Working and being physically close to its customers is one of Stena Bulk's foremost success factors and competitive advantages. Offi ces in Gothenburg, Houston, New York, London, Moscow, Singapore and Beijing provide the optimum conditions for a good understanding of the customers' logistics and trading requirements. The company has a total of about 50 employees.
Stena Bulk functions as Concordia Maritime's marketing organisation and is responsible for the chartering, marketing and commercial management of the fl eet.
Close collaboration with Stena Bulk gives Concordia Maritime access to a worldwide marketing organisation with solid know-how and experience in all the tanker market segments. www.stenabulk.com
NMM is responsible for the manning, management and maintenance of Concordia Maritime's vessels. Since it was formed in 1983, the company has expanded heavily and is responsible for the management and/or manning of more than 121 vessels of varying types and sizes. About 70 per cent of its assignments are for external clients outside the Stena Sphere, which include several leading shipping companies and oil companies.
NMM has about 5,000 seafarers employed. In 2007, it undertook the recruitment of a large
number of seafarers, in part as a consequence of Concordia Maritime's newbuilding program. The company has its head offi ce in Glasgow together with eight offi ces around the world. The company's operations are quality certifi ed (ISO 9001:2000) and environmentally certifi ed (ISO 14001:2004) and satisfy the requirements in the ISM Code.
www.nmm-stena.com
Britt-Marie Vihlborg, Chief Offi cer on the Stena Primorsk (in 2006).
Stena Teknik is a common resource for all the marine business areas in the Stena Sphere. Its activities consist of newbuilding and conversion projects, general marine technical advice and procurement. It also conducts research and development in the marine fi eld.
Its work covers all types of shipping, from passenger traffi c to oil tankers and rigs. In 2007, Stena Teknik was responsible for 8 tankers under construction at yards in Croatia. All of these were being built for Concordia Maritime. Stena Teknik also continued to be deeply involved in Stena Drilling's three drillships under construction in South Korea.
Working with the different Stena shipping companies has enabled Stena Teknik to build up a comprehensive knowledge bank in naval architecture. Today, the company is a leading global player. Proof of the company's high competence is that it often functions as a referral body in different questions relating to shipbuilding technology in the EU.
Stena Teknik provides Concordia Maritime with a variety of solutions, everything from corrosion protection, classifi cation questions and safety to more comprehensive projects such as building whole vessels. www.stena.com
s. Chief Offi cer Vladimir Dumic is in control room supervising the work.
er of safety regulations. Before anyis allowed down into the tanks, meas-
night to get rid of the fumes it is time
different types of fuel aren't mixed",
g to load when we arrive at St. Croix
t, the tanks have to be cleaned using
chines, and after they have been left
e now know what type of fuel we're
e work on board is subject to a
lean them manually.
The Stena Performance sails between the US and the Caribbean and has a crew of 24, most of whom come from the shipping nations Croatia and the Philippines. There are a lot of jobs to be done on the short route with little spare time on board.
After having discharged its cargo in Baltimore, the Stena Performance is on its way to the refi nery in the US Virgin Islands to take on a new cargo. Seven crew members are out on deck to begin cleaning the tanks. Chief Offi cer Vladimir Dumic is in the control room supervising the work. First, the tanks have to be cleaned using machines, and after they have been left overnight to get rid of the fumes it is time to clean them manually. tank Firs ma over c
"We now know what type of fuel we're going to load when we arrive at St. Croix and then the tanks have to be clean so that different types of fuel aren't mixed", says Vladimir. "W goin says
The work on board is subject to a number of safety regulations. Before anyone is allowed down into the tanks, meas-Th numb
uring equipment is lowered into them to check the oxygen level and whether they still contain any gases. Each crew member has an apparatus with him that measures different types of gas and warns if something is wrong.
"Safety is the number one priority", says Captain Igor Glad.
After dinner, everybody is tired after a hard day's work, and the crew members who have fi nished their work disappear into the dayroom or their cabins. On the bridge, all that can be seen in the dark is the light from the instruments. Dejan Derencinovic, the third mate, and Joel Minao, a rating, are standing in the dark looking out at the starry sky.
"Today, we spent the whole day cleaning the tanks, so when our shift ends it will be good to have a rest", says Joel.
The Stena Performance has left the US East Coast and is sailing on a southerly course towards the Caribbean. As the cloudy sky gradually clears, the temperature rises and when the ship reaches the Gulf Stream, the thermometer shows 20o C.
In the galley, Elmer Ostan has just fi nished work on breakfast. He is the cook on board and is responsible for making sure that the crew is served three meals a day.
"It's a nice job, specially when people are pleased and like the food I cook", he says.
Two messmen help him in the kitchen.
"I help prepare the food, and then I serve it in one of the dining rooms", says Reinarld Neri while he is clearing the tables in the mess.
Both Elmer and Reinarld are married with children and they phone home as soon as the ship arrives at a port.
Elmer Ostan is the cook on board the Stena Performance. He went to sea when he was 13 years old.
"This route is good because I'm often able to phone home to my wife and son. We've bought American mobile phones, which means we have coverage as soon as we are in port, about once every fi fth day. I've always worked in the galley on board. I try to vary the menu as much as possible, and listen to the crew's wishes. Every day we try to have fresh fruit for dessert at lunch, and we also bake our own bread".
Igor Glad is the Master of the Stena Performance and is ultimately responsible for all the activities on board.
"There's always something to do, the pace is high all the time. I try to see to it that the crew is in a good mood; if they are dissatisfi ed, it's diffi cult to work. It doesn't take much, but it makes such a big difference. It's part of my job to get rid of differences and make sure that everybody enjoys their work. One way of doing that is to make sure that everybody gets enough to eat and is satisfi ed. The food is what's most important on board; if the food is good, everybody is in a better mood".
Joel Minao is a rating on board the Stena Performance. In addition to working on deck, he stands watch on the bridge between 16:00 and 20:00 and between 04:00 and 08:00.
"There's quite a lot to do on the way back to the refi nery in St. Croix. We have to clean the tanks and prepare for the next cargo. In addition to this, I have watch duty on the bridge twice a day. If I'm standing watch when we're entering or leaving a port, I steer the ship according to the orders given by the pilot on board. When we're th
out on the open sea, we use the autopilot. It's nice when we're approaching warmer latitudes, because I prefer hot weather to cold weather". out aut app bec col
The Stena Performance always sails on the same route, between the refi nery in St. Croix and the US East Coast.
On this short stretch there is always a lot to do, and the crew does not have much time off. It is always Monday on board.
But after lunch on Sunday, there are at least some crew members who spend their time off doing something other than resting, and that is when the karaoke machine in the dayroom comes into use. Some of the crew members get together to noisily sing their favourite songs. Each performance is awarded points by the program, and is met
by booing and whistling depending on the points awarded. The captain and the chief offi cer also look in, but cannot be persuaded to sing. the
"I try to make sure that the crew is in a good mood, if they're dissatisfi ed it's diffi cult to work", says Vladimir Dumic.
As night falls, the next shift has taken over the karaoke machine, and the other crew members have returned to their duties. It is still two days before the ship reaches St. Croix and a lot of work remains to be done on board.
For many years, Concordia Maritime's business has been characterised by a strong focus on safety and environmental issues. With increasingly stringent demands, pro-active safety and environmental work have become an important competitive advantage.
I n all areas of shipping today, extensive work at the global level is being conducted with the aim of further increasing safety and minimising the negative environmental impact. In recent years, the laws and regulations governing the environmental impact of shipping have become increasingly stringent and this trend will continue. This has resulted in a very large improvement in the standard of the world tanker fl eet.
Among the most important regulations governing safety and environmental questions are the conventions drawn up in the UN agency IMO (International Maritime Organisation). These include Marpol and Solas (IMO's conventions on the environment and safety, respectively) and the socalled ISM Code (issued by IMO and relating to quality and safety). In addition, the EU, the classifi cation societies, EPA (U.S. Environmental Protection Agency) and the national maritime authorities have a large infl uence.
External control of how the tanker shipping companies satisfy environmental and safety regulations has increased sharply in the last 15 years. In addition to the annual fl ag state controls, regular inspections are
carried out by e.g. the oil companies and the classifi cation societies. Over and above this, the shipping companies also have, of course, their own internal control systems.
The environmental impact of tanker shipping consists mainly of emissions from the vessels' engines, the use of toxic bottom paint, discharging different types of water that have been used on board and the impact on the marine environment of emptying ballast water.
Perhaps the most important challenge for the shipping industry, and for all industrial activity, is the emissions of greenhouse gases. Reducing emissions of sulphur and nitric oxide to the air is one of the most prioritised environmental issues in shipping. Sulphur is diffi cult to remove after it has been emitted and, consequen t ly, the most effective way of protecting the environment is to burn bunker oil with a lower sulphur content. This has now been adopted internationally and mandatory reductions in sulphur content will be introduced over the next fi ve years. These reductions will be introduced in the Sulphur oxide Emission Control Areas (SECA) in the North Sea and the Baltic Sea as well as at a global level.
The Stena Performance in the Atlantic, 23 August, 2007. The photo received an honorary mention in Concordia Maritime's photo competition. Read more about the competition on page 81.
For Concordia Maritime, safety of humans and protection of the marine environment have the highest priority both as a principle in our dayto-day activities and in the company's overall objectives
Safety and protection of the marine environment shall be an integrated part of our daily activities. Only with commitment from all employees, both on board and ashore, will it be possible to maintain a high safety standard and good protection of the marine environment
In 2006 and 2007, international shipping was the subject of considerable discussion concerning above all emissions and discharges to the air and water. The handling of ballast water is one of the areas where regulations have been tightened up. The goal of the new ballast water regulations is to prevent living organisms from spreading from one region to another. The transfer of organisms, together with discharges from land-based sources, depletion of fi sh stocks and the destruction of coral reefs, is regarded as one of the greatest threats to the oceans. The ballast problem has been known since the 1980s and is considered by many to be shipping's most diffi cult problem.
In recent years, the shipping industry has taken steps to reduce the impact on the environment and people when ships are recycled; steps that will lead to a number
of regulations and recommendations. These are expected to come into force in the next few years and will apply to the whole chain from ship design and construction to operation and recycling.
Some of the future regulations will concern ship construction. Shipowners will be made responsible for what was previously called a Green Passport being drawn up. The most important component in this certifi cate is an Inventory of Hazardous Materials (IHM), which increasingly replaced the term Green Passport in 2007.
Quality, environment and safety have been guiding principles in Concordia Maritime's business for many years. The company's environmental and safety work has two overall aims: to prevent accidents by working preventively and to minimise the amount of hazardous discharges to the sea and air.
In addition to tougher laws, the general public's demands and expectations as regards safe and reliable oil transportation have increased and today, there is zero tolerance when it comes to accidents and oil spills. This change is a result of trends in society as a whole, but it has also been reinforced by several factors:
• Large oil spills off European coasts with serious consequences for the environment have triggered strong reactions from the general public in recent years
and pushed tanker safety high up on the political agenda
The development of Concordia Maritime's new P-MAX concept is a concrete example of how an environmental and safety philosophy is applied as a fundamental principle already at the drawingtable stage. The vessels are among the world's safest product tankers. They have a full double hull, which means that all the tanks containing oil or oily water are protected by the double hull. The unique design of the hull and the twin skeg result in better fuel economy and speed characteristics compared with standard tonnage. Despite substantially larger cargo capacity, the P-MAX tankers burn up to six per cent less fuel than a standard MR tanker. Concordia Maritime's ten P-MAX tankers also have IHM (Green Passport) certifi cation. The intention is to have full control over what materials are in the vessels and to act pro-actively and satisfy future regulations and recommendations before they are introduced. This requires close collaboration with the yard and the classifi cation societies. The Stena Paris was the fi rst newbuilding in the world to be certifi ed in accordance with Den Norske Veritas' Green Passport and during the year, the Stena President and the Stena Perros were delivered with IHM certifi cation.
In the work on preventing accidents, there is a comprehensive exchange of information between shipping companies all over the world. Concordia Maritime's manning agent, Northern Marine Management (NMM), participates every year in a number of formal meetings with the aim of improving safety on board. In addition to these meetings, there is a comprehensive exchange of information.
The most common accidents on board are due to slipping and falling, most often resulting in some degree of personal injury. In the case of preventive work on board,
NMM works continuously to identify potential risks and dangerous elements in the work done. Here, the crew's participation is crucial. For example, on all the vessels operated by NMM, ten minutes are spent every day on studying movement patterns and adherence to routines. Re ports are made according to a standardised model and risks identifi ed are subsequently eliminated. The observations are gathered in reports, which are sent to all the vessels. This enables continuous improvements to be made. In addition to this, dedicated safety meetings are held every month.
All this work has resulted in a low number of accidents on board Concordia Maritime's vessels compared with the industry as a whole. After the fi rst P-MAX tanker was delivered in 2005, no serious accidents have occurred on board any of Concordia Maritime's owned or operated vessels.
Concordia Maritime was founded in 1984 and its Series B share was listed on the OMX Nordic Exchange Stockholm the same year. In 2007, the share price dropped 51 per cent.
At the start of 2007, the share price of Concordia Maritime's Series B share was SEK 55 and at the end of the year SEK 27, a drop of 51 per cent. The Nordic index of the OMX Nordic Exchange Stockholm (OMX Nordic 40) fell 4.7 per cent during the same period. The highest price paid during the year was SEK 55 and the lowest was SEK 26. Concordia Maritime's market value, the value of all outstanding shares in Concordia Maritime, amounted to SEK 1,289 (2,625) million on 31 December, 2007.
In 2007, the total return on the shares, including the proposed dividend of SEK 1.00, was –49 per cent. Since the listing in 1984, the total return on the shares, compared to the introductory price of SEK 20, has averaged 13 per cent per year.
For 2007, the board of directors proposes a dividend of SEK 1.00 (1.00) per share, which represents 76 (92) per cent of the group net result for the year. The dividend is in line with Concordia Maritime's objective of distributing 20–30 per cent of the consolidated net result for the year. Concordia Maritime's payout ratio in historical terms is shown in the 10-year overview on page 42.
In 2007, 16.8 (32.4) million shares were traded at a total value of SEK 670 (1,497) million, which is equivalent to a turnover rate of 38.4 (74.1) per cent. The average trade per trading day was 67,293 (129,055) shares or SEK 2.7 (6.0) million.
At the end of 2007, share capital amounted to SEK 381.8 million, divided between 47.73 million shares, of which 43.47 million were Series B shares. The quota value is SEK 8 per share. Each Series A share represents ten votes and each Series B share one vote.
There were 4,963 (5,942) shareholders as of 31 December, 2007, which represents a reduction of 16.5 per cent compared with the previous year. All Series A shares with voting rights are owned by the Stena Sphere, which has been the principal owner since the company was fi rst listed in 1984. Stena has declared that a holding in Concordia Maritime of about 50 per cent of the capital is one of its long-term objectives. At year-end, the Stena Sphere owned 52.2 per cent of the share capital and had 72.7 per cent of the votes.
The second largest owner is Adelphi Capital LLP, which owns shares equivalent to 5.3 per cent of the capital and 3.0 per cent of the votes.
As of 31 December, 2007, foreign ownership amounted to 25.1 (28.2) per cent of the share capital and 14.3 (16.1) per cent of the votes. Total ownership by institutions
amounted to 9.2 (2.1) per cent. The board of directors and the President together own around 0.1 per cent of the total number of shares (Stena Sphere excluded).
Equity per share amounted to SEK 34.08 (34.09) as of 31 December, 2007.
The ticker code is CCOR B and the ISIN code is SE0000102824. A trading unit consists of 200 shares.
Concordia Maritime aims to facilitate the market's assessment of the company through clear information. In 2007, the company participated in a large number of investor meetings and meetings with customers at banks and trade organisations. In conjunction with the publication of fi nancial reports, Concordia Maritime met analysts and other professional players, either in person or via teleconferences. Concordia Maritime also conducted a number of road shows, including in London.
Go to www.concordia-maritime.se for fi nancial information about the company.
| 17-01-2007 Delivery of Stena Poseidon | |
|---|---|
| 17-01-2007 Judgement pronounced in dispute | |
| Å 15-02-2007 Financial Statement | |
| 22-02-2007 Delivery of product tanker Palva | |
| 26-04-2007 Interim Report Concordia Maritime AB (publ) 1 January–31 March |
|
| Ç 04-05-2007 Press release from AGM Concordia Maritime AB (publ) |
|
| 25-06-2007 V-MAX Stena Vision back in service | |
| É 29-06-2007 Concordia Maritime signs strategic agreement with TOTAL |
|
| 14-08-2007 Interim Report, 1 January–30 June, 2007, for Concordia Maritime AB (publ) |
|
| 21-09-2007 Stena President named in Split | |
| 25-09-2007 | Stena President delivered from Brodosplit |
| Ñ 19-10-2007 Interim Report, 1 January–30 September, 2007, for Concordia Maritime AB (publ) |
|
| Ö 26-11-2007 Revised forecast for full year | |
| 01-12-2007 | Stena Perros naming ceremony at Brodosplit Shipyard |
| 06-12-2007 Delivery of Stena Perros |
Concordia Maritime's long-term objective is to maximise the value of the shareholders' capital in the company through long-term growth in the value of the fl eet and a good return on oil transport. This should provide the necessary conditions for a longterm, positive share price trend. The shareholders should be able to expect a reasonable dividend in relation to both the company's result and its investment requirements. The aim is for the dividend to amount to 20–30 per cent of the consolidated profi t after tax. However, a minimum of 10 per cent of the profi t should be distributed to the shareholders.
