Odfjell SE Annual Report 2012

to reduce the Company’s exposure to fluctuations in the
above-mentioned aspects limits the upside potential from
favourable movements in respect of these risk factors.
The single largest monetary cost component affecting
our time charter earnings is bunkers. In 2012 this item
amounted to more than USD 318 million (59.8% of voyage
cost). A variation in the average bunker price of USD 100
per tonne equals about USD 54 million, or a USD 1,832 per
day change in time charter earnings of the ships in which
we have a direct economic interest. Our bunker exposure
is partly hedged through bunker adjustment clauses in
most of our Contracts of Affreightment. As of 31 December
2012 we had entered into additional hedging through swaps
and options for about 20% of the 2013 bunker exposure.
All interest-bearing debt, except debt held by tank terminals
outside the US, is denominated in US Dollars. Bonds issued
in non-USD currencies are swapped to USD. Interest rates
are generally based on USD LIBOR rates. A portion of the
interest on our debt is fixed through long-term interest
rate swaps. With our current interest rate hedging in place,
about 25% of our loans are on a fixed rate basis. In order to
reduce volatility of the net result and cash flow related to
changes in short-term interest rates, interest rate periods
on the floating rate debt and interest periods of our liquidity
are managed to be concurrent.
The Group’s revenues are primarily denominated in US
Dollars. Only tank terminals outside the US and our regional
European shipping trade generate and receive income in
non-USD currencies. Our currency exposure relates to the
net result and cash flow from voyage-related expenses,
ship operating expenses and general and administrative
expenses denominated in non-USD currencies, primarily
in NOK and EUR. Our estimate is that a 10% appreciation of
the USD against the NOK would improve the yearly pre-tax
result by roughly USD 11 million, assuming no currency
hedging is in place.
Our currency hedging at the end of 2012, under which we
sold USD and purchased NOK, covers about 21% of our
2013 NOK exposure respectively. Future hedging periods
may vary depending on changes in market conditions.
LIQUIDITY AND FINANCING
As of 31 December 2012, cash and cash equivalents and
available-for-sale investments amounted to USD 170 million,
compared with USD 205 million as of 31 December
2011. Interest-bearing debt fell from USD 1,245 million
at year-end 2011 to USD 1,221 million as of 31 December
2012. At the same date net interest-bearing debt amounted
to USD 1,046 million, the equity ratio was 36.9%, and the
current ratio was 1.1.
Odfjell Holding (US) Inc., a joint venture company between
Odfjell and Lindsay Goldberg, secured in October a USD
200 million five-year secured credit facility from a group
of five US banks. The principal amount under this facility
can be increased up to an additional USD 100 million
(accordion feature) for potential new expansion opportunities
throughout North America.
In December Odfjell SE issued two new unsecured bonds,
a NOK 500 million 6-year bond with a coupon of 3-month
NIBOR + 6.50%, and a NOK 200 million 3-year bond with a
coupon of 3-month NIBOR + 5.50%. The bonds have been
swapped to USD 124 million.
With a solid balance sheet, the Company will be looking
for further opportunities in the financial markets to secure
additional funding at reasonable terms to finance expected
growth.
KEY FIGURES
The return on equity for 2012 was negative 11.3% and the
return on total assets was negative 2.3%. The corresponding
figures for 2011 were positive 30.3% and 12.4%, respectively.
The return on capital employed (ROCE) was negative 2%
in 2012. Earnings per share in 2012 amounted to USD
-1.37 (NOK -8.01), compared to USD -0.25 (NOK -1.5) from
continued operation in 2011. The cash flow per share was
USD 0.26 (NOK 1.5), compared to USD 5.15 (NOK 30.95)
in 2011.
As of 31 December 2012 the Price/Earnings (P/E) ratio was
negative 3.1 and the Price/Cash flow ratio was 16.5. Based
on book value, the current Enterprise Value (EV)/EBITDA
multiple was 23.1 while the EV/EBITDA multiple was 16.7
based on the market capitalisation as per 31 December
2012. The interest coverage ratio (EBITDA/net interest
expenses) was 1.8, compared to 3.5 in 2011.
ORGANISATION, WORKING ENVIRONMENT AND JOB
OPPORTUNITIES
Odfjell aims at being a company for which it shall be
attractive to work, with an inspiring and interesting work
environment both at sea and ashore. We carry out employee
surveys at the headquarters in Bergen and at our overseas
offices, and we do ergonomics inquiries. In addition we
have implemented a programme for improved health care
for seafarers, focusing on exercise and a healthy diet. The
work environment onshore and offshore is considered good.
Odfjell maintains a policy of providing employees with
equal opportunities for development of skills and offering
new challenges within our Company. All employees are
treated equally, irrespective of ethnic background, gender,
religion or age – and they are offered equal opportunities
for development and promotion to managerial positions.
Gender-based discrimination is not allowed in terms of
recruitment, promotion or wage compensation. Of about
224 employees at the headquarters in Bergen, 67.4% are
men and 32.6% women, whilst the corresponding global
figures (about 908 employees in our fully owned onshore
operations) are 74.4% and 25.6% respectively. Three of
the six Directors of the Board of the Group are women.
15
odfjell annual report 2012