2013-02-16 11:01:56 -
The I.M. Skaugen Group (IMSK) achieved a negative pre-tax result for 4Q12 of
USD4.4 mill, compared to a loss of USD1.6 mill in 4Q11. EBITDA was USD2.5 mill
for 4Q12 compared to USD2.3 mill in 4Q11.
The preliminary pre-tax result for 2012 was a loss of USD15.8 mill, compared to
a loss of USD8.1 mill in 2011. EBITDA for 2012 was USD21.2 mill compared to
USD23 mill in 2011.
Year 2012 was a year of many external challenges, testing our organisation in
all aspects imaginable. We experienced a "new high" in doing our first LNG
cargoes and within ports in China, but also experienced a new low point in the
unfortunate and tragic collision involving our
vessel Norgas Cathinka in
The Company is not satisfied with the overall financial performance of the group
as it shows a negative result for the year.
IMS no longer considers the Skaugen China Activities nor the Marine Transfer
Activities to be part of the Group's core business activities. IMS consider its
investment in the related entities to be financial investments as of 31 December
2012. The Group will now focus its resources primarily on it Gas Transportation
Please refer to page 6 in attachment regarding segment changes.
Due to the underlying negative results in 2012, the equity ratio has shown a
negative trend during the year and ended at 25.7 % and a reduction from 30.1%.
Our target is to have an equity ratio of at least 30% and we have and will take
needed steps to maintain it above 25% and bring it back to the target level.
Several projects have been initiated by the Board to accomplish this and
measures have been taken during 2012 in order to reduce the negative results in
our non-core businesses and we expect to see the benefits of these actions
On a regular basis we collect "brokers' estimated values" for all the
carriers in our fleet, and these are substantially higher than their book value.
Currently the brokers' values are 17% higher than the average book value of the
fleet. We also apply a "value in use" concept as an estimate for the true
earning capacity and thus the earning capacity adjusted value of our gas
carriers are substantially higher than the brokers' estimated values. We have
also received offers for sale of vessels and these offers are above the
"brokers' estimated values". Historically, we have most of the time been able
sell our vessels at a price above book value and thus with book gain.
We are in the process of monetizing the investments we have made in China and
specially the investment in Shenghui Gas and Chemical Systems Ltd (50%
ownership). We are reasonably confident that these shares can be sold at a gain
compared to book value of the investment and that the process will be concluded
We have taken decisive steps to reduce our cost of operations.
Our "centralise and simplify program" initiated in late 2010 to reduce the
headcount and by this our overall cost of operations has delivered a positive
contribution during the year. The underlying 50 per cent reduction of head count
of shore side staff from its start in the late 2010 will now have full effect in
2013. We have also further scaled down on our new business development
activities during the year and we will now start to capitalize on the
investments made in the core business activity.
After the repayment of IMSK10 in March, we are satisfied to have reduced
significantly any refinancing risk until 2015.
The bonds have however, increased our financing cost and their effective
interest rate has increased to 11.2%.
The company currently has no material capital commitments and remains fully
CORE BUSINESS - GAS ACTIVITIES, NORGAS
The result on EBITDA basis in Norgas Carriers segment for 4Q12 was USD3.6 mill
and USD24.1 mill for the year 2012. Compared with USD6.2 mill and USD30 mill,,
respectively, for the same periods in 2011.
Three short haul carriers (abt. 6.000 cbm size) within our fleet have had
unsatisfactory performance in their spot trade. As of second half of the year
they are now better incorporated in our contract portfolio with the rest of the
fleet and we see now an improved performance going forward.
A major challenge going forward for Norgas is to get paid in a way to match not
only the increased cost of operation and the cost of finance of the ownership of
the vessels, but also the risk of its operation. The below mentioned accident in
Indonesia is only one of these risks that we have previously not evaluated well
enough and priced into these agreements.