Share turnover, last fi ve years
| 20071) | 20061) | 20051) | 2004 | 2003 | 2002 | 2001 | 2000 | 1999 | 1998 | |
|---|---|---|---|---|---|---|---|---|---|---|
| Dividend, SEK | 1.002) | 1.00 | 1.00 | 3.00 | 0.50 | — | 0,60 | 1.10 | — | 0.50 |
| Dividend as % of net result after tax | 763) | 92 | 83 | 19 | 31 | — | 12 | 22 | — | 12 |
| Shares outstanding at year-end, millions | 47.73 | 47.73 | 47.73 | 47.73 | 47.73 | 47.73 | 46.41 | 42.19 | 27.22 | 27.22 |
| Average number of shares outstanding, millions | 47.73 | 47.73 | 47.73 | 47.73 | 47.73 | 47.07 | 44.30 | 34.71 | 27.22 | 26.75 |
| Share price at year-end, SEK | 27.00 | 55.00 | 43.00 | 34.80 | 17.50 | 11.00 | 16.00 | 21.50 | 11.80 | 11.50 |
| Dividend yield, % 4) | 3.73) | 1.81 | 2.32 | 8.62 | 2.86 | — | 3.75 | 5.11 | — | 4.34 |
| Total return, Concordia shares, % | –49.093) | 30.23 | 26.44 | 116.00 | 63.64 | –31.25 | –22.79 | 91.53 | 2.61 | –48.94 |
| Enskilda NO Shipping Index | 8.0 | –5.25 | 22.99 | 73.09 | 96.23 | –31.64 | –2.67 | 14.37 | 42.72 | –46.92 |
| P/E ratio including ship sales | 20.5 | 50.5 | 35.8 | 2.2 | 10.8 | neg | 3.3 | 4.8 | neg | 4.1 |
| P/E ratio excluding ship sales | — | — | 2,150.0 | 17.8 | 9 | neg | 3.3 | 5.2 | — | — |
| Turnover of shares per year, thousands | 16,810 | 32,393 | 18,608 | 24,289 | 8,443 | 5,791 | 8,875 | 16,863 | 6,535 | 12,545 |
| Rate of turnover, % | 38 | 74 | 43 | 56 | 19 | 13 | 21 | 65 | 26 | 50 |
| Market value at year-end, SEK million | 1,288 | 2,625 | 2,052 | 1,661 | 835 | 525 | 743 | 907 | 321 | 313 |
| Number of shareholders | 4,963 | 5,942 | 6,209 | 6,081 | 5,431 | 5,542 | 5,215 | 5,551 | 5,268 | 6,305 |
1) Key fi gures for 2005, 2006 and 2007 are recalculated in accordance with IFRS accounting principles 2) The board's proposal
3) Calculated on the proposed dividend 4) Dividend per share divided by the share price at year-end
| Capital % | Votes % | |
|---|---|---|
| Foreign owners | 25.1 | 14.3 |
| Swedish owners | 74.9 | 85.7 |
| of which | ||
| - Institutions | 9.2 | 5.2 |
| - Equity funds | 0.4 | 0.2 |
| - Private individuals | 65.4 | 80.3 |
| Capital % | Votes % |
|---|---|
| 85.3 | |
| 86.6 | |
| 88.4 | |
| The 10 largest shareholders 74.2 The 25 largest shareholders 76.5 The 100 largest shareholders 79.7 |
| Capital % | Votes % | |
|---|---|---|
| Stena Sphere | 52.2 | 72.7 |
| Adelphi Capital | 5.3 | 3.0 |
| Fjärde AP-fonden | 5.1 | 2.9 |
| DWS-Scudder Funds | 3.8 | 2.2 |
| SEB | 3.2 | 1.8 |
| T Rowe Price Funds | 1.6 | 0.9 |
| Mariedals Lantbruk | 1.6 | 0.9 |
| Pettersson Rune | 0.5 | 0.3 |
| Andra AP-fonden | 0.5 | 0.3 |
| DFA Funds (USA) | 0.5 | 0.3 |
| Total | 74.3 | 85.3 |
| Others | 25.7 | 14.7 |
| Total | 100.0 | 100.0 |
No. of shareholders
| Shareholding | Number owners |
Number shares |
Share of capital % |
Share of votes % |
|---|---|---|---|---|
| 1–1,000 | 4,057 | 1,262,945 | 2.7 | 1.5 |
| 1,001–10,000 | 772 | 2,575,071 | 5.4 | 3.1 |
| 10,001–100,000 | 107 | 2,900,734 | 19.9 | 11.4 |
| 100,001– | 27 | 40,991,048 | 72.0 | 84.0 |
| Total | 4,963 | 47,729,798 | 100.0 | 100.0 |
Concordia Maritime aims to facilitate the market's assessment of the company through clear information.
For IR-related information, please contact: Göran Hermansson, Financial Manager +46 (0)31-85 50 46 or +46 (0)704-85 50 46 [email protected]
Shipping in general and tanker shipping in particular are associated with a range of risks that the board and management have to manage and plan for. For Concordia Maritime, long-term customer contracts and access to the entire skills base in the Stena Sphere help to partially reduce the risks otherwise associated with shipping.
The risks that Concordia Maritime is exposed to can be divided into three main categories – operational risks, fi nancial risks and external risks. The fi nancial risks, mainly related to currencies and interest rates, are described in note 20 on page 67, and are therefore not reported in this section.
The purpose of describing Concordia Maritime's risk situation below is partly to give investors and others a picture of the risk environment in which Concordia Maritime operates, and partly to demonstrate what Concordia Maritime is doing to minimize the negative effects of these risks. The description, however, does not make any claim to being complete or comprehensive.
Operational risks refer primarily to risks related to the management of the business, in other words, risks that the board and management are able to infl uence to a degree.
As regards the risks related to the actual operating of vessels, Concordia Maritime has taken out insurance policies customary in the industry. The vessels are insured against damage and loss (Hull & Machinery) at amounts representing the vessels'
market value. Protection & Indemnity applies without limitation of amount, except for responsibility for oil spills, where the limitation of amount is USD 1 billion. The vessels are also insured against Loss of Hire.
In addition to the insurance policies above, Concordia Maritime has also taken out the customary insurance for operating in specifi c waters. One example is COFR insurance (Certifi cate of Financial Responsibility), which is required in order to operate vessels in American waters. COFR is issued by the US Coast Guard to an operator (owner/bareboat charterer) who can demonstrate having the fi nancial capability, via insurance, to pay for cleaning up oil spills and oil damage up to the amounts required by the American Oil Pollution Act, OPA 90.
Customer-related risks refer to the risk that a customer may choose to terminate the relationship, or the risk that a customer cannot meet his obligations towards Concordia Maritime.
As regards the fi rst aspect, Concordia Maritime's strategy is based on close and long-term relationships with customers. At the end of 2007, 11 of the 14 vessels in the fl eet were signed to charters for periods ranging from 2 to 9 years. The remaining
3 vessels will be delivered in 2009–2010, see graph on page 5.
Normally, basing one's business on a limited number of customers incurs greater risk. In Concordia Maritime's case, however, the long-term contracts with what are mainly world-class energy companies provide operational and fi nancial stability during the periods covered by the contracts.
An accident at sea or in port (breakdown, oil spill, collision, etc.) could lead to extensive negative consequences both to the environment and to property. The new vessels, built in accordance with the P-MAX principle, are probably among the world's safest product tankers. The vessels have been specially designed for operation in sensitive waters. The fact that accidents happen can never be excluded. However, Concordia Maritime devotes considerable resources to the continuous development of both vessels and basic systems and procedures, both to prevent accidents and to minimise damage should an accident happen.
Despite insurance cover, an accident could have a very serious impact on Concordia Maritime. The oil industry's demands for safety and environmental responsibility are comprehensive, and an accident at sea or in port would have not only negative environmental consequences, but could also damage the Concordia Maritime brand. Ever since its establishment in 1984, the company has promoted its image as a quality shipowner, with high demands in all aspects of safety. This position makes particularly high demands on control and responsibility. Guarding against this type of risk is diffi cult, and can only be achieved by extensive preventive work and complete openness should an accident nevertheless occur.
Concordia Maritime is very dependent on being able to attract and retain employees. This applies in the case of e.g. technicians and employees responsible for customers and partners, but above all skilled seagoing personnel. Concordia Maritime has only a small organisation of its own, and this normally means it is very dependent on a number of key individuals. This is to some extent counterbalanced by the close cooperation with several companies in the Stena Sphere. Concordia Maritime also puts considerable effort into creating a stimulating workplace, with good opportunities to develop.
External risks refer mainly to the risks related to changes in the outside world and the market, in other words, risks that the board and management only have a limited chance of infl uencing in the short term, but must nevertheless deal with in the longterm planning of the business.
Shipping is a highly cyclical business. The demand for transportation of petroleum and chemical products is largely determined by the consumption of these products. This, in turn, is largely determined by the state of the economy. The effects of an economic
recession are, in the short term, largest in the spot market, but in the long term they also have an effect on the time-charter market. It is diffi cult to guard against a long-term economic recession. Concordia Maritime strives to limit the risks by means of a strategy based largely on long-term contracts.
Concordia Maritime operates in a market that is subject to a number of regulations that may change from time to time depending on changing factors in the outside world and/or political decisions. This includes decisions to do with regulations for international trade, safety and the environment.
As regards international trade, the trend in recent years has been towards increased global free trade, and fewer restrictions of a commercial policy nature. There has even been harmonisation in the area of taxation, which to some extent has reduced the risks that fi scal policy changes might affect the competitive situation. The main risk of changes would appear to lie in the area of safety and the environment, where there is a continual review of international and national laws, industry-related conventions, regulations and practice. This trend is being driven from several directions, both political and from trade associations and industry. But having one of the world's safest and most modern fl eets means that for Concordia Maritime, the increased focus on safety and environmental issues is, if anything, an opportunity.
Freight rates in tanker shipping can fl uctuate signifi cantly from time to time. A downturn in freight rates may be due to reduced demand for transport capacity, or an increased supply of vessels. A change in rates can have a signifi cant impact on the profi tability of the business. Freight rates on the spot market normally fl uctuate more
than the rates on the time-charter market. With a large part of the fl eet signed to long-term charters, Concordia Maritime's exposure to changes in freight rates in the next few years is limited.
Changes in oil prices do not affect Concordia Maritime to any great extent. Its business is largely based on time charter contracts, which means that the customers are responsible for the costs of the voyage (bunker oil, port dues, pilots, tugs, etc.). Changes in the price of oil affect freight rates, which, in turn, have an impact on the shipping company's revenue.
A large part of global oil production is in areas of political instability. War or other disturbances may limit access to oil and petroleum products, but also increase the need for transport to and from various storage depots. The risks of this affecting the business are relatively limited in the short term, since Concordia Maritime's business is largely based on long-term contracts.
The illustration gives a picture of the factors that may affect the business. The assessment relates both to the probability and the degree of any effect.
| Operational risks related to |
Financial risks related to |
External risks related to |
|---|---|---|
| • Shipping opera tions and insurance issues • Employees • Brand |
• Liquidity • Interest rates • Credits • Currency |
• Economic trends • Political decisions and events • Demand for oil and oil transport • Trend in oil prices • War/instability |
| Risk management |
| 2007 | 2006 | 2005 | 2004 | 2003 | ||
|---|---|---|---|---|---|---|
| Profi t/loss items, SEK million | ||||||
| Net sales | 457.2 | 381.2 | 254.0 | 354.0 | 649.7 | |
| Operating costs | 423.2 | 376.5 | 312.0 | 271.2 | 575.7 | |
| Operating result | 34.0 | 4.7 | –1.8 | 729.4 | 58.9 | |
| whereof result from the sale of ships | — | — | 56.2 | 646.6 | –15.1 | |
| EBITDA | 91.5 | 38.7 | –1.3 | 795.5 | 177.5 | |
| Result before tax | 48.0 | 52.5 | 42.7 | 740.2 | 35.1 | |
| Net result after tax | 62.9 | 51.9 | 57.2 | 740.2 | 77.1 | |
| Cash fl ow from operating activities 1) | 123.0 | 100.0 | 20.4 | 136.2 | 150.5 | |
| Investments | 836.7 | 767,2 | 492.8 | 86.3 | 61.6 | |
| Balance sheet items, SEK million | ||||||
| Ships | 1,769.6 | 1,048.7 | 304.2 | 32.5 | 1,223.9 | |
| (Number of ships) | 7 | 4 | 1 | 1 | 4 | |
| Ships under construction | 158.3 | 222.3 | 384.7 | 128.0 | 55.4 | |
| (Number of ships) 2) | 4 | 7 | 6 | 7 | 6 | |
| Cash and cash equivalents | 55.6 | 30.2 | 280.4 | 1,123.4 | 40.3 | |
| Short-term investments | 397.1 | 517.6 | 559.1 | 130.7 | — | |
| Other assets | 429.6 | 413.7 | 368.9 | 313.4 | 87.8 | |
| Interest-bearing liabilities | 1,073.0 | 506.2 | 0.0 | 0.0 | 300.7 | |
| Other liabilities and provisions | 110.7 | 99.3 | 126.4 | 111.2 | 80.2 | |
| Equity | 1,626.5 | 1,627.0 | 1,770.9 | 1,616.8 | 1,026.5 | |
| Balance sheet total | 2,810.2 | 2,232.5 | 1,897.3 | 1,728.0 | 1,407.4 | |
| Key ratios, % | ||||||
| Equity ratio | 58 | 73 | 93 | 94 | 73 | |
| Return on total capital | 4 | 4 | 5 | 47 | 3 | |
| Return on capital employed | 4 | 5 | 6 | 49 | 3 | |
| Return on equity | 3 | 3 | 3 | 56 | 7 | |
| Per-share data, SEK | ||||||
| Per-share data, SEK | 1.32 | 1.09 | 1.20 | 15.51 | 1.62 | |
| of which profi t/loss from ship sales | — | — | 1.18 | 13.55 | –0.32 | |
| Cash fl ow1) | 2.54 | 2.10 | 0.43 | 2.85 | 3.15 | |
| Equity | 34.08 | 34.09 | 37.10 | 33.87 | 21.51 | |
| Equity/market value | 1.26 | 0.62 | 0.86 | 0.97 | 1.22 | |
| Share price at year-end | 27.00 | 55.00 | 43.00 | 34.80 | 17.50 | |
| Dividend3) | 1.00 | 1.00 | 1.00 | 3.00 | 0.50 | |
| Dividend as % of net result after tax | 75.88 | 91.96 | 83.44 | 19.34 | 30.95 | |
| Other | ||||||
| P/E ratio including ship sales | 20.5 | 50.5 | 35.8 | 2.2 | 10.8 | |
| P/E ratio excluding ship sales | — | — | 2,150.0 | 17.8 | 9 | |
| Number of shareholders | 4,963 | 5,942 | 6,209 | 6,081 | 5,431 |
1) Ship sales not included 2) Six wholly-owned ships and two ships in which the group has a 50 per cent holding 3) Proposed dividend Comparative fi gures for 1998–2003 have not been recalculated in accordance with IFRS.
| 1998 | 1999 | 2000 | 2001 | 2002 |
|---|---|---|---|---|
| 1,102.9 | 773.6 | 1,327.6 | 1,334.6 | 768.6 |
| 901.1 | 817.7 | 1,098.2 | 1,043.6 | 877.9 |
| 201.8 | –44.1 | 246.0 | 292.5 | –98.2 |
| — | — | 16.6 | 1.5 | 11.1 |
| 297.7 | 57.1 | 382.9 | 454.4 | 89.5 |
| 114.0 | –72.0 | 227.7 | 251,9 | –142.4 |
| 117.3 | –62.5 | 207.3 | 231.3 | –148.9 |
| 205.8 | 15.9 | 337.2 | 392.1 | 40.0 |
| 259.3 | 295.7 | 351.1 | 513.6 | — |
| 1,155.5 | 1,121.3 | 1,073.3 | 2,544.3 | 1,907.0 |
| 10 | 10 | 9 | 9 | 6 |
| 253.9 | 573.7 | 1,001.8 | — | — |
| — | 2 | 2 | — | — |
| 128.1 | 16.2 | 81.0 | 263.0 | 115.2 |
| — | — | — | — | — |
| 213.5 | 180.1 | 338.4 | 343.0 | 216.7 |
| 772.0 | 953.4 | 938.5 | 1,261.7 | 926.6 |
| 244.0 | 232.2 | 352.8 | 295.4 | 159.3 |
| 735.0 | 705.7 | 1,203.2 | 1,593.2 | 1,153.0 |
| 1,751.0 | 1,891.3 | 2,494.5 | 3,150.3 | 2,238.9 |
| 43 | 38 | 48 | 51 | 51 |
| 12 | –2 | 12 | 11 | –4 |
| 13 | –2 | 14 | 12 | –4 |
| 17 | –8 | 21 | 16 | –11 |
| 2.79 | –0.96 | 4.47 | 4.85 | –3.12 |
| — | — | 4.11 | 0.03 | 0.23 |
| 4.64 | 0.68 | 7.14 | 8.21 | 0.84 |
| 20.85 | 20.03 | 26.67 | 33.62 | 24.16 |
| 1.81 | 1.70 | 1.24 | 2.10 | 2.20 |
| 11.50 | 11.80 | 21.50 | 16.00 | 11.00 |
| 0.50 | — | 1.10 | 0.60 | — |
| 11.60 | 0.00 | 22.39 | 12.04 | 0.00 |
| 4.1 — |
neg — |
4.8 5.2 |
3.3 3.3 |
neg neg |
| 6,305 | 5,268 | 5,551 | 5,215 | 5,542 |
The trend in net sales, costs and result in recent years is a consequence of Concordia Maritime's strategic shift from crude oil transportation to product tankers, and the newbuilding program currently in progress. As the fl eet takes shape, the company will increase its borrowing, which can be seen in the trend of the equity ratio – from nearly 100 per cent in 2004 to 58 per cent at the end of 2007. As a result of this, interest-bearing liabilities in principle doubled in 2007 compared with the previous year. Since the newbuilding program was initiated in 2003, Concordia Maritime has invested SEK 2,244.6 million in the new fl eet. Important measures of the result, such as EBITDA, are expected to increase as the fl eet grows. The EBITDA, excluding costs of a non-recurring nature, amounted to USD 17.6 million and the company forecasts an EBITDA of USD 26 million for 2008, an increase of about 48 per cent.
Equity ratio Equity expressed as a percentage of the balance sheet total.
Return on total capital Earnings after net fi nancial items plus fi nancial expenses as a percentage of average balance sheet total.
Earnings after net fi nancial items plus fi nancial expenses as a percentage of average capital employed. Capital employed refers to the balance sheet total minus noninterest-bearing liabilities, including deferred tax liability.
Return on equity Earnings for the year expressed as a percentage of average equity.
Earnings after net fi nancial items plus depreciation minus tax paid (cash fl ow before change in working capital and investments and before effect of ship sales).
P/E ratio Share price at year-end in relation to profi t per share after tax.
Number of shareholders
Cash fl ow from operating activities
For defi nitions, see page 43.
The board of directors and the President of Concordia Maritime AB (publ), corp. ID 556068-5819, hereby submit the Annual Report for the fi nancial year 1 January–31 December 2007. The parent company is Stena Sessan Rederi AB, which controls approx. 52% of the capital and 73% of the total voting power. Its parent company is Stena Sessan AB.
In 2007 Concordia Maritime took delivery of the fi fth and sixth P-MAX tankers in a series of ten. The Stena President was delivered in September and has been chartered to Argo Shipping International for ten years. The Stena Perros, delivered in December, about two months ahead of scheduled, will for the next fi ve years enter service for TOTAL. The other four vessels, which are chartered to TOTAL, Hess Corporation and Argo Shipping International, have all performed well. In principle, the vessels have operated worldwide although they have primarily plied transatlantic routes.
In the second quarter, Concordia Maritime signed a new fi ve-year contract with TOTAL. This time for the P-MAX tanker Stena Progress. At the same time, the charters for the Stena Paris and the Stena Provence were extended by two years. At the end of 2007, about 21 years remain of the 24 years Concordia Maritime's tonnage is contracted to TOTAL.
The two Panamax tankers Stena Poseidon and Palva, which Concordia Maritime owns jointly with Neste Shipping, were delivered during the fi rst quarter. The vessels are time-chartered for 10 years to Neste Shipping. They have performed well and have primarily sailed on transatlantic routes from Neste Oil's refi nery in Borgå, Finland.
The weak market during the second half of the year has affected the profi t-split for some contracts. The segment reports an EBITDA before overhead costs of USD 23.1 million for 2007.
The Stena Victory, which is time-chartered from Arlington Tankers, entered service for Lukoil during the fourth quarter. The charter expires at the end of 2009 when the tanker will be redelivered to Arlington Tankers. Concordia Maritime can choose to extend the charter via three 12-month options.
The Stena Victory's sister ship Stena Vision will continue to sail for Sunoco until the autumn of 2008, after which she will be employed by Lukoil until the end of 2010 when she will be redelivered to Arlington Tankers. Concordia Maritime can choose to extend the charter via two 12-month options.
The previously reported damage to the reduction gear on the Stena Vision has been repaired, and the vessel re-entered service in June. In total, SEK 17.9 million has been charged to the segment's operating result for 2007.
With respect to the dispute between Concordia Maritime and Halliburton, concerning the sale of a vessel in 2000, an agreement was reached during the fi rst quarter which resulted in SEK 9.8 million being charged to the segment's operating result.
As a consequence of the above-mentioned items together with insurance commitments in connection with calls at ports in West Africa, the segment posted an EBITDA before overhead costs of USD –5.6 million for the year.
