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LAURITZEN NEWS ISSUE NO. 15 SEPTEMBER 2011 OCEANS OF KNOW-HOW BULKING UP IN SINGAPORE HALF-YEAR AT HOME AT BLOGGING BUILDING ON RESULTS SANKT ANNAE FROM THE EXPERIENCE PLADS HENRIETTA KOSAN 2 LAURITZEN NEWS · ISSUE #15 · SEPTEMBER 2011 TABLE OF CONTENTS Editorial ················································· 3 Half-year results 2011 ··························· 4 Bulking up in Singapore ························ 6 At home at Sankt Annae Plads ·············· 8 Seeking synergies in ship management ······························ 10 BULKING UP SEEKING SYNERGIES Blogging from the Henrietta Kosan ········ 12 IN SINGAPORE 6 IN SHIP Staff news ············································· 13 JL’s Singapore office is an increasingly im- MANAGEMENT 10 portant hub, not least for Lauritzen Bulkers’ Lauritzen Bulkers employs three outside Another big scoop in Brazil activities in the Pacific Rim. partners to help optimise ship management for Lauritzen Offshore ···························· 14 and stay competitive. Strengthened commitment to CSR ······· 16 Keeping an eye on quality ······················ 18 Countering piracy off Somalia: an expert opinion ··································· 20 Building on experience ··························· 23 Jørgen Lauritzen “capsized” ·················· 24 ANOTHER BIG SCOOP KEEPING AN EYE IN BRAZIL 14 ON QUALITY 18 Lauritzen Offshore’s Dan Swift begins a five- The head of Lauritzen Tankers’ site office at year contract with Petrobras for work on oil Guangzhou Shipyard in China discusses how platforms in the Campos Basin. his team operates. PIRACY OFF SOMALIA 20 Dan B. Termansen, Commander s.g. Royal Danish Navy and former Captain on HDMS Absalon, offers an expert opinion. LAURITZEN NEWS · ISSUE #15 · SEPTEMBER 2011 3 DEAR READER THE BUSINESS The historic downgrade of the US govern- coordination and find the much-needed solu- ment debt by Standard & Poor’s early August tions to this menace. ENVIRONMENT AND 2011 sent waves through markets across the GLOBAL ECONOMIC globe. Brent Crude dropped USD 10 and Responsibility is an integral part of JL’s DNA, UNCERTAINTY CONTINUE suffered the biggest two-day decline since and JL has always been engaged in social TO MAKE BUSINESS 2009, illustrating how fast commodity mar- and environmental activities. Earlier this kets can swing in a crisis. Stock, currency, year, a cross-divisional CSR Committee was OPERATIONS COMPLEX and bond markets are also in the midst of established, and in the beginning of August AND CHALLENGING increased volatility with a general negative 2011 JL signed the UN Global Compact com- FOR SHIPPING impact on global economic trends. mitment letter (see article on pages 16-17). This CORPORATIONS. commitment marks an important step for JL The current crisis also has defied the mean- in relation to working even more systemati- ing of the old maritime oath “my word is my cally with our CSR activities to the benefit of bond”. This has left JL with a number of non- our stakeholders. performance cases by counterparties, but we will pull through the turmoil in the usual Before plunging into the articles in this issue JL way, by being “world-class” in everything of Lauritzen News, please take a moment to we do. appreciate its new graphic design and layout. After seven successful years of covering vir- Under these demanding conditions, I can tually every facet of JL’s business develop- convey that JL’s financial results for the first ment – and subjects ranging from onboard half year of 2011 were slightly better than IT to combating piracy – we felt that it was expected, but negatively impacted not only time for a new look. With an updated version by weakening of markets, but unfortunately of a classic typeface and a clean, open page also by counterparty defaults (see article on layout, this new design reflects the combina- pages 4-5). tion of stability and boldness that makes JL a world-class shipping company. And it pro- Piracy remains a formidable threat and chal- vides an ideal platform for the future report- lenge for shipping. During the first part of ing on important developments ranging from 2011, pirate attacks further increased, but our growing presence in South East Asia to the actual number of hijackings was reduced. our promising entry into serving the offshore The reason for the success in suppressing oil industry. piracy is fairly obvious, and primarily due to navy-escorted convoys and an increas- Sincerely, ing number of armed guards on board ships Torben Janholt transiting the Gulf of Aden. Meanwhile, President & CEO vessels are increasingly being