In spite of a world economy still suffering from the financial crisis starting
in 2007/2008 as well as the political situation with the Iran embargo taking
full effect, we have managed to maintain our positions. Norgas Carrier's volumes
held up well and continued the positive trend.
The equivalent time charter rates for our fleet have stayed above the eight year
average during 2012 and we see that trend continuing into 2013.
Our contract covers (% COA volumes versus total volume transported) remains on a
level between 60-70%. We have a number of good volume contracts with the key
exporter in the GCC region, which is the region with the lowest cost base for
In December we did our first LNG cargo on one of the Multigas ship, proving not
only the technology itself but also our small scale LNG concept. Loading at a
large conventional LNG import terminal and delivering the cargo to distribution
terminal from where the LNG will be distributed by trucks.
There was an unfortunate accident in Indonesia on September 26(th) 2012
involving our ship Norgas Cathinka in a collision. The incident leading to the
tragic loss of life for 7 passengers and 1 crew member, on the ferry called
Bahuga Jaya. This was the worst incident, involving loss of lives, for our
Company since Second World War and thus a low in our nearly hundred years of
history and we need to make sure it will never happen again.
We do sincerely regret the loss of lives and we do consider it an avoidable
accident that should not have happened and we regret the part we played in it.
The ferry Bahuga Jaya was 40 years old and evidently not maintained for its
trade and it was probably unseaworthy and did most probably sink for reasons of
fatigue or construction failures. The sinking caused in our views the loss of
lives and not the collision itself. The loss of lives was also caused by the
lack of proper procedures on the ferry to evacuate passengers in an emergency
and with inadequate lifesaving procedures and equipment.
The available data from the VDR data (Black Box) on our ship makes it possible
to reconstruct the events leading to the collision. From this it is evident that
our vessel is not the vessel that caused the collision. The aftermath has also
proven to be very challenging due to a far from transparent juridical process in
Indonesia and we are still waiting for the ship and its crew to be released. The
long delays in release of the ship are costly for our Company and the loss of
earnings amount to USD 400,000 / month with full operational cost of the vessel
with full crew and with cargo of liquefied gasses on board. This complex and
not very transparent process in Indonesia makes it appear much more like a
"hostage situation". It is needed to designate the most senior management`
attention on settling the issues, with support from and in cooperation with the
insurance companies we have, and that is also difficult for a smaller company
LONG HAUL TRADE OF PETROCHEMICAL GASES - NICHE MARKET FOR OUR CORE BUSINESS
Our long term niche strategy, focussing on the long-haul Petrochemical trade is
sound and valid. It is a market with more stable growth and more stable earnings
compared to many or most other shipping markets. The long term underlying growth
in demand is ahead of the increase in the fleet due to new building activities.
With our recent renewal program we have maintained our position as one of the
market leaders in our segment with one of the largest and youngest fleet.
The split between the different products we transport has changed over the years
and the two major ones; ethylene and butadiene currently make up 80-90% of the
total volumes transported.
The growth in world ethylene production has been closely correlated to world
economic growth and with a factor of 1.1 to 1.3 x GDP growth. The long haul
trade of ethylene as a percentage of total trade has also increased over time
and the change in trading patterns has further supported the growth in long haul
transport with an increase in ton-miles.
The most important product for the butadiene market is car tyres (making up
close to 60% of the volumes) and thus vehicle use and production are key
drivers. In 2012 the world's total car production reached new heights mainly
driven by the growth economies in Asia.
The current world fleet of long haul ethylene carriers (8,000-22,000 cbm) stands
at 78 vessels with our fleet making up 19% of this. New deliveries of such
ships, that are expected for delivery in 2013, will add a further 6 vessels by
year end to the global fleet. Net of vessel becoming too old for the ethylene
trade, the world fleet will have grown with a more modest 6%. Taking a longer
view and looking towards 2018 and taking into account known new buildings as
well as vessels becoming too old for the ethylene trade, the average yearly
growth will only be 2% and we do expect growth in demand to be much higher than
this in the same period.