Market developments during the fourth quarter were both unexpected and unusual. Following several months with a downward pressure on freight rates, the VLCC market saw the biggest upswing towards the end of the quarter since 2004. Record levels were achieved for the eastbound traffi c with freight rates of up to USD 300,000 per day. Although there is normally a seasonal improvement in the market during the fourth quarter, the strength of the upswing was very surprising. One of several contributory factors was that Saudi Arabia lowered the price of its crude oil to the US. This price reduction created the incentive to replenish the low stock levels of crude oil in the US, and this resulted in a sharp increase in the number of shipments. High fuel prices have apparently resulted in many ship owners instructing their ships to reduce speed, which has, in turn, resulted in a reduction in available tonnage. Other factors, such as discussions about the probable conversion of a large number of single-hull vessels into dry-cargo vessels, can have contributed to the psychological effect that drove up the market to this historically high level.
In the product tanker market there was continued downward pressure on freight rates and the expected seasonal upswing failed to materialise, even if the market as a whole did improve slightly. The freight market for "dirty products" such as heavy oil was generally better than for "clean products" such as petrol. Reduced refi nery profi t margins meant, among other things, that it was no longer profi table to sell and transport petrol from Europe to the US on speculation, which resulted in radically reduced freight volumes. This type of transportation was extensive during the fi rst half of the year, resulting in an unusually strong market just then. The growing product tanker fl eet has also exerted additional downward pressure on freight rates. According to the analysis and brokerage company, Clarkson, 30 product tankers were delivered during the fourth quarter alone, while the scrapping rate remained low.
Shipbuilding prices increased somewhat during the fourth quarter. At the end of the year, the price of a VLCC was about USD 140 million, and the price of an MR was about USD 50 million. The second-hand market for tankers remained higher than for newly built vessels. A standard MR is valued at about USD 52 million. P-MAX tankers, with their unique design and, among other things, substantially larger cargo intake, should therefore not be compared to standard vessels. External ship brokers' valuations are in the region of USD 62–73 million.
Note that tanker evaluations are based on immediate delivery for the open market (spot market).
Net sales amounted to SEK 457.2 (381.2) million. The result before tax was SEK 48.0 (52.5) million. The net result was SEK 62.9 (51.9) million, which corresponds to a net result per share of SEK 1.32 (1.09).
Total operating costs amounted to SEK 423.2 (376.5) million. The largest cost item was the operating costs for vessels, SEK 282.2 (251.6) million.
Concordia Maritime's shareholding consists of 1,534,785 shares, which is equivalent to 10% of the total number of shares. The share price on 31-12-2007 was USD 22.13 per share (31-12-2006: USD 23.37). The holding has been valued at its market value in the balance sheet.
Total short-term investments as of 31 December 2007 were SEK 397.1 (517.6) million. The holdings have been valued at their fair value in the balance sheet. Changes in value of SEK –13.0 (–7.4) million are included in the result for the year.
Investments during the year amounted to SEK 836.7 (767.2) million and, in addition to fi nal payment on delivery, also consist of advance payments to shipyards and project costs relating to the vessels on order.
The group's disposable liquid funds, including unutilised credit facilities, amounted to SEK 515.9 (493.8) million at year-end.
Remuneration to the Chairman of the board, Deputy Chairman of the board and the board of directors shall be in accordance with the decision of the annual general meeting (AGM). There is no special remuneration of committee work.
The board of directors has proposed that the next AGM follows the same procedure as the previous one. The AGM has
decided upon the following guiding principles for the remuneration for senior executives.
Remuneration comprises a fi xed salary, variable compensation, pension and other benefi ts. In order to attract and retain competence, Concordia Maritime strives to offer its personnel an attractive and competitive fi xed salary. The top level depends upon the scope and complexity of the position held and the performance of the individual during the year. Performance is refl ected more especially in the variable compensation. This is based on, among other things, the development of the company and its success in meeting, e.g. commercial, operational and fi nancial goals. These goals shall be determined by the board. Agreement with respect to further remuneration can be pertinent when felt necessary in order to attract and retain key competence or to induce individuals to move to new locations or accept new positions. This type of remuneration should be for a limited period, however.
The company's policy with regard to pensions is to follow the practice adopted by the local market in the country in question. In the case of the President, a premium corresponding to 35 per cent of the monthly pensionable salary and compensation at any point in time is paid into the pension. For other senior executives in Sweden, a premium, based retirement pension plan is applied in addition to the basic plans in the Swedish labour market.
The basic principle is that other benefi ts, e.g. company car, shall be at a competitive level with respect to the local market.
For senior executives in Sweden, the reciprocal period of notice is three to twelve months depending on the position held. In the case of notice of termination by the company, a one-off compensation of up to 24 months salary is paid.
See note 16.
As regards the risks related to the actual operating of vessels, Concordia Maritime has taken out insurance policies customary in the industry. The vessels are insured against damage and loss, (Hull & Machinery) at amounts representing the vessels' market value. Protection & Indemnity applies without limitation of amount, except for responsibility for oil spills, where the amount is limited to USD 1 billion. The vessels are also insured against Loss of Hire. In addition to the insurance policies above, Concordia Maritime has also taken out the customary insurance for operating in specifi c waters. One example is COFR insurance (Certifi cate of Financial Responsibility), which is required in order to operate vessels in American waters. COFR is issued by the US Coast Guard to an operator (owner/bareboat charterer) who can demonstrate having the fi nancial capability, via insurance, to pay for cleaning up oil spills and oil damage up to the amounts required by the American Oil Pollution Act, OPA 90.
Despite insurance cover, an accident could have a very serious impact on Concordia Maritime. The oil industry's demands for safety and environmental responsibility are comprehensive, and an accident at sea or in port would have not only negative environmental consequences, but could also damage the Concordia
Maritime brand. Ever since its establishment in 1984, the company has promoted its image as a quality shipowner, with high demands in all aspects of safety. This position places particularly high demands on control and responsibility. Guarding against this type of risk is diffi cult, and can only be achieved by extensive preventive work and complete openness should an accident never theless occur.
Shipping is a highly cyclical business. The demand for transportation of petroleum and chemical products is largely determined by the consumption of these products. This, in turn, is largely determined by the state of the economy. The effects of an economic recession are, in the short term, largest in the spot market, but in the long term it also has an effect on the futures market. It is diffi cult to guard against a long-term economic recession. Concordia Maritime strives to limit the risks by means of a strategy based largely on long-term contracts.
Freight rates in tanker shipping can fl uctuate signifi cantly from time to time. A downturn in freight rates may be due to reduced demand for transport capacity, or an increased supply of vessels. A change in rates can have a signifi cant impact on the profi tability of the business. Freight rates on the spot market normally fl uctuate more than the rates on the futures market. With a large part of the fl eet signed to long-term charters, Concordia Maritime's exposure to changes in freight rates over the next few years is relatively limited.
Concordia Maritime works closely with the Stena Group, which among other things provides chartering, operations, manning and newbuilding services. The company management believe that this co-operation is one of Concordia Maritime's foremost strengths vis-à-vis the competition. Though this relationship is benefi cial, it is associated with a degree of risk, as essential services are purchased from a single supplier. Concordia Maritime and the Stena Group are to a degree interconnected as a brand.
For Concordia Maritime, people's safety and the protection of the maritime environment have the highest priority, both as a principle in day-to-day business and in the company's strategic objectives. Safety and the protection of the maritime environment must be an integral part of our day-to-day business. Only with the commitment of all employees, both on board and ashore, will it be possible to maintain a high safety standard and good protection of the marine environment.
Through innovation and performance, we will strive to achieve better control of the ways in which our business affects the environment. We will improve the effi ciency of both existing and new vessels with regard to fuel consumption and emissions
Through innovation and performance, we will strive to operate safer and more effi cient shipping in environmentally-sensitive areas
There have been no new issues, bonus issues or such like during the year. Consequently the number of shares is unaltered. There are 4,000,000 A shares, each representing ten votes and 43,729,798 B shares, each representing one vote. Concordia Maritime is not in possession of any information on shareholder agreements between shareholders.
Concordia Maritime's fl eet consists of six P-MAX, two V-MAX and two Panamax tankers. There will be no new deliveries in 2008. The market expectation for 2008 is for a continued decline in the tanker market. Average freight rate levels are expected to be lower than in 2007. Operations are estimated to generate an EBITDA of about USD 26 million, which will give a result before tax of about USD 11 million or USD 0.23 per share. When converted at the closing day rate, the result before tax corresponds to about SEK 70 million or SEK 1.47 per share.
See note 27.
The board of directors and President propose that SEK 118.9 million of the result brought forward be made available for appropriation as follows:
| SEK million | 2007 | 2006 |
|---|---|---|
| Dividend (47,729,798 shares x SEK 1.00 per share) |
47.7 | 47.7 |
| To be carried forward | 71.2 | 102.1 |
| Total | 118.9 | 149.8 |
With regard to the company's result and position as a whole, please refer to the following income statement, balance sheet and notes to the accounts.
After distribution of the proposed dividend, the group's equity ratio and liquidity are satisfactory, which means all group companies can meet their commitments in both the short and long term. The proposed dividend can thus be justifi ed in terms of the Swedish Companies Act, chap. 17 § 3 sections 2–3.
| 1 January–31 December, SEK million | Note | 2007 | 2006 |
|---|---|---|---|
| Net sales | 2, 3, 21 | 457.2 | 381.2 |
| Total income | 457.2 | 381.2 | |
| Operating costs for ships | 21 | –282.2 | –251.6 |
| Seagoing personnel costs | –42.5 | –27.4 | |
| Other external costs | 5 | –31.0 | –53.5 |
| Personnel costs | 4, 16 | –10.0 | –10.0 |
| Depreciation according to plan | 8 | –57.5 | –34.0 |
| Total operating costs | 9 | –423.2 | –376.5 |
| Operating result | 2, 3, 5, 24 | 34.0 | 4.7 |
| Financial income | 66.2 | 84.1 | |
| Financial expenses | –52.2 | –36.3 | |
| Financial net | 6 | 14.0 | 47.8 |
| Result before tax | 48.0 | 52.5 | |
| Tax | 7 | 14.9 | –0.6 |
| Net result for the year | 62.9 | 51.9 | |
| Net result per share | 14 | 1.32 | 1.09 |
| As of 31 December, SEK million | Note | 2007 | 2006 |
|---|---|---|---|
| Assets | |||
| Fixed assets | 9, 22 | ||
| Vessels | 8 | 1,769.6 | 1,048.7 |
| Vessels under construction | 8 | 158.3 | 222.3 |
| Equipment | 8 | 0.1 | 0.1 |
| Financial assets | 10, 20 | 218.5 | 246.5 |
| Long-term receivables | 11 | 7.7 | 9.0 |
| Deferred tax assets | 7 | 1.1 | |
| Total fi xed assets | 2,154.2 | 1,527.7 | |
| Other short-term receivables | 11 | 156.8 | 64.5 |
| Prepaid expenses and accrued income | 12 | 46.5 | 92.5 |
| Short-term investments | 10, 20 | 397.1 | 517.6 |
| Cash and cash equivalents | 13 | 55.6 | 30.2 |
| Total current assets | 656.0 | 704.8 | |
| Total assets | 2,810.2 | 2,232.5 | |
| Equity | |||
| Share capital | 381.8 | 381.8 | |
| Other contributed capital | 61.9 | 61.9 | |
| Reserves | –120.8 | –105.1 | |
| Result brought forward (including result for the year) | 1,303.6 | 1,288.4 | |
| Total equity | 1,626.5 | 1,627.0 | |
| Liabilities | |||
| Long-term liabilities | 15, 9 | ||
| Liabilities to credit institutions | 1,063.1 | 506.2 | |
| Other long-term liabilities | 18 | 7.7 | 9.0 |
| Other provisions | 17 | 6.1 | 19.6 |
| Deferred tax liabilities | 7 | 18.9 | 11.3 |
| Total long-term liabilities | 1,095.8 | 546.1 | |
| Short-term liabilities | 20 | ||
| Liabilities to credit institutions | 10.0 | ||
| Accounts payable | 0.5 | ||
| Other liabilities | 18 | 8.9 | 4.1 |
| Provisions | 17 | 9.5 | 13.1 |
| Accrued expenses and deferred income | 19 | 59.5 | 41.7 |
| Total short-term liabilities | 87.9 | 59.4 | |
| Total liabilities | 1,183.7 | 605.5 | |
| Total equity and liabilities | 2,810.2 | 2,232.5 |
For information on the group's pledged assets and contingent liabilities, see note 23.
| Reserves2) | |||||||
|---|---|---|---|---|---|---|---|
| SEK million | Share capital |
Other contributed capital |
Trans- lation reserve |
Fair value reserve |
Hedging reserve |
Result brought forward1) |
Total equity |
| Opening balance, 01 Jan 2006 | 381.8 | 61.9 | 21.7 | 21.3 | 1,284.2 | 1,770.9 | |
| Change in translation reserve | –156.1 | –4.1 | –160.2 | ||||
| Tax attributable to hedging | –21.6 | –21.6 | |||||
| Change in reserves | 18.3 | 15.4 | 33.7 | ||||
| Total changes to wealth reported directly in terms of equity, excluding transactions with the company owner |
–177.7 | 14.2 | 15.4 | –148.1 | |||
| Net result for the year | 51.9 | 51.9 | |||||
| Total changes to wealth, excluding transactions with the company owner |
–177.7 | 14.2 | 15.4 | 51.9 | –96.2 | ||
| Dividend | –47.7 | –47.7 | |||||
| Closing balance, 31 Dec 2006 | 381.8 | 61.9 | –156.0 | 35.5 | 15.4 | 1,288.4 | 1,627.0 |
| Reserves2) | |||||||
| SEK million | Share capital |
Other contributed capital |
Trans- lation reserve |
Fair value reserve |
Hedging reserve |
Result brought forward1) |
Total equity |
| Opening balance, 01 Jan 2007 | 381.8 | 61.9 | –156.0 | 35.5 | 15.4 | 1,288.4 | 1,627.0 |
| Change in translation reserve | –51.9 | –1.6 | –53.5 | ||||
| Tax attributable to hedging | –23.8 | –23.8 | |||||
| Change in reserves | –12.9 | 74.5 | 61.6 | ||||
| Total changes to wealth reported directly in terms of equity, excluding transactions with the company owner |
–75.7 | –14.5 | 74.5 | –15.7 | |||
| Net result for the year | 62.9 | 62.9 | |||||
| Total changes to wealth, excluding transactions with the company owner |
–75.7 | –14.5 | 74.5 | 62.9 | 47.2 | ||
| Dividend | –47.7 | –47.7 | |||||
| Closing balance, 31 Dec 2007 | 381.8 | 61.9 | –231.7 | 21.0 | 89.9 | 1,303.6 | 1,626.5 |
1) Result brought forward including result for the year.
2) See note 20.
| 1 January–31 December, SEK million | Note | 2007 | 2006 |
|---|---|---|---|
| 26 | |||
| Cash fl ow from operations | |||
| Result before tax | 48.0 | 52.5 | |
| Adjustments for items not included in cash fl ow | 75.0 | 49.2 | |
| Paid income tax | –1.7 | ||
| Cash fl ow from operating activities before changes in working capital |
123.0 | 100.0 | |
| Cash fl ow from changes in working capital | |||
| Increase (–)/Decrease (+) in operating receivables | 26.1 | –56.5 | |
| Increase (+)/Decrease (–) in operating liabilities | 11.5 | –33.9 | |
| Cash fl ow provided by operating activities | 160.6 | 9.6 | |
| Investment activities | |||
| Acquisition of fi xed assets | –838.6 | –767.2 | |
| Acquisition of fi nancial assets | –238.3 | ||
| Sale of fi nancial assets | 81.1 | 198.3 | |
| Cash fl ow from investment activities | –757.5 | –807.2 | |
| Financing activities | |||
| Utilisation of credit facility | 694.1 | 539.4 | |
| Amortisation of credit facility | –69.6 | ||
| Dividend | –47.7 | –47.7 | |
| Other fi nancing | 35.6 | 71.8 | |
| Cash fl ow from fi nancing activities | 612.4 | 563.5 | |
| Cash fl ow for the year | 15.5 | –234.1 | |
| Cash and cash equivalents, opening balance | 30.2 | 280.4 | |
| Exchange rate differences | 9.9 | –16.1 | |
| Cash and cash equivalents, at year-end | 55.6 | 30.2 |
| 1 January–31 December, SEK million | Note | 2007 | 2006 |
|---|---|---|---|
| Net sales | 2, 3 | 51.7 | 31.7 |
| Total income | 51.7 | 31.7 | |
| Operating costs for ships | –16.1 | –4.5 | |
| Seagoing personnel costs | –14.7 | –7.3 | |
| Other external costs | –13.5 | –19.1 | |
| Personnel costs | 4, 16 | –9.0 | –8.6 |
| Depreciation according to plan | 8 | –18.5 | –11.6 |
| Operating result | 4, 5, 24 | –20.1 | –19.4 |
| Result from fi nancial items: | |||
| Result from participating interests in group companies | 20.0 | ||
| Result from other securities and receivables that are fi xed assets | 3.6 | ||
| Other interest income and similar items | 104.2 | 147.1 | |
| Interest expenses and similar items | –55.5 | –51.3 | |
| Result after fi nancial items | 6 | 28.6 | 100.0 |
| Result before tax | 28.6 | 100.0 | |
| Tax | 7 | –8.9 | –22.3 |
| Net result for the year | 19.7 | 77.7 |
| As of 31 December, SEK million | Note | 2007 | 2006 |
|---|---|---|---|
| Assets | |||
| Fixed assets | 22 | ||
| Tangible fi xed assets | 8 | 433.8 | 453.8 |
| Financial fi xed assets | |||
| Participating interests in group companies | 25 | 754.2 | 754.2 |
| Other long-term receivables | 11 | 7.7 | 9.0 |
| Total fi nancial fi xed assets | 761.9 | 763.2 | |
| Total fi xed assets | 1,195.7 | 1,217.0 | |
| Current assets | |||
| Short-term receivables | |||
| Other receivables | 11 | 40.0 | 29.7 |
| Prepaid expenses and accrued income | 12 | 3.6 | 2.5 |
| Total current receivables | 43.6 | 32.2 | |
| Short-term investments | |||
| Other short-term investments | 20 | 61.6 | 64.0 |
| Total short-term investments | 61.6 | 64.0 | |
| Cash and cash equivalents | 271.5 | 58.5 | |
| Total current assets | 376.7 | 154.7 | |
| Total assets | 1,572.4 | 1,371.7 | |
| Equity and liabilities | |||
| Equity | |||
| Restricted equity | |||
| Share capital | 14 | 381.8 | 381.8 |
| Reserve fund | 138.3 | 138.3 | |
| Non-restricted equity | |||
| Result brought forward | 99.2 | 72.1 | |
| Net result for the year | 19.7 | 77.7 | |
| Total equity | 639.0 | 669.9 | |
| Long-term liabilities | |||
| Liabilities to credit institutions | 15 | 836.4 | 460.5 |
| Liabilities to group companies | 195.3 | ||
| Other liabilities | 18 | 7.7 | 9.0 |
| Deferred tax liability | 7 | 9.2 | 1.4 |
| Total long-term liabilities | 853.3 | 666.2 | |
| Short-term liabilities | |||
| Liabilities to credit institutions | 34.4 | ||
| Accounts payable | 0.5 | ||
| Liabilities to group companies | 30.7 | 26.7 | |
| Other liabilities | 1.9 | 1.9 | |
| Accrued expenses and deferred income | 19 | 13.1 | 6.5 |
| Total short-term liabilities | 80.1 | 35.6 | |
| Total equity and liabilities | 1,572.4 | 1,371.7 |
| As of 31 December, SEK million | Note | 2007 | 2006 |
|---|---|---|---|
| Pledged assets | 23 | 257.3 | 274.9 |
| Contingent liabilities | 23 | 352.4 | 496.6 |
| Restricted equity | Non-restricted equity | ||||||
|---|---|---|---|---|---|---|---|
| SEK million | Share- capital |
Statutory reserves |
Share premium fund |
Brought forward result for the year |
Net result | Total equity |
|
| Opening balance, 01 Jan 2006 | 381.8 | 76.4 | 61.9 | 170.8 | –51.0 | 639.9 | |
| Reversal of premium fund | 61.9 | –61.9 | |||||
| Result for the previous year | –51.0 | 51.0 | |||||
| Result for the year | 77.7 | 77.7 | |||||
| Dividend | –47.7 | –47.7 | |||||
| Closing balance, 31 Dec 2006 | 381.8 | 138.3 | 72.1 | 77.7 | 669.9 |
| Restricted equity | Non-restricted equity | |||||
|---|---|---|---|---|---|---|
| Share- | Statutory | Brought | Net result | Total | ||
| SEK million | capital | reserves | forward result for the year | equity | ||
| Opening balance, 01 Jan 2007 | 381.8 | 138.3 | 72.1 | 77.7 | 669.9 | |
| Result for the previous year | 77.7 | –77.7 | ||||
| Result for the year | 19.7 | 19.7 | ||||
| Group contribution | –4.0 | –4.0 | ||||
| Tax on group contribution | 1.1 | 1.1 | ||||
| Dividend | –47.7 | –47.7 | ||||
| Closing balance, 31 Dec 2007 | 381.8 | 138.3 | 99.2 | 19.7 | 639.0 |
| 1 January–31 December, SEK million | Note | 2007 | 2006 |
|---|---|---|---|
| 26 | |||
| Cash fl ow from operations | |||
| Result before tax | 28.6 | 100.0 | |
| Adjustments for items not included in cash fl ow | –22.3 | –21.8 | |
| Cash fl ow provided by operating activities before changes in working capital |
6.3 | 78.2 | |
| Cash fl ow from changes in working capital | |||
| Increase (–)/Decrease (+) in operating receivables | –11.2 | 99.2 | |
| Increase (+)/Decrease (–) in operating liabilities | –189.7 | –36.3 | |
| Cash fl ow provided by operating activities | –194.6 | 141.1 | |
| Investment activities | |||
| Acquisition of vessels | –465.3 | ||
| Sale of fi nancial assets | 15.6 | ||
| Acquisition of fi nancial assets | –75.9 | ||
| Cash fl ow from investment activities | 0.0 | –525.6 | |
| Financing activities | |||
| Utilisation of credit facility | 483.0 | 490.2 | |
| Amortisation of credit facility | –62.1 | ||
| Dividend | –47.7 | –47.7 | |
| Cash fl ow from fi nancing activities | 373.2 | 442.5 | |
| Cash fl ow for the year | 178.6 | 58.0 | |
| Cash and cash equivalents, opening balance | 58.5 | 0.5 | |
| Cash and cash equivalents, at year-end | 237.1 | 58.5 |
The consolidated accounts have been drawn up in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and statements of interpretation from the International Financial Reporting Interpretations Committee (IFRIC) which have been approved by the EU Commission for application within the EU. Furthermore, the Swedish Financial Accounting Standards Council's recommendation RR 30:06 Supplementary rules for consolidated fi nancial statements has been applied.
