Royal Arctic Line A/S Royal Arctic Line Group Interim Report H1 2011
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Royal Arctic Line A/S og Royal Arctic Line Group (reg. nr. A/S 209.527) Interim report H1 2011 Contents: Company details 3 Management commentary H1 2011 4 - Interim financial statements 4 - The market 5 Expectations for the rest of 2011 6 Statement by Management on the interim report 7 Income statement 8 Assets 9 Equity and liabilities 10 Cash flow statement 11 This document is an unofficial translation of the Danish original. In the event of any inconsistencies, the Danish version shall apply. Company details Company: Royal Arctic Line A/S, Aqqusinersuaq 52, Postboks 1580, 3900 Nuuk Telefon: +299 34 91 00, E-mail: [email protected], Homepage: www.ral.gl Reg. nr.: A/S 209.527 Registered office: Nuuk, Greenland Share capital: DKK 120m Ownership: The Self Rule Government of Greenland, Nuuk, 100% ownership Board of Directors: Martha Labansen, Chairman Kristian Lennert, Vice-Chairman Tanja Nielsen Bent Østergaard Ole Frie Efraim Tittussen* Jens Peter Berthelsen* Mariane Hansen* *Elected by the employees in 2010 for a four-year term Direktion: Jens Andersen, Chief Executive Officer (CEO) Executive Group: John Rasmussen, Chief Operations Officer (COO), and CEO, Royal Arctic Bygdeservice A/S Bent Ole Baunbæk, Chief Financial Officer (CFO) Niels Clemensen, Chief Development Officer (CDO) Management group: Jesper Balthazar-Christensen, Chief Executive Officer, Royal Arctic Logistics A/S Jette Larsen, Chief Executive Officer, Arctic Umiaq Line A/S Taitsiannguaq Olsen, Division Manager, Royal Arctic Havneservice Harald Asschenfeldt, , Department Head, IT Jens Boye, , Department Head, Ship Management Helena R. Kristiansen, , Department Head, HR Jakob Strøm, , Department Head, Communication and Marketing Management commentary H1 2011 The first half year of 2011 saw a significant rise in Greenland on supply to settlements. The agreement cargo volumes arriving in Greenland and a slight introduced an investment contribution on all freight increase in cargo volumes leaving Greenland. This to, from and domestically in Greenland from 1 Feb- situation is clearly reflected in the financial perfor- ruary, also applying to the Parent. The investment mance. contribution is presently fixed at 3.1% and its sole purpose is to finance the new service agreement on The financial pick-up puts an end to two years of supply to settlements. stagnant or dropping cargo volumes. Cargo vol- umes arriving in Greenland in the first six months of In H1 2011, the Scottish enterprise, Cairn Energy, 2011 have gone up by 33,000 cubic metres, almost conducted exploratory oil drillings off Greenland’s 20% up on the same period in 2010. The increase west coast which has boosted harbour activities in is primarily attributable to a boost in building activi- Nuuk. The oil exploration has also been of major ties, while other cargo categories have improved importance to the associate, Arctic Base Supply, as well. Cargo volumes leaving Greenland show which has a service and logistics agreement with a handsome rise of 5,000 cubic metres on the Cairn Energy, and to the subsidiary, Royal Arctic same period in 2010. Domestically in Greenland, Logistics, which renders a wide range of services to the transported volumes continue to drop, but the the oil exploration activities. curve flattens off significantly compared to recent years’ major drop. A new logistics warehouse and office facilities are being constructed in the Greenland Harbour in the In January 2011, Royal Arctic Line entered into the port of Aalborg. These new facilities will optimise final agreements on funding and contracting of five and simplify working procedures, lead to improved new ships to the Group. Also, a freight rate increase utilisation of the capacity for Royal Arctic Logistics of 1.5% was introduced as part of the consolidation and at the same time increase the possibilities of of Royal Arctic Line’s finances in connection with developing new business areas. The construction is the investment in new tonnage. Several of the ships expected to be completed during H2 2011. are to be chartered out to the subsidiary Royal Arc- tic Bygdeservice, which in 2011 has concluded a Interim financial statements 20-year service agreement with the Government of The Royal Arctic Line Group realised a pre-tax loss of DKK 4.7m for H1 2011 and a loss after tax and minority interests of DKK 3.2m. The same period 2010 from DKK 1.3m to DKK 0.4m following a in 2010 saw a pre-tax loss of DKK 37.8m and a reduction in interest-bearing debt and increased loss of DKK 25.2m after tax. The H1 2011 financial interest income from the Group’s free cash flow. performance has accordingly been improved by approx DKK 22m after tax and minority interests