The one possible game changer for industry in general and the Petrochemical
market in particular is the shale-oil and shale-gas development and especially
in the USA. In the past it was only the middle-east based producers of
Petrochemical products and gases that had access to low cost feed-stock in the
form of local ethane, but now also US based producers will have access to
competitively priced ethane which emanates from the increased shale-oil and
shale-gas production. We have started to see the effect during 2012. Not only is
the US very likely to become net exporter of oil and gas but the domestic
industry has started to benefit from lower electricity prices due to low cost
gas. Also, the fertiliser industry as well as the Petrochemical will industry
will benefit from lower cost of feed-stock. We will also see natural gas in the
form of LNG being used much more for transportation and power generation as a
result of this. This will further enhance our thinking re the Multigas carrier
design and development.
NON-STRATEGIC JOINT VENTURES AND ASSOCIATES
The results from our non-strategic investments were below last year's result;
SPT delivered a negative result and our investments in China had a positive
result, but both below the 2011 level.
SPT's global support business continues to make progress and has now a presence
in all key geographical markets. It continuous to compensate for the very
depressed STS business in US Gulf region (also due to general crude tanker
markets) and do it with a performance through earnings and cash flow while the
STS operations in US Gulf continuous to be negative.
The support services sector completed another first in 2012 with the successful
completion of a bulk transfer of coal. Working closely with our customer all
necessary approvals were received for this maiden event which would allow our
customer to increase their market competitiveness through shipping larger
A number of FSRU projects were supported during the year that provided our
customers with both engineering solutions and technical support. Again
highlighting the depth of LNG experience within SPT, an engineering contract for
the provision of an alternative unloading solution was secured from a large
established LNG importation terminal.
Our main investment in China, Shenghui Gas and Chemical Systems (SGCS),
performed in line with the Chinese economy and delivered result on par with
The weakening margins mainly attributed to increase in financing cost as well as
effects from increasing labour- and raw material cost during the year.
With the consensus view that the world economy will perform better in 2013 than
in 2012 we remain cautiously optimistic looking forward. If demand for
Petrochemicals will continue to mirror the growth in GDP we can see volumes of
Petrochemicals transported increase towards the 2011 level. Adding to that a
modest foreseen growth in the fleet we can see a tightening market. Also our
first LNG cargoes in 2012 could be the forbearer of better things to come for
this new area for our liquid gas transportation business.
Oslo, 15(th) February 2013
I.M. Skaugen SE
Board of Directors
I.M. Skaugen SE
If you have any questions, please contact:
Bente Flø, Chief Financial Officer, on telephone
+47 23 12 03 30/+47 91 64 56 08 or by e-mail: email@example.com
. This press
release is also available on the Internet at our website:
I.M. Skaugen SE is a Marine Transportation Service Company, with a focus on
Innovative Maritime Solutions. Our core activity is the seaborne transport and
logistics of liquefied gases, such as petrochemical gases, LPG and now also LNG.
The I.M. Skaugen Group of companies (IMS) currently operates a fleet of 39
vessels worldwide of which 19 are gas carriers within the core business area. We
are also capable to provide on- and off-shore LNG terminal management as well as
ship to ship transfer services of LNG/LPG and on a global basis. We have in-
house capabilities for the development and design of specialized high quality
gas carriers for our niche markets and we recruit, train and employ our own team
IMS employs approximately 2,000 people globally out of which 700 are within our
core gas activity, and with 23 nationalities represented. We manage and operate
our activities and service our clients from our offices in Singapore, Oslo,
Shanghai, St. Petersburg, Houston, Sunderland and Bahrain.
This information is subject of the disclosure requirements pursuant to section
5-12 of the Norwegian Securities Trading Act.
IMSK Preliminary Report 2012:
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Source: I. M. Skaugen SE via Thomson Reuters ONE