The parent company applies the same accounting principles as the group, except in those cases specifi ed below in "The parent company's accounting principles". The deviations that arise between the parent company's and the group's principles are caused by limits to the options for applying IFRS in the parent company as a result of the Swedish Annual Accounts Act and the Act on Safeguarding of Pension Commitments, and in some cases for tax purposes.
The annual accounts and consolidated accounts were approved for issue by the board of directors on 7 March, 2008. The consolidated income statement and balance sheet, as well as the parent company's income statement and balance sheet will be submitted for approval at the ordinary Annual General Meeting on 22 April, 2008.
The group's functional currency is the US dollar, but the Swedish krona (SEK) is used as the reporting currency for the parent company and the group. This means that the fi nancial reports are presented in SEK. All sums, unless otherwise stated, are reported in SEK millions. Assets and liabilities are reported at historic acquisition values, except some fi nancial assets and liabilities, which are reported at fair value. Financial assets and liabilities reported at fair value consist of derivative instruments, fi nancial assets classifi ed as fi nancial assets valued at fair value via the income statement or as fi nancial assets available for sale.
Fixed assets held for sale are reported at whichever is the lowest of the previously reported value and the fair value after deductions for selling expenses.
Creating the fi nancial reports in accordance with IFRS requires the company's management to make assessments and estimates, as well as assumptions that affect the application of the accounting principles and the reported sums from assets, liabilities, income and expenses. The estimates and assumptions are based on historical experience and a number of other factors that, under normal conditions, would seem reasonable. The results of these estimates and assumptions are then used to assess the reported values of assets and liabilities that cannot be clarifi ed by other means or sources. The actual result may deviate from these estimates and assessments. Estimates and assumptions are revised regularly. Changes to estimates are reported in the period the change was implemented if the change only affected that period, or in the period the change was implemented and subsequent periods if the change affects both the current period and subsequent periods.
Assessments made by the company's management when applying IFRS which have a considerable impact on the fi nancial reports, and estimates which may lead to signifi cant adjustments in future fi nancial reports, are deemed not to exist at the present time.
The accounting principles mentioned below for the group have been applied consistently in all periods recorded in the group's fi nancial reports, unless otherwise stated. The group's accounting principles have been applied consistently to reporting and consolidation of the parent company, subsidiaries and joint venture companies.
IFRS 7 fi nancial instrument: Information and connected change in IAS1 Structure of fi nancial reports require considerable information regarding the signifi cance of fi nancial instruments for the company's fi nancial position and result as well as qualitative and quantitative information concerning the character and scope of risks. IFRS 7 and connected changes in IAS1 have resulted in further insight into the group's fi nancial reports for 2007 with regard to the group's fi nancial goals and utilisation of equity. The standard has not resulted in new accounting principles, only in changes to meet the transparency requirements. New interpretation bulletins (IFRIC 7–10) have had no impact on the fi nancial reports.
IFRS 8 Operations segment, determines what an operative segment is and the information that must be provided about them in the fi nancial reports. The standard, compiled by the EU, shall be applicable from and including the fi nancial year 2009. The introduction of IFRS 8 is at present not considered to have any signifi cant impact on the group's segment reports.
Revised IAS 1 Structure of fi nancial reports, entails a degree of change to the presentation of the fi nancial reports and the proposal of new, non-compulsory, titles for the reports. The changes do not affect the determination of the amounts that are reported. The revised IAS 1, which has not yet been adopted by the EU, shall apply to the fi nancial year 2009. The introduction of these changes is estimated not to have any signifi cant impact on the structure of the fi nancial reports.
Changes have been made to IAS 23 Loan costs, and these stipulate that there must be an activation of loan costs that directly concern purchase, construction or production of assets for the specifi c purpose or sale, if they require a longer period to be carried out. Changes that as yet have not been adopted by the EU shall apply to the fi nancial year 2009. These will not have any effect since the activation of loan costs occurs even today when the above criteria are met.
The interpretation bulletin (IFRIC 11– IFRIC 14) will not affect the fi nancial reports.
A segment is an identifi able part of the group included in the accounts that either supplies products or services (lines of business) or goods or services within specifi c economic circumstances (geographical area), which are exposed to risks and opportunities that differ from other segments. Segment information is submitted in accordance with IAS 14 for the group only.
Fixed assets and long-term liabilities in the parent company and the group consist almost entirely of amounts that are expected to be recovered or paid more than twelve months after the closing day. Current assets and liabilities in the parent company and the group consist almost entirely of amounts expected to be recovered or paid within twelve months of the closing day.
Subsidiaries are companies over which Concordia Maritime AB (publ) has a controlling infl uence. A controlling infl uence means having the right, directly or indirectly, to shape a company's fi nancial and operative strategies for the purpose of achieving fi nancial advantages. When determining whether or not a controlling
infl uence exists, potential voting shares that can be utilised or converted without delay must also be considered.
Subsidiaries are consolidated using the acquisition method. This means that the acquisition of a subsidiary is regarded as a transaction whereby the group indirectly acquires the subsidiary's assets and assumes responsibility for its liabilities and contingent liabilities. The consolidation acquisition value is established through an acquisition analysis in connection with the acquisition. The analysis determines both the acquisition value of the share or business and the fair value of acquired identifi able assets and assumed liabilities and contingent liabilities. The difference between the acquisition value of the subsidiary's shares and the fair value of acquired assets, assumed liabilities and contingent liabilities constitutes consolidated goodwill, or negative goodwill. The fi nancial reports of subsidiaries are included in the consolidated accounts from the acquisition date until the date the controlling infl uence ceases.
Joint ventures are companies in the accounts over which the group has a common controlling infl uence over operational and fi nancial management through co-operation agreements with one or more parties. Shareholdings in joint ventures are consolidated using the proportional method in the consolidated accounts. The proportional method means that for joint-venture companies, the group's ownership of the companies' income and expenses and assets and liabilities is reported in the consolidated income statement and balance sheet. This is done by the joint owner's share of assets and liabilities, income and expenses in a joint-venture company being merged item for item with corresponding items in the joint owner's consolidated accounts. Only equity earned after the acquisition is reported in the consolidated equity. The proportional method is applied from the date when the common controlling infl uence was gained until the date when it ceases.
Intra-group receivables and liabilities, income or expenses and unrealised gains or losses that arise through intra-group transactions between group companies are eliminated in their entirety when drawing up the consolidated accounts. Unrealised gains that arise from transactions with associated companies and jointly controlled companies are eliminated to an extent equivalent to the group's participating share in the company. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no indication of a requirement for impairment losses.
Transactions in foreign currencies are translated into the functional currency at the exchange rate on the transaction day. Monetary assets and liabilities in foreign currencies are converted to the functional currency at the closing day rate. Exchange rate differences that arise during translation are reported in the income statement. Non-monetary assets and liabilities that are reported at the historical acquisition value are converted at the exchange rate on the transaction day. Nonmonetary assets and liabilities that are reported at their fair value are converted into the functional currency at the rate applicable at the time when the fair value was determined. The exchange rate fl uctuation is then reported in the same way as any other change in value for the asset or liability.
Assets and liabilities relating to foreign operations, including goodwill and other consolidation surplus and negative surplus values, are converted into SEK at the closing day. Income and expenses from a foreign operation are converted into SEK at an average exchange rate that is an approximation of the rates on each transaction day. Translation differences that occur during currency conversion of foreign operations are reported directly against equity as a translation reserve.
Translation differences that arise in connection with translation of a foreign net investment and the associated effects of hedging of net investments are reported directly in the translation reserve under equity. When disposing of a foreign operation, the accumulated translation differences attributable to the operation after deductions for any currency hedging are realised in the consolidated income statement.
Consolidated income mainly consists of freight income and time-charter income for vessels. Freight income is generated when vessels are employed on the open market (also called the spot market), i.e. chartered voyage by voyage. Freight income is received and recognised as revenue when the voyage in question is concluded. Freight income for voyages ongoing at the time of each report is divided between the current report period and future report periods on the basis of the number of days the voyage lasts. If the net income (freight income less direct voyage expenses) for the voyage is negative, the entire income is included in the current report period. Time-charter income is received when the vessels are chartered out for a fi xed period, normally one year or more. The income, which consists of a fi xed charter rate for the vessel, is paid every month in advance and recognised as revenue in the same way as freight income. Profi t-split contracts are reported as settled with the charterer. If the settlement period and the fi nancial reporting period deviate, the profi t-split contract is reported on the basis of the company management's assessments and estimates, based on the market situation and the charterer's actual earnings for the fi nancial reporting period. The usual settlement period for profi tsplit contracts is monthly, per 90-day period or per 180-day period.
Time-charter agreements are classifi ed as operating leases. With time-chartering, the vessel's owner normally assumes all risks, for example when a vessel is out of service due to breakdown or stoppage. The shipowner is normally responsible for operations and the crew. The leasor's commitments normally cease at the end of the time-charter period. Payments regarding operating lease contracts are reported in the income statement in the same way as freight income above.
Financial income and expenses comprise interest income from bank balances and receivables, as well as interest-bearing securities, interest expenses on loans, dividend income, exchange rate differences, unrealised and realised gains on fi nancial investments, and derivative instruments used in fi nancial activities.
Interest income on receivables and interest expenses on liabilities are calculated using the effective rate method. The effective rate is the rate that causes the present value of all future payments in and out during the fi xed interest term to be the same as the reported value of the receivable or liability. Interest income includes allocated amounts for transaction costs and any discounts, premiums and other differences between the original value of the receivable and the amount received on maturity.
Dividend income is reported once the right to receive payment has been established.
Financial instruments that are reported in the balance sheet include, on the assets side, cash and cash equivalents, accounts receivable, shares and other equity instruments, loan and bond receivables, as well as derivatives. Items regarded as liabilities and equity include accounts payable, loans and derivatives.
Financial instruments are initially reported at an acquisition value equivalent to the instrument's fair value, with additions for transaction costs for all fi nancial instruments except those that belong to the fi nancial asset category reported at fair value via the income statement, which are instead reported at fair value excluding transaction costs. Further reporting then depends on how the instruments are classifi ed, in accordance with the following.
A fi nancial asset or fi nancial liability is recognised in the balance sheet when the company becomes party to the instrument's contractual terms. Accounts receivable are recognised in the balance sheet once an invoice has been issued. Any liability is recognised once the other party has performed its contractual obligations for which payment is required, even if no invoice has been received. Accounts payable are recognised once an invoice has been received.
A fi nancial asset is removed from the balance sheet once the rights as per the contract are realised or fall due, or the company loses control over the rights. The same applies to part of a fi nancial asset. A fi nancial liability is removed from the balance sheet once the contractual obligation has been fulfi lled or has otherwise expired. The same applies to part of a fi nancial liability.
The acquisition and sale of fi nancial assets is reported on the trade date, which is the day on which the company commits itself to acquire or sell the asset, except in those instances when the company acquires or sells listed securities, which are instead reported on the settlement date.
The fair value of listed fi nancial assets corresponds to the asset's listed buying price on the closing day. The fair value of unlisted fi nancial assets is determined using valuation methods, for example, recently completed transactions, prices of similar instruments and discounted cash fl ows. For further information, see note 20.
On each reporting date, the company assesses whether or not there are any objective indications that a fi nancial asset or a group of fi nancial assets is in need of an impairment loss. For equity instruments classifi ed as available-for-sale assets, a signifi cant and protracted downturn in the fair value below the acquisition value of the instrument is required before an impairment loss is recognised. If an impairment loss is required for an asset in the available-for-sale category, any previously accumulated reduction in value reported directly against equity is transferred to the income statement. Write-downs of equity instruments reported in the income statement must not be reversed later via the income statement.
IAS 39 classifi es fi nancial instruments into categories. The classifi cation depends on the intended purpose in acquiring the fi nancial instrument. The company's management determines the classifi cation on the original acquisition date. The categories are as follows:
This category consists of two sub-groups: fi nancial assets held for trading and other fi nancial assets that the company has initially chosen to place in this category. A fi nancial asset is classifi ed as being held for trading if it is acquired for the purpose of being sold in the short term. Stand-alone and embedded derivatives are classifi ed as being held for trading, except when they are used for hedge accounting. Assets in this category are continuously measured at fair value with changes in value reported in the income statement.
Loans and receivables are non-derivative fi nancial assets with fi xed or determinable payments that are not listed on an active market. Receivables arise when companies provide money, goods or services direct to the borrower with no intention of carrying on trade in the rights in action. Accounts receivable are reported at the amount expected to fl ow in after deductions for unsecured receivables that have been assessed individually. The expected term for accounts receivable is short, which is why the value has been reported at a nominal amount without any discounting.
Write-downs of accounts receivable are reported in the operating expenses. This category also includes acquired receivables. Assets in this category are measured at the accrued acquisition value. The accrued acquisition value is determined on the basis of the effective rate calculated on the acquisition date.
Financial assets with payment streams that are fi xed or can be determined in advance and have a fi xed term, which the company expressly intends to hold, and is able to hold until maturity. Assets in this category are measured at the accrued acquisition value. The accrued acquisition value is determined on the basis of the
effective rate calculated on the acquisition date. This means that surplus and negative surplus values, as well as direct transaction expenses, are allocated over the term of the instrument.
The Available For Sale fi nancial assets category (AFS) includes fi nancial assets not classifi ed in any other category or those that the company initially chose to classify in this category. Assets in this category are continuously measured at fair value with changes in value against equity. When investments are removed from the balance sheet, any previously reported accumulated result in equity is transferred to the income statement.
This category consists of fi nancial liabilities held for trading and derivatives (standalone and embedded) which are not used for hedge accounting. Liabilities in this category are continually measured at fair value with changes in value reported in the income statement.
Financial liabilities that are not held for trading are measured at their accrued acquisition value. The accrued acquisition value is based on the effective interest rate as calculated when the liability is accepted. This means that surplus and negative surplus values, as well as direct issue expenses, are allocated over the term of the liability.
All derivatives are reported at their fair value in the balance sheet. Value changes are reported in the income statement for hedging at fair value. For cash fl ow hedging and hedging of net investments in a foreign currency, the value changes are reported in specifi c categories within equity, pending the hedged item being reported in the income statement. Hedge accounting is described in greater detail below.
Cash and cash equivalents comprise cash funds and instantly accessible balances at banks and similar institutions, as well as short-term liquid investments with a term from the acquisition date of less than three months, which are exposed to only a minor risk of value fl uctuations.
Financial investments consist of either fi nancial assets or short-term investments, depending on the purpose of the holding. If the term or the expected term of possession is more than one year, they are fi nancial assets and if shorter than one year, they are short-term investments.
Financial investments that consist of shares belong to either the fi nancial assets valued at their fair value via the income statement category or the available- forsale fi nancial assets category.
Interest-bearing securities that are acquired for the purpose of being held until maturity belong to fi nancial assets held until maturity and are valued at the accrued acquisition value.
Interest-bearing securities not likely to be held to maturity are classifi ed as fi nancial assets valued at their fair value via the income statement or availablefor-sale fi nancial assets.
When valued at fair value via the income statement, the value change is reported as net fi nancial income/expense.
Long-term receivables and other short-term receivables are receivables that arise when the company provides money with no intention of carrying on trade involving rights in action. If the expected term of possession is more than one year, they are classed as long-term receivables, and if it is less, as other receivables. These receivables belong to the Loans and receivables category.
Liabilities are classifi ed as other fi nancial liabilities, which means that they are initially reported at the received amount after deductions for transaction costs. After the time of acquisition the loan is valued to its fair value. Long-term liabilities have an expected term of more than one year, while current liabilities have a term of less than one year.
Accounts payable belong to the other fi nancial liabilities category. Accounts payable have a short expected term and are measured without discounting to a nominal amount.
For further information, see note 20.
Derivative instruments comprise things like futures contracts, warrants and swaps that are utilised to cover the risks of exchange rate fl uctuations and/or exposure to interest rate risks. Derivatives are also agreement terms embedded in other agreements. Embedded derivatives must be reported separately if they are not closely related to the contract. Value changes affecting derivative instruments, both stand-alone and embedded, are reported in the income statement according to the purpose of possession. If a derivative is used for hedge accounting to the extent this is effective, value changes affecting the derivative are reported on the same line in the income statement as the hedged item. Even if hedge accounting is not used, increases and decreases in value affecting the derivative are reported as income or an expense in the operating result or in the net fi nancial income/expense based on the purpose of using the derivative instrument and whether the use is to be related to an operating item or a fi nancial item. In hedge accounting, ineffectiveness is reported in the same way as value changes affecting a derivative that is not being used for hedge accounting.
If hedge accounting is not applied when using interest swaps, the interest coupon is reported as interest, and other changes the in value of the interest swap are reported as other fi nancial income or other fi nancial expense.