attacked out- side the protected areas, e.g., in the Red Sea. As discussed in one of the articles in this edition of Lauritzen News (see article on pages 20-22), the piracy problem and the solution to it are extremely complex and I would like to urge governments, the EU, and the UN to further strengthen their operational 4 LAURITZEN NEWS · ISSUE #15 · SEPTEMBER 2011 CHALLENGING START TO THE YEAR During the first six months of 2011, re- Invested capital amounted to USD Offshore’s four vessels are now all on long- turn on invested capital (ROIC) was 3.1% 2,342, up from USD 2,033m at period- term contracts with the Brazilian oil major. compared to 13.2% in the same period end 2010 due to planned fleet expansion • JL took delivery of eight bulk carriers in 2010. Excluding installments on ves- and renewal. (four Capesize, three Handymax and one sels under construction return on invested Handysize), two fully pressurized gas carri- capital amounted to 4.1% compared to Main events ers, and two MR3 product tankers. 17.5% in the first half of 2010. During the first half of 2011, the following • Three gas carriers were sold. Further- main events occurred: more, a purchase option for a bulk carrier Cash and securities amounted to USD was declared and the vessel was subse- 156m at the end of June 2011 (USD • JL successfully completed its offshore quently sold. 224m at year-end 2010). Including un- strategy by securing a long-term contract • A Korean charterer went into receivership used facilities cash amounted to USD for accommodation and support vessel Dan and subsequently redelivered four long- 209m. Swift with Petrobras, and thus Lauritzen term time-chartered handymax bulk car- riers to Lauritzen Bulkers. The charterer also announced the intention not to fulfill contractual obligations to take delivery of First half year Full year a long-term time-chartered Capesize bulk Key figures USDm 2011 2010 2010 carrier newbuilding in September 2011. Revenue 285.2 383.8 739.5 • Charter parties for two long-term time- EBITDA 65.4 153.6 252.2 chartered Capesize bulk carriers to a Chi- Depreciation (42.4) (33.1) (53.2) nese charterer were renegotiated and the Sales of assets 6.6 (0.8) (12.5) new contractual obligations are fulfilled. Operating income 29.6 119.6 186.5 Joint ventures 4.9 7.1 11.0 Finance net (31.6) (20.7) (56.3) Lauritzen Bulkers Result brfore tax 2.9 106.0 141.2 The dry bulk market was seriously impacted JL’s share of the result 3.6 99.6 130.7 by weather-inflicted export constraints at the beginning of the year, high commodity Invested capital (average) 2,195.5 1,923.4 1,931.3 prices, and intense newbuilding deliveries ROIC 3.1% 13.2% 10.2% throughout the period. ROIC (excl prepayments) 4.1% 17.5% 14.3% Investments, net 276.1 180.5 319.7 Invested capital (period end) 2,342.2 2,033.1 2,048.9 Total number of ship days increased to - hereof prepayments 349.7 506.4 663.1 16,890, compared to 15,148 in the first half Fleet (full year average) 152 149 148 of 2010. - hereof pool/partner share 32 35 39 Average no. of employees 1,169 1,159 1,149 EBITDA was USD 26.4m, compared to USD 106.2m in 2010, and operating income was USD 17.1m, compared to USD 96.9m in 2010. The decline was primarily due to EBITA OPERATING INCOME the weakening of the market, counterparty 1st half Full year 1st half Full year defaults, and non-recurring income included USDm 2011 2010 2010 2011 2010 2010 in the 2010 half-year result. Lauritzen Bulkers 26.4 106.2 155.5 17.1 96.9 133.8 Lauritzen Kosan 17.9 13.1 30.7 5.3 (1.1) 7.2 Lauritzen Offshore 18.7 29.7 61.3 7.2 21.7 41.2 Lauritzen Kosan Lauritzen Tankers 6.8 5.4 12.1 4.4 3.0 11.8 The open market for smaller gas carriers held Other/not allocated (4.3) (1.0) (7.4) (4.3) (1.0) (7.4) up quite well during the first half of the year 65.4 153.6 252.2 29.6 119.6 186.5 due to the gradual market recovery. LAURITZEN NEWS · ISSUE #15 · SEPTEMBER 2011 5 INVESTED caPITAL YEAR-END, USDm Total number of ship days was 2,034, com- pared to 2,357 in the first half of 2010. 2.400 2.000 EBITDA was USD 6.8m, compared to USD 1.600 5.4m in 2010, and operating income was 1.200 USD 4.4m, compared to USD 3.0m in 2010. 800 The improvement was mainly due to the 400 improved spot market. 0 LB LK LT LO JL P Investments and balance sheet hoto by 2010 2011 Invested capital amounted to USD 2,342m, C up from USD 2,033m at period-end 2010 due arsten to planned fleet expansion and renewal. L undager Total number of ship days was 6,887, com- JL maintains a firm balance sheet with a sol- pared to 8,657 in the first half of 2010. vency ratio (excluding minority shareholders’ share of equity) of 49% at of 30 June 2010.