Plant under construction in property, plant and compared to last year’s interim results. equipment is affected particularly by investments in new ships. The improvement of the H1 performance is attrib- utable to a rise in total income and a drop in total The market costs. Income is DKK 364m on DKK 341m in H1 In H1 2011, 373,000 cubic metres of cargo were 2010. The rise in income is primarily attributable to transported to, from and domestically in Greenland increased concessioned cargo income of approx against 345,000 cubic metres in H1 2010. DKK 28m stemming from higher cargo volumes etc to Greenland in general, particularly construc- Cargo arriving in Greenland is recorded at 201,000 tion material, and to a minor degree the freight rate cubic metres compared to 168,000 cubic metres in increase mentioned above. Non-concession in- 2010. Several cargo categories have seen improve- come has dropped by approx DKK 4.1m mainly as ment, particularly within construction material. a result of lower project cargo volumes. Handsome increases were also recorded for ordi- nary cargo as well as cars, boats and contractors’ Also in H1 2011, Royal Arctic Line collected invest- machinery. ment contributions of DKK 6.1m. The amount is to cover the Government of Greenland’s increased ex- Cargo volumes leaving Greenland have gone up by penses for the new service agreement on supply to 5,000 cubic metres from 115,000 cubic metres in settlements, which comprises construction of new H1 2010 to well over 120,000 cubic metres in the ships for this purpose. As the new ships are not same period this year. The fishing industry takes the delivered until 2012, income from the investment biggest increase. contribution was accrued and taken to the balance 46,500 cubic metres were transported domesti- sheet of the interim financial statements. cally in Greenland against 47,000 cubic metres Total costs have in H1 2011 been reduced by DKK in H1 2010. The drop is a result of less domestic 10m and amount to DKK 349m against DKK 359m transportation of ordinary cargo while the amount in H1 2010. The reduction is a result of a number of commodities in the fishing industry has seen a of factors. Amortisation and depreciation are down slight increase. by DKK 20m on 2010 and constitute a significant factor. Please note that the drop in amortisation and depreciation in 2011 is temporary as the construc- tion plan launched will lead to a major rise in depre- ciation on ships, starting in H2 2012. The rise in staff costs, selling and administrative expenses reflect increased activities in H1 and the introduction of new administrative systems. The increased costs for bunkers under ships operations are due to higher oil prices. The rise of DKK 13.6m on H1 2010 has not been fully compensated for although income from the oil and exchange rate margins has gone up markedly. The compensation is lacking because the model, by which the margin is charged, involves a delay in the settlement of rise/drop in oil prices and exchange rates. The lack- ing charge of margins amounts to DKK 8.3m at 30 June 2011 and has gone up by DKK 2.6m, which has impacted results negatively. Net financing expenses dropped in H1 2011 on Expectations for the rest of 2011 The positive development in cargo volumes realised next adjustment is fixed for 1 November 2011. As in H1 is expected to continue throughout the year, a result of the increasing oil prices in H1 2011, the however, with a more flat curve as we expect activi- balance for later collection of the oil and exchange ties in the construction industry to flatten off a little. rate margins has gone up, see above description The forecast shows that 2011 will see 840,000 cu- of the matter. As long as oil prices will not begin to bic metres transported to, from and domestically in rise again in H2 2011, the balance will be reduced Greenland, including project cargo, which leads to which in turn will affect the Group’s earnings posi- a total volume improvement of some 27,000 cubic tively. metres compared to 2010. Based on the results realised for H1 and expecta- The development in oil prices and the USD rate af- tions for H2 2011, we expect a pre-tax profit for the fects the oil and exchange rate margins which drop year in the range of DKK 75-80m compared to the to 15% from the present 21% with effect from 1 expectations of DKK 40-45m announced in con- September 2011. The price development is evalu- nection with the presentation of the annual report ated on a continuous basis, and the oil and ex- for 2010. change rate margins are adjusted accordingly. The Statement by Management on the interim report The Board of Directors and the Executive Board have today examined and adopted the unaudited interim report of Royal Arctic Line A/S for the period 1 January to 30 June 2011.