In order to meet the requirements for hedge accounting as per IAS 39, an unambiguous connection to the hedged item is required. It must also be the case that hedging effectively protects the hedged item, that hedge documentation has been completed and that the effectiveness is measurable. Gains and losses associated with hedging are reported in the income statement at the same time as gains and losses are reported for hedged items. In those instances when the conditions for hedge accounting can no longer be met, the derivative instrument is reported at fair value with the change in value via the income statement in accordance with the principle described above.
When hedging assets or liabilities against exchange rate risk, instruments such as currency futures can be used. No hedge accounting is required for these hedges, as both the hedged item and hedging instrument are valued at their fair value with changes in value reported in the income statement under exchange rate differences. Changes in value for business-related receivables and liabilities are reported in the operating result, while changes in value for fi nancial receivables and liabilities are reported as a net fi nancial income/expense.
Currency exposure regarding future forecasted cash fl ows is hedged through currency futures, for example. The instrument that protects the forecast cash fl ow is recorded in the balance sheet at fair value. The value changes are reported directly against equity in the hedging reserve until the hedged cash fl ow reaches the income statement, when the hedging instrument's accumulated value changes are transferred to the income statement in order to meet and match the profi t effects of the hedged transaction. The hedged cash fl ows can be both contracted and forecast transactions.
As the hedged future cash fl ow refers to a transaction set up as an asset in the balance sheet, the hedging reserve is dissolved when the hedged item is reported in the balance sheet. If the hedged item consists of a non-fi nancial asset or a nonfi nancial liability, the dissolution from the hedging reserve is included in the original acquisition value for the asset or liability. If the hedged item consists of a fi nancial asset or fi nancial liability, the hedging reserve is gradually dissolved against the income statement as the hedged item affects the result.
When a hedging instrument falls due, is sold, liquidated or redeemed, or the company modifi es identifi cation of the hedging relationship before the hedged transaction has occurred and the forecast transaction is still expected to occur, the reported accumulated profi t or loss in the hedging reserve remains as equity and is reported in a similar way as above when the transaction occurs.
If the hedged transaction is no longer expected to occur, the hedging instrument's accumulated profi t or loss is immediately dissolved against the income statement in accordance with the principles described above for derivative instruments.
Interest swaps are used to hedge interest risks, etc. The instrument is measured at fair value in the balance sheet. In the income statement, the interest coupon part is continually reported as interest income or interest expense; any other value change in the instrument is reported directly against the hedging reserve as equity, provided the criteria for hedge accounting and effectiveness are met.
When a hedging instrument is used to hedge a fair value, the derivative is entered at fair value in the balance sheet and the hedged asset/liability is also entered at fair value with regard to the risk being hedged. The change in value of the derivative is reported in the income statement along with the change in value of the hedged item.
Investments in foreign subsidiaries (net assets including goodwill) have to a certain extent been hedged through the raising of futures contracts. On the closing day these are recognised at the closing day rate. Exchange rate differences recognised as income by the parent company are eliminated in the consolidated accounts on conversion of net assets in the subsidiary transferred as equity. In those instances hedging is not effective, the ineffective part is reported in the income statement.
Tangible fi xed assets are reported as assets in the balance sheet if it is likely that future fi nancial advantages will be gained by the company and the acquisition value of the asset can be calculated in a reliable way.
Tangible fi xed assets are reported in the group at acquisition value after deductions for accumulated depreciation and any impairment loss. The acquisition value includes the purchase price and expenses directly attributable to the asset in order to acquire it in a condition where it can be utilised in accordance with the aim of the acquisition. Examples of directly attributable expenses included in the acquisition value are cost of delivery and handling, installation, land registration, consultancy services and legal services. Loan costs are included in the acquisition value for non-current assets produced by the group. The accounting principles for impairment losses are shown below.
The acquisition value for non-current assets produced by the group includes material costs, remuneration expenses for employees and, if applicable, other manufacturing costs regarded as directly attributable to the asset.
Tangible fi xed assets that consist of parts with varying economic lives are treated as separate components of tangible fi xed assets.
The reported value for tangible fi xed assets is removed from the balance sheet when scrapped, sold or when no future fi nancial advantages are expected from using or scrapping/selling the asset. Any profi t or loss resulting from the sale or scrapping of an asset comprises the difference between the sale price and the
asset's reported value with deductions for direct selling expenses. The result is reported as other operating income/cost.
Additional expenses for periodic maintenance are added to the acquisition value only if it is likely that the future fi nancial advantages that are associated with the asset will be available to the company and the acquisition value can be calculated in a reliable way. Depreciation charges for periodic maintenance are reported in the income statement as part of Operating costs for ships, and not as Depreciation according to plan. This division is made in order to clarify the results for operating ships. In note 8, the depreciation charges for periodic maintenance are reported in a separate line. All other additional expenses are reported as a cost for the period in which they arise. The depreciation period for periodic maintenance for owned tonnage is between thirty months and fi ve years, while the depreciation period for time-chartered tonnage runs until the next dry-docking or until re-delivery of the vessel.
A decisive factor in assessing when an additional expense is added to the acquisition value is whether the expense refers to the exchange of identifi ed components, or parts thereof, when such expenses are set up as an asset. Even in those instances when a new component has been created, the expense is added to the acquisition value. Any undepreciated reported values for exchanged components, or parts of components, are scrapped and written off in connection with the exchange. Repairs are written off on an ongoing basis.
Loan costs which are directly attributable to the purchase, construction or production of an asset, which requires a signifi cant period of time to be made ready for the intended use or sale, are included in the asset's acquisition value. Loan costs are capitalised, provided it is probable that they will lead to future fi nancial advantages and the costs can be measured in a reliable way.
Depreciation is done in a straight line over the asset's estimated economic life. The group applies component depreciation, which means that the components' assessed economic life forms the basis for any impairment loss. Estimated economic lives:
| – Ships | 25 years |
|---|---|
| – Periodic maintenance (dry dock) ship components | 2.5–5 years |
| – Equipment, tools and installations | 3–5 years |
An asset's residual value and economic life are assessed annually.
The reported values of the group assets are checked on every closing day with respect to the need for write-downs.
Dividends are reported as a liability once the Annual General Meeting has approved the dividend.
All pension plans in the group are classifi ed as defi ned-contribution pension plans. The company's obligation for each period consists of the sums that the company is to contribute for the period in question. This sum is charged to the income statement for the period.
A provision is reported in the balance sheet when the group has an existing legal or informal obligation as a result of an event that has occurred, and it is likely that an outfl ow of resources will be required to settle the obligation, and a reliable assess ment of the amount can be made. Where the effect of the date of payment is important, provisions are calculated by discounting the expected future cash fl ow at a rate of interest before tax that refl ects current market assessments of the time value of money and, where applicable, the risks associated with the liability.
Income tax comprises current tax and deferred tax. Income tax is reported in the income statement, except when an underlying transaction is reported directly as a change in equity, whereby any pertaining tax effect is reported as equity.
Current tax is tax that must be paid or received in relation to the current year, with application of the tax rates that have been adopted or adopted in practice as of the closing day; this also includes adjustment of current tax attributable to previous periods.
Deferred tax is calculated as per the balance sheet method based on temporary differences between the reported and taxable values of assets and liabilities. The following temporary differences are not taken into account; initial reporting of assets and liabilities that are not business acquisitions and, at the time of the transaction, affect neither the reported nor taxable profi t; furthermore temporary differences attributable to shares in subsidiaries or associated companies not expected to be reversed within the foreseeable future are not taken into consideration. The valuation of deferred tax is based on how reported values of assets or liabilities are expected to be realised or settled. Deferred tax is calculated with application of the tax rates and tax rules that have been adopted or adopted in practice as of the closing day. Deferred tax assets regarding deductible temporary differences and defi cit deductions are reported only to the extent it is likely these can be utilised. The value of deferred tax assets is reduced when it is assessed to be no longer likely that these can be utilised.
Any additional income tax that arises through dividends is reported at the same time as the dividend is reported as a liability.
The implication of a fi xed asset classifi ed as held for sale is that its reported value will be recovered, in the main, through its sale and not through use.
Immediately before classifi cation as held for sale, the reported value of the assets must be determined in accordance with applicable standards. When fi rst classifi ed as held for sale, fi xed assets are reported at whichever is the lowest, the reported value or fair value with deduction for selling expenses. According to IFRS 5.5, certain balance sheet items are exempt from the valuation rules that apply to IFRS 5. For each subsequent report, the fi xed asset must be valued as a whole at the fair value with deductions for selling expenses.
Losses as a result of a drop in value on initial classifi cation as held for sale are included in the income statement, even when it is a question of revaluation. The same is applied to profi ts or losses on subsequent revaluations. A company may not write off a fi xed asset as long as it is classifi ed as being held for sale.
A contingent liability is reported when there is a possible commitment arising from an event that has occurred and whose occurrence is confi rmed only by one or more uncertain future events, or when there is a commitment that is not being reported as a liability or provision because it is unlikely that an outfl ow of resources will be required.
The parent company has drawn up its annual accounts in accordance with the Swedish Annual Accounts Act (1995:1554) and the Swedish Financial Accounting Standards Council's recommendation RR32:06, Accounting for Legal Entities. RR 32:06 means that the parent company in the annual accounts for the legal entity must apply all IFRS and statements approved by the EU, provided this is possible within the framework of the Annual Accounts Act and with regard to the connection between accounting and taxation. The recommendation states which exceptions and additions are to be made to IFRS. The differences between the group and parent company's accounting principles are described here.
The accounting principles mentioned below for the parent company have been applied consistently in all periods recorded in the parent company's fi nancial reports.
Service assignments are reported as profi t in the parent company in accordance with the Annual Accounts Act chap. 2 § 4 once the service is completed. Until then, ongoing work on behalf of others with regard to service assignments is reported at whichever is the lowest, the acquisition value or net sales value on the closing day.
Dividend income is reported when the shareholders' right to receive payment is deemed to be certain.
The parent company applies Annual Accounts Act chap. 4 § 14 a–e, which permits the valuation of certain fi nancial instruments at fair value.
Derivatives not used for hedging are valued in the parent company at their fair value as per the Annual Accounts Act. Reporting of derivatives used for hedging is controlled by the hedged item. This means that the derivative is treated as an off balance-sheet item, provided the hedged item is not included in the balance sheet or is in the balance sheet at acquisition value. Once the hedged item is reported in the balance sheet, the derivative is reported in the balance sheet at its fair value.
Tangible fi xed assets in the parent company are reported at acquisition value after deductions for accumulated depreciation and any impairment loss in the same way as for the group, but with the addition of any written-up values.
The parent company reports untaxed reserves including deferred tax liability. In the consolidated accounts, untaxed reserves are allocated between deferred tax liability and equity.
The company reports group contributions and shareholders' contributions in accordance with the statement from the Swedish Financial Accounting Standards Council's Emerging Issues Task Force. Shareholders' contributions are transferred directly to equity for the receiver and are capitalised as assets in shares and participating interests by the giver, to the extent no write-down is required. Group contributions are reported according to fi nancial substance. This means that group contributions made for the purpose of minimising the group's total tax are reported directly to profi t brought forward after deductions for its current tax effect.
A parent company applies IFRS 5 with the exceptions specifi ed in RR 32.7–8. According to IFRS 5.33 a and IFRS 5.38, certain information must be submitted in the income statement and balance sheet. However, this does not conform to the standard layouts in the appendices to the Annual Accounts Act. The information in question, like other information specifi ed in accordance with IFRS 5, will, therefore, be given in notes. IFRS 5.25, which prescribes that fi xed assets held for sale are not to be written off, will not be applied. Instead, depreciation will be carried out in accordance with chap. 4 § 4 of the Annual Accounts Act.
Segment reporting is used for the group's lines of business (Product Tanker and Large Tanker/VLCC) and geographical areas (America and Other). The group's internal reporting system is based on monitoring the return from the group's various freight services, which is why lines of business are the primary basis for division. There is no internal trade between the different segments.
The result, assets and liabilities for each segment include directly attributable items and items that can be divided by segment in a reasonable and reliable manner.
Non-divided items consist of interest and dividend income, profi ts from the disposal of fi nancial investments, interest expenses, losses from the disposal of fi nancial investments, tax expenses and general administrative costs. Assets and liabilities that have not been divided by segment are deferred tax assets and deferred tax liabilities, fi nancial investments or fi nancial liabilities, or other assets or liabilities that are not directly attributable to a specifi c segment. Investments in
Lines of business constitute the group's primary segments. The group consists of the following lines of business:
The group's segments are divided into the following two geographical areas: America and Other. Geographical areas comprise the group's secondary segments. The information presented with regard to segment income refers to the geographical areas grouped according to where customers are located.
| Income by material type of income, | The group | The parent company | ||
|---|---|---|---|---|
| SEK million | 2007 | 2006 | 2007 | 2006 |
| Net sales: | ||||
| Freight income | 28.9 | |||
| Time-charter income | 457.2 | 352.3 | 51.7 | 31.7 |
| Total | 457.2 | 381.2 | 51.7 | 31.7 |
| Product tankers | Large tankers/VLCC | The group | ||||
|---|---|---|---|---|---|---|
| The group | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 |
| Net sales | 275.6 | 167.6 | 181.6 | 213.6 | 457.2 | 381.2 |
| Result from ship sales | ||||||
| Total income | 275.6 | 167.6 | 181.6 | 213.6 | 457.2 | 381.2 |
| Result per line of business | 85.7 | 51.9 | –40.7 | –35.9 | 45.0 | 16.0 |
| Unallocated costs | –11.0 | –11.3 | ||||
| Operating result | 34.0 | 4.7 | ||||
| Financial net | 14.0 | 47.8 | ||||
| Tax expenses | 14.9 | –0.6 | ||||
| Net result for the year | 62.9 | 51.9 | ||||
| Assets | 1,913.0 | 1,276.8 | 272.1 | 337.7 | 2,185.2 | 1,614.5 |
| Unallocated assets | 625.0 | 618.0 | ||||
| Total assets | 2,810.2 | 2,232.5 | ||||
| Liabilities | 1,109.5 | 467.5 | 27.5 | 38.5 | 1,137.0 | 506.0 |
| Unallocated liabilities | 46.7 | 99.5 | ||||
| Total liabilities | 1,183.7 | 605.5 | ||||
| Investments | 832.8 | 748.0 | 3.9 | 19.2 | 836.7 | 767.2 |
| Depreciation | 56.5 | 34.0 | 1.0 | 0.0 | 57.5 | 34.0 |
| EBITDA before administration costs (cash fl ow measurement) | 156.0 | 112.1 | –37.3 | –9.9 |
| Geographic areas | America | Other | |||
|---|---|---|---|---|---|
| The group | 2007 | 2006 | 2007 | 2006 | |
| Net sales | 208.9 | 214.9 | 248.3 | 166.3 |
The parent company's income is attributable to Other.
| The group | 2007 | 2006 |
|---|---|---|
| Salaries and remuneration etc. | 40.4 | 31.9 |
| Pension expenses, contribution-based pensions | 1.3 | 2.1 |
| Social security expenses | 2.9 | 2.7 |
| 44.6 | 36.7 |
| The parent company | 2007 of which men | 2006 of which men | ||||
|---|---|---|---|---|---|---|
| Sweden | 2 | 100% | 2 | 100% | ||
| Total parent company | 2 | 100% | 2 | 100% | ||
| Subsidiaries | ||||||
| Switzerland | 2 | 50% | 2 | 50% | ||
| Bermuda | 1 | 100% | 1 | 100% | ||
| Total for subsidiaries | 3 | 3 | ||||
| Seagoing personnel | 161 | 100% | 96 | 100% | ||
| Group, total | 166 | 99% | 101 | 99% |
| Parent company | 2007 of women |
2006 of women |
|---|---|---|
| The board of directors | 0% | 0% |
| Other senior executives | 0% | 0% |
| The group | ||
| The board of directors | 0% | 0% |
Other senior executives 25% 25%
| 2007 2006 Salaries and Social security Salaries and Social security |
||||
|---|---|---|---|---|
| Parent company | remuneration | expenses | remuneration | expenses |
| The parent company | 5.7 | 3.8 | 6.3 | 3.8 |
| (of which pension expenses) | 1.11) | 1.31) |
1) Of the parent company's pension expenses, SEK 1,104 (1,242) thousand relates to the group board of directors, the managementgroup and the President.
| 2007 | 2006 | |||
|---|---|---|---|---|
| Board of directors, President and management group |
Other employees |
Board of directors and President |
Other employees |
|
| Parent company: Sweden | 6.2 | 6.6 | ||
| Subsidiaries: Switzerland | 4.0 | 0.1 | 3.5 | |
| Subsidiaries: Bermuda | 0.1 | 0.2 | ||
| Seagoing personnel | 32.0 | 21.6 | ||
| Group, total | 10.3 | 32.1 | 10.3 | 21.6 |
| (of which bonus payments etc.) | (2.0) | (1.8) |
For further information, see note 16.
| The group | The parent company | |||||
|---|---|---|---|---|---|---|
| SEK million | 2007 | 2006 | 2007 | 2006 | ||
| KPMG | ||||||
| Audit assignments | 1.1 | 1.6 | 0.5 | 0.8 | ||
| Other assignments | 0.1 | 0.2 | 0.0 | 0.0 |
Audit assignments refer to the examination of the Annual Report, the accounts and the administration of the board of directors and the President; other tasks included in the duties of the company's auditor as well as advice and other assistance occasioned by observations made during his/her examination or performance of these other tasks. Everything else falls under other assignments.
| The group, SEK million | 2007 | 2006 |
|---|---|---|
| Interest income on bank balance | 2.3 | 2.9 |
| Interest income on fi nancial assets valued at fair value | 39.7 | 51.0 |
| Dividends on fi nancial assets available for sale | 24.2 | 25.9 |
| Net exchange rate differences | 4.3 | |
| Financial income | 66.2 | 84.1 |
| Interest expenses on fi nancial liabilities | ||
| valued at fair value | 38.5 | 25.6 |
| Other fi nancial costs | 0.4 | 1.9 |
| Net loss due to disposal of fi nancial assets valued at fair value |
0.1 | 1.4 |
| Net value change due to revaluation of fi nancial assets | 13.0 | 7.4 |
| Net exchange rate differences | 0.2 | |
| Financial costs | 52.2 | 36.3 |
| Financial net | 14.0 | 47.8 |
| The parent company, SEK million | 2007 | Result from participating interests in group companies 2006 |
| Dividends from the group company | 0 | 20.0 |
| 0 | 20.0 |
| Result from other securities and receivables |
Interest income and similar profi t/loss items |
|||
|---|---|---|---|---|
| The parent company, SEK million | 2007 | 2006 | 2007 | 2006 |
| Interest income, other | 1.7 | 3.0 | ||
| Interest income on fi nancial assets valued at fair value |
2.8 | 3.0 | ||
| Net result on disposal of fi nancial assets valued at fair value |
0.5 | |||
| Net value change due to revaluation of fi nancial assets |
3.1 | |||
| Net exchange rate fl uctuations | 99.7 | 141.1 | ||
| 3.6 | 104.2 | 147.1 | ||
| The parent company, SEK million | 2007 | Interest expenses and similar items 2006 |
||
| Interest expenses, group companies | 3.5 | 10.8 | ||
| Interest expenses on fi nancial liabilities valued at fair value |
51.5 | 40.5 | ||
| Net value change due to revaluation of fi nancial assets | 0.5 | |||
| 55.5 | 51.3 |
| The group, SEK million | 2007 | 2006 |
|---|---|---|
| Deferred tax expense (–) [/tax income (+)] | 0.1 | –0.9 |
| Deferred tax with regard to temporary differences | –20.7 | 0.3 |
| Deferred tax income during the year capitalised as tax loss carry forward | 11.7 | |
| Tax reported against equity | 23.8 | |
| 14.9 | –0.6 | |
| Total reported tax expense for the group | 14.9 | –0.6 |
| The parent company, SEK million | 2007 | 2006 |
| Deferred tax expense (–) [/tax income (+)] | ||
| Deferred tax income during the year capitalised as tax loss carry forward | 11.7 | 5.7 |
| Deferred tax expense resulting from excess depreciation | –20.6 | –28.0 |
| Total reported tax expense for the parent company | –8.9 | –22.3 |
| The group, SEK million | 2007, % | 2007 | 2006, % | 2006 |
|---|---|---|---|---|
| Result before tax | 48.0 | 52.5 | ||
| Tax as per applicable tax rate for parent company | 28 | 13.4 | 28 | 14.7 |
| Effect of other tax rates for foreign subsidiaries | –61 | –29.0 | –27 | –14.0 |
| Non-deductible expenses | 1 | 0.4 | 1 | 0.4 |
| Other untaxed income | –1 | –0.5 | ||
| Adjustment for previous years | 1 | 0.3 | ||
| Reported effective tax | –31 | –14.9 | 1 | –0.6 |
| The parent company, SEK million | 2007, % | 2007 | 2006, % | 2006 |
| Result before tax | 28.6 | 100.0 | ||
| Tax as per applicable tax rate for parent company | 28 | 8.1 | 28 | 28.0 |
| Non-deductible expenses | 1 | 0.3 | 0 | 0.4 |
| Tax-free dividend | –6 | –5.6 | ||
| Other untaxed income | 0 | –0.5 | ||
| Adjustment for previous years | 2 | 0.5 | ||
| Reported effective tax | 31 | 8.9 | 22 | 22.3 |
| The group, SEK million | 2007 | 2006 |
|---|---|---|
| Tax attributable to hedging | 23.8 | 21.6 |
| 23.8 | 21.6 |
Deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
| Deferred tax assets | Deferred tax liability | ||||
|---|---|---|---|---|---|
| The group, SEK million | 2007 | 2006 | 2007 | 2006 | |
| Provisions | 9.7 | 9.9 | |||
| Tax loss carry forwards | 39.4 | 27.7 | |||
| Excess depreciation | 48.6 | 28.0 | |||
| Tax assets/liabilities | 39.4 | 27.7 | 58.3 | 37.9 | |
| Offset | –39.4 | –26.6 | –39.4 | –26.6 | |
| Tax assets/liabilities, net | 0.0 | 1.1 | 18.9 | 11.3 |
Deferred tax assets and liabilities are attributable to the following:
| Deferred tax assets/liabilities | ||
|---|---|---|
| The parent company, SEK million | 2007 | 2006 |
| Tax loss carry forwards | 39.4 | 26.6 |
| Excess depreciation | –48.6 | –28.0 |
| Tax assets/liabilities, net | –9.2 | –1.4 |
The parent company's change between the years has been reported as deferred tax income.
The group's tax loss carry forwards are distributed as follows:
| SEK million | 2007 | 2006 |
|---|---|---|
| Sweden | 140.6 | 98.9 |
| Total | 140.6 | 98.9 |
No tax loss carry forwards have a due date.
| Vessels under | ||||
|---|---|---|---|---|
| The group, SEK million | Vessels | construction | Equipment | Total |
| Acquisition value | ||||
| Opening balance, 1 January, 2006 | 304.7 | 384.7 | 0.3 | 689.7 |
| Purchases | 41.9 | 725.3 | 767.2 | |
| Reclassifi cation to vessels | 843.9 | –843.9 | ||
| Exchange rate differences | –103.6 | –43.8 | –147.4 | |
| Closing balance, | ||||
| 31 December, 2006 | 1,086.9 | 222.3 | 0.3 | 1,309.5 |
| Opening balance, 1 January, 2007 | 1,086.9 | 222.3 | 0.3 | 1,309.5 |
| Purchases | 12.5 | 826.0 | 0.1 | 838.6 |
| Reclassifi cation to vessels | 883.4 | –883.4 | ||
| Exchange rate differences | –112.6 | –6.6 | –119.2 | |
| Closing balance, | ||||
| 31 December, 2007 | 1,870.2 | 158.3 | 0.4 | 2,028.9 |
| Depreciation and write-downs | ||||
| Opening balance, 1 January, 2006 | 0.5 | 0.2 | 0.7 | |
| Depreciation for the year | 34.0 | 0.0 | 34.0 | |
| Depreciation for the year by period | ||||
| maintenance | 6.2 | 6.2 | ||
| Exchange rate differences | –2.5 | –2.5 | ||
| Closing balance, | ||||
| 31 December, 2006 | 38.2 | 0.2 | 38.4 | |
| Opening balance, 1 January, 2007 | 38.2 | 0.2 | 38.4 | |
| Depreciation for the year | 57.4 | 0.1 | 57.5 | |
| Depreciation for the year by period | ||||
| maintenance | 10.1 | 10.1 | ||
| Exchange rate differences | –5.1 | –5.1 | ||
| Closing balance, 31 December, 2007 |
100.6 | 0.3 | 100.9 | |
| Reported values | ||||
| 1 January, 2006 | 304.2 | 384.7 | 0.1 | 689.0 |
| 31 December, 2006 | 1,048.7 | 222.3 | 0.1 | 1,271.1 |
| 1 January, 2007 | 1,048.7 | 222.3 | 0.1 | 1,271.1 |
| 31 December, 2007 | 1,769.6 | 158.3 | 0.1 | 1,928.0 |
| The group 2007, SEK million | Vessels | Vessels under construction |
Total |
|---|---|---|---|
| Loan costs included in asset acquisition | |||
| values during the reporting period | 7.6 | 2.6 | 10.2 |
| The group 2006, SEK million | Vessels | Vessels under construction |
Total |
|---|---|---|---|
| Loan costs included in asset acquisition values during the reporting period |
6.1 | 10.8 | 16.9 |
| The parent company, SEK million | Vessels | Equipment | Total |
|---|---|---|---|
| Acquisition value | |||
| Opening balance, 1 January, 2006 | 0.3 | 0.3 | |
| Acquisitions | 465.3 | 465.3 | |
| Closing balance, | |||
| 31 December, 2006 | 465.3 | 0.3 | 465.6 |
| Opening balance, 1 January, 2007 | 465.3 | 0.3 | 465.6 |
| Acquisitions | 0.1 | 0.1 | |
| Closing balance, | |||
| 31 December, 2007 | 465.3 | 0.4 | 465.7 |
| Depreciation | |||
| Opening balance, 1 January, 2006 | 0.2 | 0.2 | |
| Depreciation for the year | 11.6 | 0.0 | 11.6 |
| Closing balance, | |||
| 31 December, 2006 | 11.6 | 0.2 | 11.8 |
| Opening balance, 1 January, 2007 | 11.6 | 0.2 | 11.8 |
| Depreciation for the year | 20.0 | 0.1 | 20.1 |
| Closing balance, | |||
| 31 December, 2007 | 31.6 | 0.3 | 31.9 |
| Reported values | |||
| 1 January, 2006 | 0.1 | 0.1 | |
| 31 December, 2006 | 453.7 | 0.1 | 453.8 |
| 1 January, 2007 | 453.7 | 0.1 | 453.8 |
| 31 December, 2007 | 433.7 | 0.1 | 433.8 |
As of 31 December, 2007, vessels with a reported value of SEK 1,769.6 million (1,048.7) have been offered as security for the available credit facility.
The group has a 50 per cent holding in the joint-venture companies Terra LTD and Lacus LTD, two shipping companies.
The group's fi nancial reports include the items below that constitute the group's ownership in the joint-venture company's assets, liabilities, income and expenses.
| SEK million | 2007 | 2006 |
|---|---|---|
| Income | 42.5 | |
| Expenses | –40.1 | 0.0 |
| Result | 2.4 | 0.0 |
| Fixed assets | 292.0 | 117.7 |
| Current assets | 14.7 | 1.1 |
| Total assets | 306.7 | 118.8 |
| Long-term liabilities | 226.6 | 113.9 |
| Current liabilities | 16.0 | 0.8 |
| Total liabilities | 242.6 | 114.7 |
| Net assets/net liabilities | 64.1 | 4.1 |
| The group, SEK million | 2007-12-31 | 2006-12-31 |
|---|---|---|
| Financial investments that are fi xed assets | ||
| Financial assets available for sale (valued via fair value reserve in equity) |
||
| Shares and participating interests | 218.5 | 246.5 |
| 218.5 | 246.5 |
| 397.1 | 517.6 | |
|---|---|---|
| Other holdings | 31.4 | 31.3 |
| Interest-bearing securities | 365.7 | 486.3 |
| the income statement | ||
| Financial assets valued at fair value via | ||
| Short-term investments that are current assets |
| The group, SEK million | 2007-12-31 | 2006-12-31 |
|---|---|---|
| Long-term receivables that are fi xed assets | ||
| Endowment insurance for pension commitments | 7.7 | 9.0 |
7.7 9.0
| 156.8 | 64.5 | |
|---|---|---|
| Derivatives held for hedging | 128.7 | 42.0 |
| Other short-term receivables | 28.1 | 16.4 |
| Bunker storage | 6.1 | |
| Other receivables that are current assets |
| The parent company, SEK million | 2007-12-31 | 2006-12-31 |
|---|---|---|
| Long-term receivables | ||
| Endowment insurance for pension commitments | 7.7 | 9.0 |
| 7.7 | 9.0 | |
| Other receivables (short-term) | ||
| Other receivables | 1.2 | 3.1 |
| Derivatives held for hedging | 38.8 | 26.6 |
| 40.0 | 29.7 | |
| Long-term receivables | ||
| Accumulated acquisition values | ||
| At the start of the year | 9.0 | 10.7 |
| Payments | –1.3 | –1.7 |
| Closing balance, 31 December | 7.7 | 9.0 |
| 12 Prepaid expenses and accrued income |
|
|---|---|
| ------------------------------------------- | -- |
| The group | The parent company | |||
|---|---|---|---|---|
| SEK million | 2007-12-31 | 2006-12-31 | 2007-12-31 | 2006-12-31 |
| Prepaid time-charter hire | 21.5 | 70.0 | ||
| Other prepaid expenses | 9.1 | 3.6 | 0.5 | 1.2 |
| Accrued fi nancial income | 15.9 | 18.9 | 3.1 | 1.3 |
| 46.5 | 92.5 | 3.6 | 2.5 |
| The group, SEK million | 2007-12-31 | 2006-12-31 |
|---|---|---|
| The following sub-components are included in cash and cash equivalents: | ||
| Cash and bank balances | 46.6 | 13.7 |
| Deposits | 9.0 | 16.5 |
| Total as per balance sheet | 55.6 | 30.2 |
| Total as per cash fl ow statement | 55.6 | 30.2 |
During 2007 or 2006 the company has not carried out any transactions that affect the number of issued shares henceforth. See list below. There has therefore been no dilution. The calculation is applied to the average number of shares outstanding. There are no outstanding fi nancial instruments that can cause a dilution effect in the future.
| SEK | 2007 | 2006 |
|---|---|---|
| Profi t per share | 1.32 | 1.09 |
| Profi t per share from remaining activities | 1.32 | 1.09 |
| Number | 2007 | 2006 |
|---|---|---|
| Class A shares | 4,000,000 | 4,000,000 |
| Class B shares | 43,729,798 43,729,798 | |
| Total | 47,729,798 47,729,798 |
| The group, SEK million | 2007-12-31 | 2006-12-31 |
|---|---|---|
| Bank loans (Revolving credit facility) | 1,063.0 | 506.2 |
| Total non-current liabilities | 1,063.0 | 506.2 |
| The group, SEK million | 2007-12-31 | 2006-12-31 |
| Bank loans (Revolving credit facility) | 10.0 | |
| Total short-term liabilities | 10.0 | 0 |
| The parent company, SEK million | 2007-12-31 | 2006-12-31 |
| Bank loans (Revolving credit facility) | 836.4 | 460.5 |
| Total non-current liabilities | 836.4 | 460.5 |
The group has credit arrangements totalling USD 368.3 million, of which USD 166.8 million had been utilised at the year-end. The arrangement is conditional on achieving certain fi nancial key fi gures. For more information on the company's exposure to interest risk and risk from exchange rate fl uctuations, refer to note 20.
In Sweden the group has defi ned-contribution pension plans for its employees that are totally fi nanced by the company.
Outside Sweden, there are defi ned-contribution plans for which the costs are partially borne by subsidiaries and partially by employee contributions.
Payment for these plans is made continually as per the rules for each plan.
| The group | The parent company | |||
|---|---|---|---|---|
| SEK million | 2007 | 2006 | 2007 | 2006 |
| Costs of defi ned-contribution pensions 1.3 | 2.1 | 1.1 | 1.3 |
| SEK thousand | Basic salary, board of director's fees |
Variable remuneration |
Other benefi ts |
Pension cost |
Total |
|---|---|---|---|---|---|
| Chairman of the board | 350 | 350 | |||
| Deputy Chairman of the board | 350 | 350 | |||
| Board members | 920 | 920 | |||
| President | 2,437 | 1,740 | 93 | 1,011 | 5,281 |
| Other senior executives (3 people) | 3,763 | 543 | 75 | 280 | 4,661 |
| Total | 9,180 | 2,283 | 168 | 1,291 | 11,562 |
See Corporate governance section for information regarding remuneration, benefi ts and agreements for the board, President and senior executives.
| The group, SEK million | 2007-12-31 | 2006-12-31 |
|---|---|---|
| Provisions that are long-term liabilities | ||
| Commitments relating to ship management | 6.1 | 19.6 |
| Total | 6.1 | 19.6 |
| Provisions that are current liabilities | ||
| Commitments relating to ship management | 9.5 | 13.1 |
| Ongoing dispute concerning ship sale | ||
| Total | 9.5 | 13.1 |
| The group, SEK million | 2007-12-31 | 2006-12-31 |
|---|---|---|
| Reported value at start of period | 32.7 | 47.5 |
| Amount used during the period | –17.1 | –14.8 |
| Reported value at end of period | 15.6 | 32.7 |
| The group, SEK million | 2007-12-31 | 2006-12-31 |
|---|---|---|
| Reported value at start of period | 18.3 | |
| Provisions made during the period | ||
| Amount used during the period | –18.3 | |
| Reported value at end of period | 0.0 | 0.0 |
| The group, SEK million | 2007-12-31 | 2006-12-31 |
|---|---|---|
| Total reported value at start of period | 32.7 | 65.8 |
| Provisions made during the period1) | ||
| Amount used during the period | –17.1 | –33.1 |
| Total reported value at end of period | 15.6 | 32.7 |
| Of which total long-term element of provisions | 6.1 | 19.6 |
| Of which total short-term element of provisions | 9.5 | 13.1 |
1) Provisions made during the year include existing provisions.
| The group, SEK million | 2007-12-31 | 2006-12-31 |
|---|---|---|
| Amount of the provision expected to be paid | ||
| after more than twelve months | 6.1 | 19.6 |
| The group/parent company, SEK million | 2007-12-31 | 2006-12-31 |
|---|---|---|
| Other long-term liabilities | ||
| Pension commitments (covered by endowment insurance) | 7.7 | 9.0 |
| 7.7 | 9.0 | |
| The group, SEK million | ||
| Other short-term liabilities | ||
| Liabilities to other related parties | 0.9 | |
| Tax liability | 3.4 | 4.1 |
| Other short-term liabilities | 4.6 | |
| 8.9 | 4.1 |
| The group | The parent company | |||||
|---|---|---|---|---|---|---|
| SEK million | 2007-12-31 | 2006-12-31 | 2007-12-31 | 2006-12-31 | ||
| Accrued voyage costs ships | 16.5 | 3.7 | 3.8 | 3.0 | ||
| Accrued personnel costs | 0.9 | 1.8 | 0.6 | 1.4 | ||
| Other accrued expenses | 10.7 | 28.8 | 3.6 | 2.1 | ||
| Accrued interest costs | 7.2 | 5.1 | ||||
| Deferred income | 24.2 | 7.4 | ||||
| 59.5 | 41.7 | 13.1 | 6.5 |
As a result of its activities, the group is exposed to various types of fi nancial risks. Financial risks refer to fl uctuations in the company's income and cash fl ow as a result of changes in exchange rates, interest levels, refi nancing and credit risks. The group's fi nance policy for managing fi nancial risks has been drawn up by the board and forms a framework of guidelines and rules in the form of risk mandates and limits for fi nancial activities. The responsibility for the group's fi nancial transactions and risks is handled centrally by the parent company's fi nance department. The overall objective for the fi nance function is to supply cost-effective fi nancing and to reduce the negative effects of market fl uctuations on the group's earnings.
The term liquidity risk (also referred to as the fi nancing risk) refers to the risk that fi nancing cannot be obtained at all, or only at signifi cantly increased cost. According to the fi nance policy, there must always be suffi cient ready cash and guaranteed credit facilities to cover the next six months. The group has guaranteed borrowing of up to approx. 80% of the total investment sum for ten P-MAX tankers. Borrowing has also been guaranteed up to around 80% for the two Panamax tankers being built as a joint venture. Guaranteed borrowing together with available
fi nancial assets mean that the group will have a low debt/equity ratio when investments in the new fl eet are concluded in 2010.
The interest risk is the risk that the value of a fi nancial instrument will vary due to changes in market interest rates. Interest risk may consist of both changes in fair value – price risk, and changes in cash fl ow - cash fl ow risk. A signifi cant factor affecting the interest risk is the fi xed-rate period. Long fi xed-rate periods mainly affect the cash-fl ow risk, while shorter fi xed-rate periods affect the price risk.
Management of the group's interest exposure is centralised, which means that
the central fi nance function is responsible for identifying and managing this exposure. No hedging of future interest expense has been initiated. No hedging has been carried out for the interest-bearing instruments held by the group (consisting of corporate bonds). The fi nance department continually follows the interest market and submits a recommendation to the board regarding any interest-rate hedging required.
Interest-bearing fi nancial assets and liabilities. The table below shows the effective rate on the closing day, and the due-date structure of fi nancial assets and liabilities.
| The group, SEK million | Interest rate % | Fixed-rate period | Effective rate % |
Nominal sum in Currency original currency |
2007-12-31 | 2006-12-31 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Corporate bond portfolio | 10.03 | Fixed during term | 10.12 | USD | 54,600 | 365.7 | 486.2 | ||||||
| Revolving credit facility | Variable 3 months | 5.70 | USD | 130,000 | –836.4 | –506.2 | |||||||
| Bank loans | Variable 3 months | 3.99 | USD | 36,800 | –236.7 | ||||||||
| 2007 | 2006 | ||||||||||||
| Within | 5 years and | Within | 5 years and | ||||||||||
| The group, SEK million | Total | 1 year | 2 years | 3 years | 4 years | longer | Total | 1 year | 2 years | 3 years | 4 years | longer | |
| Corporate bond portfolio | 365.7 | 214.4 | 34.7 | 116.6 | 486.2 | 82.8 | 240.5 | 37.9 | 125.0 | ||||
| Revolving credit facility | –836.4 | –836.4 | –506.2 | –506.2 | |||||||||
| Bank loans | –236.7 | –10.0 | –10.0 | –10.0 | –10.0 –196.7 |
Financial risk management involves exposure to credit risks. It is primarily counterparty risks in connection with claims on banks and other counter-parties that arise when purchasing derivative instruments. The fi nance policy contains a special counter party clause that specifi es that derivatives and similar items are only made for a selection of banks. In terms of the credit risk for other fi nancial assets, such as corporate bonds, the group primarily invests in the sector and branch which the group is active in and thus knows, which is judged to reduce the risk signifi cantly.
The risk that the company's/group's customers do not meet their obligations, i.e. that payment is not received for Accounts receivable, constitutes a customer credit risk. The majority of the group's customers have good or very good credit. A bank guarantee or other security is required for customers with a low credit rating or insuffi cient credit history. On the closing day, there was no signifi cant concentration of credit exposure. The maximum exposure to credit risk is shown by the reported value in the balance sheet for each fi nancial asset.
The group's investments in ships involve advances being paid on an ongoing basis to the shipyard during the construction period. Bank guarantees are issued to secure repayment of advances in the event of the counter-party being unable to meet its obligations.
The group is exposed to various types of currency risk as specifi ed below. It should be noted that currency risk are hedged in their entirety when they are attributable to a fi nancial asset or liability in a currency other than SEK and USD. As per the policy, standardised derivatives must be used. In the accounts, hedge accounting is applied. See note 1.
A weak US dollar reduces Concordia Maritime's equity and net asset value, and vice versa. The exchange rate effect that arises during translation to Swedish krona (SEK) involving foreign subsidiaries is reported directly against equity in the consolidated balance sheet. The company's overall currency policy is to partially hedge this exposure. The policy states that around 50% of the equity is hedged against exchange rate fl uctuations. This mainly takes place through the use of currency futures. During 2007, USD 135 million was hedged against SEK. Hedging against SEK has been reported, in accordance with IAS 39, as hedging of net investments
in foreign activities (i.e. against equity). The exchange rate was 6.87 as of 31 Dec 2006 and 6.43 as of 31 Dec 2007. The negative net effect on equity from a weaker dollar is SEK –75,7 (–177,7) million, corresponding to SEK –1.59 per share (–3.72). The sum includes a positive effect of SEK 45.3 (77.1) million on the hedging of the US Dollar against SEK.
The accumulated exchange rate differences reported directly to equity are SEK –231.7 (–156.0) million, corresponding to SEK –4,85 per share (–3.27). A change in the USD exchange rate of SEK 0.10 is deemed to affect Concordia Maritime's equity by around SEK 16 million or SEK 0.34 per share.
The group's entire income is in US Dollars. The cost side is also strongly dominated by the US Dollar, except for certain administrative costs in SEK and the Swiss franc. Exchange rate variations thus affect neither the cash fl ow nor earnings signifi cantly. The exchange rate difference in the business amounts to SEK 0.0 (4.3) million. No hedging against exchange rate variations in current activities has been implemented.
Some future shipyard payments will be in Euro. When the contract started in 2006, these were hedged against the US Dollar. In total, EUR 77.2 million has been hedged against the US Dollar. As at 31 December, 2007, a total of SEK 89.9 (15.4) million has been reported as a hedging reserve in equity (see also the section on cash fl ow hedging in Note 1). This EUR 77.2 million will be paid in sequence with the new construction programme and will only affect asset acquisition values. For further information on the expected time of payment, see Note 22 Investment commitments.
The group's borrowing takes place in the investment currency of US Dollars and is thus not affected by currency exposure.
The group aims to reduce short-term fl uctuations in the group's earnings by managing its interest rate and currency risks. In the long term, however, permanent changes in exchange rates and interest rates will have an effect on the consolidated earnings.
A general increase of 1 per cent in SEK against the US Dollar has been estimated to reduce the consolidated earnings before tax by approx. SEK 0.9 million for the year ending 31 December, 2007 (SEK 2.4 million). Changes in the value of currency futures have been included in this estimate.
As of 31 December, 2007, a general increase in the US LIBOR interest rates of 1 per cent is estimated to reduce the group's result before tax by approx. SEK 8.4 (2.5) million.
Fair value and reported value are reported in the balance sheets below.
| SEK million Financial investments Long-term receivables Other receivables Short-term investments Total Long-term interest-bearing liabilities Other long-term liabilities Short-term interest-bearing liabilities |
the income statement 397.1 397.1 |
accounting 128.7 |
fi nancial assets 7.7 |
receivables 218.5 |
the income statement | liabilities | value 218.5 7.7 |
value 218.5 |
|---|---|---|---|---|---|---|---|---|
| 7.7 | ||||||||
| 128.7 | 128.7 | |||||||
| 397.1 | 397.1 | |||||||
| 128.7 | 7.7 | 218.5 | 752.0 | 752.0 | ||||
| 1,063.1 | 1,063.1 | 1,063.1 | ||||||
| 7.7 | 7.7 | 7.7 | ||||||
| 10.0 | 10.0 | 10.0 | ||||||
| Accounts payable and other liabilities | 0 | 0 | ||||||
| Total | 1,073.1 | 7.7 | 1,080.8 | 1,080.8 | ||||
| Unreported profi t/loss | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| The group 2006, | Financial assets valued at fair value via |
Derivatives used in hedge |
Available- for-sale |
Accounts and loans |
Financial liabilities valued at fair value via |
Other | Total reported |
Total fair |
| SEK million | the income statement | accounting | fi nancial assets | receivables | the income statement | liabilities | value | value |
| Financial investments | 246.5 | 246.5 | 246.5 | |||||
| Long-term receivables | 9.0 | 9.0 | 9.0 | |||||
| Other receivables | 42.0 | 42.0 | 42.0 | |||||
| Short-term investments | 517.6 | 517.6 | 517.6 | |||||
| Total | 517.6 | 42.0 | 9.0 | 246.5 | 815.1 | 815.1 | ||
| Long-term interest-bearing liabilities | 506.2 | 506.2 | 506.2 | |||||
| Other long-term liabilities | 9.0 | 9.0 | 9.0 | |||||
| Accounts payable and other liabilities | 0 | 0 | 0 | |||||
| Total | 506.2 | 9.0 | 515.2 | 515.2 | ||||
| Unreported profi t/loss | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| The group 2007, | Financial assets valued at fair value via |
Derivatives used in hedge |
Available- for-sale |
Accounts and loans |
Financial liabilities valued at fair value via |
Other | Total reported |
Total fair |
| SEK million | the income statement | accounting | fi nancial assets | receivables | the income statement | liabilities | value | value |
| Long-term receivables | 7.7 | 7.7 | 7.7 | |||||
| Other receivables | 38.8 | 38.8 | 38.8 | |||||
| Short-term investments | 61.6 | 61.6 | 61.6 | |||||
| Total | 61.6 | 38.8 | 7.7 | 108.1 | 108.1 | |||
| Long-term interest-bearing liabilities | 836.4 | 836.4 | 836.4 | |||||
| Other long-term liabilities | 7.7 | 7.7 | 7.7 | |||||
| Accounts payable and other liabilities | 34.4 | 34.4 | 34.4 | |||||
| Total | 836.4 | 42.1 | 878.5 | 878.5 | ||||
| Unreported profi t/loss | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Financial assets | Derivatives | Available- | Accounts | Financial liabilities | Total | Total | ||
| The group 2006, SEK million |
valued at fair value via the income statement |
used in hedge accounting |
for-sale fi nancial assets |
and loans receivables |
valued at fair value via the income statement |
Other liabilities |
reported value |
fair value |
| Long-term receivables | 9.0 | 9.0 | 9.0 | |||||
| Other receivables | 26.6 | 26.6 | 26.6 | |||||
| Short-term investments | 64.0 | 64.0 | 64.0 | |||||
| Total | 64.0 | 26.6 | 9.0 | 99.6 | 99.6 | |||
| Long-term interest-bearing liabilities | 460.5 | 460.5 | 460.5 | |||||
| Other long-term liabilities | 9.0 | 9.0 | 9.0 | |||||
| Accounts payable and other liabilities | ||||||||
| Total | 460.5 | 9.0 | 469.5 | 469.5 | ||||
| Unreported profi t/loss | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
The following summarises the methods and assumptions primarily used to determine the fair value of the fi nancial instruments reported in the table above.
The fair value is based on listed market prices on the closing day without deductions for transaction costs.
Forward agreements are either valued at the actual market price by using listed market prices or by discounting the forward price and then deducting the current spot
The group's contracts with respect to time charters in and out of vessels are classifi ed as operating leases. Non-declared options are not included in the estimation of accounts.
Non-terminable leasing payments amount to:
| The group | ||
|---|---|---|
| SEK million | 2007 | 2006 |
| Within one year (2008) | 170.2 | 171.1 |
| Between one and fi ve years (2009–2012) | 150.0 | 325.5 |
| Longer than fi ve years | ||
| 320.2 | 496.6 |
The group time-chartered for fi ve years the vessels Stena Vision and Stena Victory, which were sold to Arlington Tankers LTD in 2004. During the fourth and fi fth year of the agreement, in addition to a fi xed charter rate, a variable charter rate must be paid amounting to 50% of what the vessels generate in freight receipts, in addition to the fi xed hire. There are no agreements running beyond 2010.
Contractual obligations with respect to investment in vessels amount to SEK 260.0 (598.1) million in 2008, of which joint ventures constitute SEK 0.0 (195.0) million. For 2009 and onwards, this obligation amounts to SEK 1,083.1 (1,589.5) million.
rate. Outstanding currency futures contracts as at 31 Dec 2007 against the US Dollar are EUR 77.2 (77.2) million, and against the SEK are US Dollar 135 (120) million.
For Accounts receivable and creditors with a remaining economic life of less than one year, the reported value is regarded as refl ecting the fair value.
Fair value for liabilities that are not derivative instruments is assessed on the basis of the future cash fl ow of equity and of interest rates, discounted to current market rates on closing day.
| The group | ||
|---|---|---|
| SEK million | 2007 | 2006 |
| Time-chartering costs | 195.5 | 204.8 |
| Time-charter income for objects that are chartered out amounts to |
185.5 | 213.6 |
The future non-terminable leasing payments are as follows:
| The group | ||
|---|---|---|
| SEK million | 2007 | 2006 |
| Within one year (2008) | 520.2 | 431.4 |
| Between one and fi ve years (2009–2012) | 1,563.9 | 1,357.0 |
| Longer than fi ve years | 828.2 | 1,015.3 |
| 2,912.3 | 2,803.7 |
Agreements to charter out vessels have been signed for nine of the twelve tankers in the new construction programme and for the two time-chartered tankers Stena Vision and Stena Victory. The assessment above is based on the fi xed charter rates specifi ed in the agreements to charter out vessels; where relevant, profi t-split clauses are not observed. The time-charter agreements are in US dollars and are translated at the closing day rate.
| The group | The parent company | |||
|---|---|---|---|---|
| SEK million | 2007-12-31 | 2006-12-31 | 2007-12-31 | 2006-12-31 |
| Pledged assets | ||||
| In the form of pledged assets for own liabilities and provisions | ||||
| Vessel mortgages | 1,788.1 | 869.8 | 257.3 | 274.9 |
| Shares in subsidiaries (in group equity) | 1,314.4 | 1,019.2 | ||
| Total pledged assets | 3,102.5 | 1,889.0 | 257.3 | 274.9 |
| Contingent liabilities | ||||
| The parent company's guarantees for implementing time-charter agreements in subsidiaries. The sum consists of | ||||
| minimum payments during the term of the contract. | 352.4 | 496.6 | ||
| Total contingent liabilities | 352.4 | 496.6 |
The rights for certain insurance, new construction and time-charter agreements have been pledged on behalf of the banks that have issued credit commitments.
The parent company is closely affi liated to its subsidiaries. See note 25.
| Purchase of | Liabilities to | Claim on | ||
|---|---|---|---|---|
| Affi liated party | and services | affi liated | affi liated party | |
| The group, SEK million | Year | from affi liated | at 31 December | at 31 December |
| Other affi liated parties | 2007 | 22.2 | 0.9 | |
| Other affi liated parties | 2006 | 24.6 | 0.3 |
| Affi liated party The parent company, SEK million |
Year | Purchase of and services from affi liated |
Liabilities to affi liated at 31 December |
Claim on affi liated party at 31 December |
|---|---|---|---|---|
| Subsidiaries | 2007 | 30.7 | ||
| Subsidiaries | 2006 | 46.6 | ||
| Other affi liated parties | 2007 | 4.1 | 0.9 | |
| Other affi liated parties | 2006 | 2.4 | 0.3 |
Concordia Maritime's organisation is limited and therefore it buys services from the affi liated company Stena Bulk, which runs similar tanker operations. Accordingly, there is an agreement which regulates the relationship between the two companies with respect to new business. This agreement gives Concordia Maritime the right to decline or partake to the extent of 50 or 100 per cent in any new business opportunity. Services in the following areas are bought from Stena Bulk or other companies within the Stena Sphere on a regular basis:
Operation and manning of the group's vessels, so-called ship management. Ship management fees are based on a fi xed price per year and vessel.
Purchases of bunker oil. Remuneration is based on a fi xed commission per purchased tonne.
All company transactions between affi liated parties take place on commercial terms and at market prices.
| Subsidiary's registered | Ownership in % | ||
|---|---|---|---|
| offi ce, country | 2007 | 2006 | |
| Concordia Maritime Chartering AB | Sweden | 100 | 100 |
| Concordia Maritime AG | Switzerland | 100 | 100 |
| Concordia Maritime (Bermuda) Ltd | Bermuda | 100 | 100 |
| CM V-MAX I Ltd | Bermuda | 100 | 100 |
| CM V-MAX II Ltd | Bermuda | 100 | 100 |
| CM P-MAX I Ltd | Bermuda | 100 | 100 |
| CM P-MAX II Ltd | Bermuda | 100 | 100 |
| CM P-MAX IV Ltd | Bermuda | 100 | 100 |
| CM P-MAX V Ltd | Bermuda | 100 | 100 |
| CM P-MAX VI Ltd | Bermuda | 100 | 100 |
| CM P-MAX VII Ltd | Bermuda | 100 | 100 |
| CM P-MAX VIII Ltd | Bermuda | 100 | 100 |
| CM P-MAX IX Ltd | Bermuda | 100 | 100 |
| CM P-MAX X Ltd | Bermuda | 100 | 100 |
| Terra Ltd | Bermuda | 50 | 50 |
| Lacus Ltd | Bermuda | 50 | 50 |
| The parent company, SEK million | 2007-12-31 | 2007-12-31 |
|---|---|---|
| Accumulated acquisition values | 754.2 | 754.2 |
| Closing balance, 31 December | 754.2 | 754.2 |
There have been no write-downs or write-ups.
| Subsidiary/Corporate ID/Registered offi ce | Number of shares | Share in % | 31 Dec 2007 Reported value |
31 Dec 2006 Reported value |
|---|---|---|---|---|
| Concordia Maritime Chartering AB, 556260-8462, Gothenburg | 250,000 | 100 | 38.0 | 38.0 |
| Rederi AB Concordia, 556224-6636, Gothenburg | 3,000 | 100 | 0.4 | 0.4 |
| Concordia Maritime AG, Switzerland | 15,000 | 100 | 715.8 | 715.8 |
| 754.2 | 754.2 |
| The group, SEK million | 2007-12-31 | 2007-12-31 | |||
|---|---|---|---|---|---|
| The following sub-components are included in cash and cash equivalents: | |||||
| Cash and bank balances | 46.6 | 13.7 | |||
| Deposits | 9.0 | 16.5 | |||
| Total as per balance sheet | 55.6 | 30.2 | |||
| Total as per cash fl ow statement | 55.6 | 30.2 |
| Total as per cash fl ow statement | 237.1 | 58.5 |
|---|---|---|
| Total as per balance sheet | 237.1 | 58.5 |
| Utilised current account credit | –34.4 | |
| Cash and bank balances | 271.5 | 58.5 |
| The following sub-components are included in liquid assets1 | : | |
| The parent company, SEK million | 2007-12-31 | 2006-12-31 |
| The group | The parent company | ||||
|---|---|---|---|---|---|
| SEK million | 2007 | 2006 | 2007 | 2006 | |
| Dividend received | 24.2 | 25.9 | |||
| Interest received | 53.9 | 53.9 | 4.6 | 6.0 | |
| Interest paid | –49.2 | –25.6 | –54.9 | –51.3 | |
| 28.9 | 54.2 | –50.3 | –45.3 |
| The group | The parent company | |||
|---|---|---|---|---|
| SEK million | 2007 | 2006 | 2007 | 2006 |
| Depreciation | 57.5 | 34.0 | 18.5 | 11.7 |
| Write-off of periodic maintenance | 10.1 | 6.2 | 1.5 | |
| Unrealised exchange rate differences | –42.9 | –29.9 | ||
| Changes in the value of | ||||
| fi nancial instruments | 12.6 | 7.4 | 0.5 | –3.1 |
| Provisions | ||||
| Income from sale | ||||
| of fi nancial assets | 0.3 | 0.5 | –0.5 | |
| Other | –5.5 | 1.1 | 0.1 | |
| 75.0 | 49.2 | –22.3 | –21.8 |
No signifi cant events have occurred since the closing day.
Concordia Maritime AB (publ) is a Swedish-registered limited company with its registered offi ce in Gothenburg. The company's shares are listed on the OMX Nordic Exchange Stockholm. The address of the head offi ce is SE-405 19 Gothenburg, Sweden.
The consolidated accounts for 2007 consist of the parent company and its subsidiaries, together referred to as the group. The group also includes the owned share of joint-venture companies.
Stena Sessan Rederi AB, whose parent company is Stena Sessan AB, corp. ID 556112-6920, with its registered offi ce in Gothenburg, owns around 52% of the capital and around 73% of the total number of votes in Concordia Maritime AB.
The consolidated accounts and the annual report have been compiled in accordance with international accounting standards as adopted by the European Parliament through ordinance (EG) no. 1606/2002 of 19 July 2002 for the application of international accounting standards and accepted accounting principles respectively,
and they give an honest picture of the group's and the parent company's positions and results. The board of directors' report for the group and the parent company, respectively, give an honest account of the group's and the parent company's operations, positions and results, and, in addition, explain the considerable risks and uncertainties facing the parent and the group companies in the future.
Gothenburg, 7 March, 2008
Johan Kratz Authorised Public Accountant
I have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the board of directors and the President of Concordia Maritime AB (publ) for the year 2007. The company's annual report is included in the printed version of this document on pages 45–73. It is the board of directors and the President who bear the responsibility for the accounting records and management, for the application of the Annual Accounts Act in the preparation of the Annual Report, and that the IFRS international reporting standard, as adopted by the EU and the Annual Accounts Act, is applied in the preparation of the consolidated accounts. My responsibility is to express an opinion on the annual accounts, the consolidated accounts and the administration based on my audit.
This audit was conducted in accordance with generally accepted auditing standards in Sweden. Those standards require that I plan and perform the audit to obtain a high but not absolute assurance that the annual accounts and consolidated accounts are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and their application by the board of directors and the President and assessing signifi cant estimates made by the board of directors and the President when preparing the annual accounts and consolidated accounts as well as evaluating the overall presentation
of information in the annual accounts and the consolidated accounts. As a basis for my opinion concerning discharge from liability, I examined signifi cant decisions, actions taken, and the circumstances of the company in order to be able to determine the liability, if any, to the company of any board member or the President. I have also examined whether any board member or the President has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association. I believe that my audit provides a reasonable basis for my opinion as set out below.
The annual accounts have been prepared in accordance with the Annual Accounts Act and, thereby, give a true and fair view of the company's fi nancial position and results in accordance with generally accepted accounting principles in Sweden. The consolidated accounts have been prepared in accordance with international accounting standards (IFRS) as adopted by the EU and the Annual Accounts Act and provide a true and fair view of the group's fi nancial position and results. The board of directors' report is consistent with the various parts of the annual accounts and the consolidated accounts.
I recommend to the Annual General Meeting of shareholders that the income statement and balance sheet for the parent company and the group be adopted, that the profi t for the parent company be dealt with in accordance with the proposal in the directors' report and that the members of the board of directors and the President be discharged from liability for the fi nancial year.
Gothenburg, 7 March 2008
Johan Kratz Authorised Public Accountant
Concordia Maritime AB is a Swedish public company whose shares are listed on the OMX Nordic Exchange Stockholm. The company is managed in accordance with Swedish company law, but also complies with other applicable Swedish and overseas laws and regulations.
Concordia Maritime Maritime is not covered by the Swedish Corporate Governance Code, but the board of directors and management strive, through openness, to make it easier for individual shareholders to follow the company's decision paths and to clarify where in the organisation responsibility and authority lie.
The Annual General Meeting (AGM) is the highest decision-making body at Concordia Maritime AB. At the AGM, the fi nancial situation is discussed, and decisions are made on a number of important matters, such as the dividend, changes to the Articles of Association, appointment of auditors, remuneration for the board and the auditors, the granting of discharge of liability to the board and election of the board for the period until the next AGM.
All shareholders have the same right of proposal and participation at the AGM. Each class A share entitles the shareholder to ten votes, while each class B share en titles the shareholder to one vote. A summons to the AGM shall be issued no earlier than six weeks and no later than four weeks before the meeting.
Formalities for the AGM are regulated by both the Companies Act and the Articles of Association.
The most recent AGM was held on 26 April, 2007 in Gothenburg, with 95
s hareholders present, representing 79.5 per cent of the votes. The meeting re-elected the sitting board members Per Bjurström, Bert Åke Eriksson, Mats Jansson, C. Mikael von Mentzer, Morten Chr. Mo and Dan Sten Olsson who was also elected Chairman of the board. Additionally, Stefan Brocker was elected to the board. The share dividend for 2006 was set in accordance with the board of directors' proposal at SEK 1.00 per share.
The board of directors bears the ultimate responsibility for the company's organisation and administration. In addition to supervising the President, the board of directors also monitors that the company's fi nancial circumstances are reviewed in a satisfactory manner. The board of directors' considerations and decisions are entirely aimed at promoting shareholders' interest in value development and returns. The board of directors is responsible for weighing up Concordia Maritime's risk-taking and has established rules for decision-making procedures, fi nancial reporting and fi nancing. In addition, the company has guidelines for work within the areas of quality, the environment, ethics, information, personnel, IT activities and safety monitoring.
The work follows rules of procedure established each year which cover the issues the board of directors will deal with at each ordinary meeting, the division of work within the board of directors, with special
duties for the Chairman and Deputy Chairman. The rules of procedure also specify rules for fi nancial reporting to the board and more detailed rules concerning the President's responsibilities and powers.
The Chairman of the board of directors shall, through contact with the President, follow the company's development between board meetings, and is responsible for board members always receiving the information they need to be able to complete their tasks. In addition, the Chairman shall lead the work of the board of directors.
The task of the nomination committee is to submit proposals to the AGM for board members and auditors (in the event of an election) and fees for the board and the auditors. The nomination committee must also submit proposals for remuneration for the work of members on special committees. The nomination committee consists of the board's Deputy Chairman and one representative of each of the two largest shareholders in terms of votes. These representatives must not be board members. The chairman of the nomination committee must be the representative of the largest shareholder.
The mandate period for the nomination committee runs until a new nomination committee is appointed. If any of the
shareholders ceases to be one of the two largest, a member appointed by such a shareholder must make his/her place available, and the shareholder(s) who replace(s) the former largest shareholder shall appoint a new member. If any shareholder renounces the right to appoint a member, the shareholder that is the next largest in terms of votes may appoint a member.
If a member leaves the nomination committee before its work is complete, the shareholder who appointed the member in question must appoint a new member. If the member in question was appointed by a shareholder who was one of the two largest, but is no longer such when the member leaves the post, the shareholder who has taken the aforementioned shareholder's place must appoint a new member. A shareholder who appoints a member to the nomination committee is entitled to discharge
the member and appoint a new member. The names of the nomination committee's members and the shareholders they represent shall be published on the company's website at least six months before the AGM.
The nomination committee for the 2008 AGM consists of Karl-Magnus Sjölin (Stena Sessan Rederi AB), Ivar Virgin (Mariedals Lantbruk) and C. Mikael von Mentzer (Deputy Chairman, Concordia Maritime). Prior to the 2008 AGM, the members met once.
A salary compensation committee is set up to make decisions on the salary and other terms of employment for the President. The committee consists of the Chairman of the board of directors and the Deputy Chairman. In 2007, the committee met twice.
There is no separate audit committee; instead, issues concerning an audit are dealt with by the entire board of directors.
The instructions issued by the AGM are followed when nominating board members.
Concordia Maritime's board of directors consists of seven ordinary members elected by the AGM, and two employee representatives and a deputy appointed by the employees. Members elected at the AGM are elected for one year. There is no limit to how long a member may sit on the board. The board of directors' assignments are regulated by the Companies Act and the Articles of Association.
The current Chairman has held the post since 1993, and the Deputy Chairman since 2002.
In 2007, six ordinary and one extraordinary board meetings were held. Each ordinary meeting dealt with the minutes from the previous meeting, safety and the environment, the President's report on the business situation, including a report from the subsidiaries, the President's report on the current status compared to the business plan/objectives, as well as a report on income and the fi nancial position.
In 2007, the work of the board of directors was assessed within the following three main areas:
The assessment as a whole gave a positive picture of the work of the board of directors.
The members of the board of directors elected by the Annual General Meeting receive a fee determined by the AGM, distributed between the members in accordance with a decision by the board. The board of directors decided at the fi rst board meeting on 26 April, 2007, that the total board fee determined by the AGM, amounting to SEK 1,575,000 should be distributed as follows: SEK 350,000 each to the Chairman and Deputy Chairman, and SEK 175,000 to each of the other members elected by the AGM. Apart from expenses incurred in the board's work, no other remuneration or benefi ts have been paid. Each of the
employee representatives received remuneration of SEK 15,000.
Concordia Maritime's group management, which consists of the President, Financial Manager and Technical Director, is based primarily in Gothenburg. The President leads daily activities, produces information and decision documentation prior to board meetings and acts as a rapporteur at such meetings.
Pursuant to the rules of procedure, which among other things regulate the relationship between the President and the board of directors, the group management is responsible for formulating the group's overall strategy, business management, division of fi nancial resources within activities and the group's fi nancing and risk management. These tasks also include issues concerning company acquisitions and other major projects. The group management is also responsible for compiling the group's fi nancial reports, communications with the stock market, and a number of other issues of general interest to the group.
In order to attract and retain expertise, Concordia Maritime aims to offer employees attractive, competitive remuneration, with a bonus system linked to targets met and earnings. All Concordia Maritime employees receive remuneration in the form of a fi xed salary. There is also a bonus program for all employees. The bonus for the President is determined by the salary compensation committee on the basis of a number of qualitative and quantitative objectives.
At Finforum in November, 2007, Concordia Maritime was named the winner in the Small Company category in the "Best Financial Reporting 2006" competition.
The jury's motivation: Concordia Maritime gives the reader, in a very balanced manner, relevant information about its business concept, strategy and fi nancial goals. The
graphics are very harmonious with a stylish interplay between text, pictures, tables and charts. To sum up, an annual report that in many ways serves as a very good example for other small companies.
Finforum is arranged by the Swedish Society of Financial Analysts SFF, FAR, SRS, OMX and Irev.
Remuneration and terms for the President are determined by Concordia Maritime's salary compensation committee. Remuneration for other senior executives is prepared and determined by the President. All remuneration paid to the President and group management in 2007 is shown in note 16 to the fi nancial report.
Pension premiums for the President of SEK 1,104 thousand have been expensed. The President is contractually entitled to retire at the age of 65. A premium corresponding to 35 per cent of the President's monthly pensionable salary at any time is paid into the pension. For other senior executives, pension terms comply with the relevant collective agreements.
The President has an agreement for severance pay amounting to two years' salary on termination by the company. Compensation from Concordia Maritime remains if remuneration is received from another employer. The President himself cannot claim severance pay. The period of notice by the President is twelve months and by Concordia Maritime twelve months.
Other benefi ts consist mainly of company car benefi ts.
The Concordia Maritime group consists of the parent company Concordia Maritime AB (publ) and two subsidiaries, which report directly to the President. Reporting takes place every month.
An auditor is proposed by the main owner and elected by the AGM for four years.
The current auditor is Johan Kratz, KPMG, whose mandate expires in 2011. The auditor provides an auditor's report for Concordia Maritime AB's Annual Report and consolidated accounts, the administration by the board and the President, plus the annual reports for the other subsidiaries. The audit is carried out in accordance with the Companies Act and IFRS.
The auditor's fee is charged on an ongoing basis. Each year the auditor reports the results of his review to the board. KPMG has been in charge of audits at Concordia Maritime since 1984. The audit comprises mainly an ongoing audit and examination of the annual accounts.
KPMG also assists Concordia Maritime with advice in the fi eld of accounting. In recent years, this has involved issues primarily relating to the introduction of accounting in accordance with IFRS. KPMG has also assisted with some tax issues. No circumstances have been found that are felt to have affected the impartiality and independence of the auditors as a result of this advice. In 2007, KPMG received fees totalling SEK 1.2 million.
| Board meetings (7 meetings in all ) |
Salary compensation committee (2 meetings in all) |
Born | Member since |
Nationality | Function | Independent1) | |
|---|---|---|---|---|---|---|---|
| Per Bjurström | 7 | — | 1939 | 1988 | Swedish | Member, not employed | Independent |
| Stefan Brocker | 5 | — | 1966 | 2007 | Swedish | Member, not employed | Independent |
| Göran Dahlman | 6 | — | 1953 | 1995 | Swedish | Member, not employed | Independent |
| Bert Åke Eriksson | 7 | — | 1944 | 1998 | Swedish | Member, not employed | Dependent |
| Jens Ole Hansen | 7 | — | 1951 | 1995 | Danish | Member, not employed | Independent |
| Mats Jansson | 7 | — | 1945 | 2005 | Swedish | Member, not employed | Independent |
| Jörgen Lorén | 6 | — | 1961 | 2003 | Swedish | Member, not employed | Independent |
| Morten Chr. Mo | 6 | — | 1948 | 2000 | Norwegian | Member, not employed | Independent |
| C. Mikael von Mentzer | 7 | 2 | 1944 | 1998 | Swedish | Member, not employed | Independent |
| Dan Sten Olsson | 7 | 2 | 1947 | 1984 | Swedish | Member, not employed | Dependent |
| Sten A. Olsson | Honorary Chairman | — | 1916 |
1) Independent is defi ned as independent of the company, its management or its major shareholders.
| • 15 Feb | Ordinary, accounts | • 14 May Telephone meeting. Chartering out of | • 14 Aug | Ordinary, half-yearly report |
|---|---|---|---|---|
| • 26 Apr | Ordinary, AGM | Stena Progress, extension of charters | • 19 Oct | Ordinary, 9-month report |
| • 26 Apr | Ordinary, first meeting | for Stena Paris and Stena Provence | • 18 Dec | Ordinary, budget, business plan for 2008 |
Born 1947. Chairman of the board. MBA. President and CEO Stena AB. Board member since 1984. Employed by the Stena Group since 1972.
Current assignments: Chairman of Stena Line Holding B.V., Stena Metall AB, Stena Bulk AB, Stena Sessan AB, Chairman of the Swedish Shipowners' Association.
Shares held in Concordia Maritime: Via companies (see page 38). Regarded as dependent in relation to Concordia Maritime's major shareholders.
Born 1944. Deputy Chairman. M. Pol. Sc. Consultant, UK. Board member since 1998.
Current assignments: Board member of Teekay Offshore Partners L.P.
Shares held in Concordia Maritime: 50,000 B shares
Born 1939. Master Mariner. B.A. L.Sc. business economics. Director. Board member since 1988.
Current assignments: Chairman of the board Dolphin Holding AB, Reseriet AB, Ondina Invest AB, Board member of O.F. Ahlmark & Co. Eftr. A.-B, Romulus B.V.
Shares held in Concordia Maritime: 0
Born 1945. B.A. President and CEO NYKCool AB Board member since 2005.
Current assignments: Board member of MGA Holding, Österströms Rederi AB, NYKCool AB and LCL Sweden AB
Shares held in Concordia Maritime: 0
Born 1948. Certifi ed economist BI (Oslo) and IMEDE (PED), Lausanne. Board member since 2000.
Current assignments: Chairman of Stemoco Holding AS, Stemoco Partners AS, MCM Shipping & Investments AS, Finance Development AS, Pecamo AS, BituTank AS, MOCO Projects AS. Board member of CellVision AS, Bitutank Pte. Ltd. Singapore and Ashgrove Shipping Ltd. Cyprus.
Shares held in Concordia Maritime: 0
Göran Dahlman
Born 1953. Deputy, employee representative. Company management training, LO-skolan. Employed by the Stena Group since 1989. Board member since 1996.
Current assignments: Club chairman SEKO Sjöfolk, ordinary board member of Torslanda Kulturhus. Deputy board member of Stena Marine Management AB and Gatubolaget AB.
Shares held in Concordia Maritime: 0
Born 1966. Lawyer. Managing Partner, Mannheimer Swartling Advokatbyrå AB. Board member since 2007.
Current assignments: Board member of Mannheimer Swartling Advokatbyrå AB.
Shares held in Concordia Maritime: 0
Born 1944. B.A. President, Stena Sessan AB Board member since 1998.
Current assignments: Board member of Stena Sessan AB, Meda AB, Beijer Electronics AB, Catella Capital AB.
Shares held in Concordia Maritime: 0 Regarded as dependent in relation to Concordia Maritime's major shareholders.
Honorary Chairman Shipowner, Hovås. Chairman of the board 1984–1990.
Born 1951. Employee representative. Company management training, LO-skolan Employed by the Stena Group since 1973. Board member since 1995.
Current assignments: Club chairman SEKO Sjöfolk, board member SEKO Sjöfolk. Employee representative at Stena Rederi AB, Stena AB, Stena Line Scandinavia AB. Board member of Stena Marine Management AB.
Shares held in Concordia Maritime: 0
Born 1961. Employee representative. Master Mariner. Dipl CMO (Commercial Management and Organisation in Nautical Science). Employed by the Stena Group since 1985. Board member since 2003.
Current assignments: Chairman of Sveriges Fartygsbefälsförening, Club chairman of SFBF Stena Line, Employee representative at Stena AB, Stena Line Scandinavia AB.
Shares held in Concordia Maritime: 0
Johan Kratz Authorised Public Accountant, KPMG. Engagement since 2007.
The Annual General Meeting will be held at Lorensbergsteatern in Gothenburg on 22 April, 2008 at 2 p.m. when the interim report for the fi rst three months of the year will be issued.
Shareholders who wish to participate in the AGM must be registered in the share register maintained by VPC AB no later than Wednesday 16 April, 2008, and must register with the company at the following address:
Concordia Maritime AB SE-405 19 Gothenburg, Sweden or by telephone +46 (0) 31-85 50 19 fax +46 (0) 31-12 06 51 e-mail: [email protected] or via the website: www.concordia-maritime.se, no later than Wednesday 16 April, 2008.
The board of directors proposes a dividend of SEK 1.00 per share. The proposed registration day for dividends is Wednesday, 25 April, 2008. If the AGM adopts the proposal, the dividend will be paid out by VPC AB on Wednesday, 30 April, 2008.
In order to be entitled to participate in the AGM, shareholders must have temporarily registered their shares in their own name with VPC AB through a bank's trust department or an individual fund manager. Shareholders who wish to reregister shares in their own names must inform the manager of this well before 16 April, 2008.
The Annual Report for 2007 will be sent to all registered shareholders. The interim report for the fi rst three months will be published on 22 April, the interim report for the fi rst six months on 13 August and the 9-month report on 23 October, 2008.
Hans Norén
Born 1957. President. B.Sc. Economics. Employed since 1994
External assignments: Board member of Nordisk Skibsrederforening
Call options in Concordia Maritime: 0 Shares held in Concordia Maritime: 0
Born 1975. Financial Manager. Master of Science in international Accounting and Control. Employed since 2005 (at Stena since 2001)
External assignments: None
Call options in Concordia Maritime: 0 Shares held in Concordia Maritime: 0
Born 1966. President, Concordia Maritime AG. Swiss Certifi ed Finance and Accounting Specialist.
Employed since 2005 (at Stena since 1989) External assignments: None
Call options in Concordia Maritime: 0 Shares held in Concordia Maritime: 0
Barrel Unit for trading oil. One barrel is the equivalent of around 159 litres.
Brent Type of North Sea oil that functions as a commercial benchmark.
Bunker, bunkering The name for the ship's fuel, i.e. the oil burnt in the ship's machinery. Bunkering refers to the taking aboard of bunker.
Charterer A cargo owner or the party leasing the ship. Charterer is also the professional term for shipping clerks or clerks at brokers that conduct business on the freight market.
Daily cost Costs of the ship's crew, insurance and maintenance.
Deadweight/dwt The weight of the load, bunker and loose equipment the ship is able to carry.
Distance minute (nautical mile) = 1,852 metres.
Freight rate The agreed price expressed in USD per day.
IMO International Maritime Organisation. The UN's international regulatory maritime organisation.
Intertanko Organisation for independent tanker companies.
ISM International Safety Management Code. Standardised regulations for organising companies in relation to ship safety and prevention of environmental pollution.
Knot A unit of speed for nautical vessels. One knot = one distance minute per hour, i.e. 1.85 km/hour.
MARPOL International convention under IMO that regulates pollution at sea.
Spot market The part of the maritime market that leases ships for individual journeys.
Time charter The shipping company charters out its ships complete crewed for a payment based on a certain sum per day or a certain sum per DWT and month. The party chartering the ship pays for bunker and port fees.
Concordia Maritime's technical director, Per Läbom, will retire in spring, 2008. Since he began his career at Broströms in the 1960s, Per has established himself as one of the most experienced fi gures in shipbuilding.
"All in all, about 20 newbuildings, I guess. First gas tankers in Germany at the end of the 1960s, then RoRo vessels in Japan in the 1970s and, fi nally, container carriers and tankers."
"Oh, a lot. Above all, today's ships are larger and far more technically complex and don't require such large crews. Then there's a big difference in how the shipping companies are organised. In those days, all the different functions were most often in-house. Today, nearly all of companies outsource operation and crewing, for example, to specialised management companies. Similarly, the level of standardisation has increased. Today, few companies develop their own
concepts; instead, they order standard tonnage. But here, Concordia Maritime and Stena Bulk have chosen a somewhat different path."
"I've appreciated working together with shipyards that want to do a good job. Negotiating, reaching an agreement and then beginning to build the ship. Then it's always a bit special when the fi rst in a series of ships has been completed; for example, when we launched the fi rst P-MAX tanker, the Stena Paris, at the end of 2005.
Concordia Maritime AB (publ) SE-405 19 Gothenburg, Sweden Tel +46 (0) 31-85 50 00 Corp. ID: 556068-5819 Registered offi ce: Gothenburg
Concordia Maritime AG Bahnhofplatz CH-6300 Zug Switzerland Tel +41 41 728 81 21
Hans Norén President Tel +46 (0) 31-85 51 01 or +46 (0) 704-85 51 01 hans.noren@ concordia-maritime.se
Göran Hermansson Financial Manager Tel +46 (0) 31-85 50 46 or +46 (0) 704-85 50 46 goran.hermansson@ concordia-maritime.se
www.concordia-maritime.se
A photo competition for the crews on board Concordia Maritime's ships was held in 2007. 34 entries were received and we are happy to present two of them on pages 33 and 34.
First prize went to Viktor Surnakin on the Stena Primorsk, whose photo can be seen on page 34.
The jury's: motivation: "A picture that describes reality at sea. It is not always the same as in our brochures and this picture is a good reminder of that".
Solberg · Photo: Johan Alfredsson, Göran Hermansson, Niclas Johansson, Jonas Lundberg, Katrin Svensson, Conny Wickberg · Illustrations: Dan Hambe · Printing: Falkenbergs tryckeri
Concordia Maritime AB (publ) SE-405 19 Gothenburg, Sweden Tel +46 (0) 31-85 50 00 www.concordia-maritime.se Registered offi ce: Gothenburg
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