TRANSATLANTIC: YEAR-END REPORT FOR 2006

Strong fourth quarter secured record full-year earnings

  • A strong improvement in operating profit was reported in the fourth quarter, compared with the year-earlier period. Earnings for the quarter amounted to SEK 69 M (3). The Group's operating profit improved sharply and amounted to SEK 216 M (100).
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  • The offshore market remained strong during the fourth quarter, and earnings for the Icebreaking/Offshore division totaled SEK 67 M (20). For the full year, the division reported record-high earnings of SEK 191 M (89).
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  • Earnings by the Transatlantic Services division improved during the quarter, but did not reach a satisfactory level. The division's operating profit for the full year amounted to SEK 12 M (0).
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  • The European Services division reported improved operating profit in the fourth quarter, and full-year earnings were in line with the year-earlier period, totaling SEK 37 M (37). Costs for market investments and the start of new operations were charged against earnings.
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  • An increase in the ordinary dividend to shareholders from SEK 1.00 per share to SEK 2.00 per share has been proposed.
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  • The consolidated operating profit for 2007 is expected to be in line with or higher than 2006.
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  • Results for January - December 2006:
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    Net revenue: SEK 2,252 M (2,334)
    Operating profit before tax: SEK 216 M (100)
    Profit before tax: SEK 207 M (314) -Earnings per share: SEK 6.90 (10.20)
    Profit after current tax: SEK 200 M (313) -Earnings per share: SEK 6,70 (10.10)
    Profit after full tax: SEK 188 M (291) - Earnings per share: SEK 6,20 (9.40)
    On December 31, 2006, shareholders' equity per share amounted to SEK 37,90
    (36.80 at year-end 2005).
    The equity/assets ratio on the closing date was 40% (40% at December 31, 2005).
     
    (Excluding operations terminated during 2005. In 2005, the result before tax was affected by the effects of mergers.)

    Transatlantic's operations, goals and strategy
     
    Transatlantic consists of the Industrial Shipping business area, which comprises two divisions - Transatlantic Services and European Services - and the Icebreaking/Offshore division. Transatlantic Services and European Services are focused on contract shipping, primarily for the forest products and steel industries. The operations of the Icebreaking/Offshore division are based on combination vessels with long-term contracts and guaranteed income for icebreaking, in addition to other deployment, mainly for rig-relocation in the offshore market.
     
    Transatlantic's business concept is to market, develop and deliver the market's most efficient transport solutions in close and active cooperation with customers.
     
    Transatlantic's goal is to be the market leader in its segments, with profitability that generates a favorable return for shareholders. The goal is a return of 12% on shareholders' equity and an equity/assets ratio that does not fall below 30%.
     
    The Group's strategy for the next few years emphasizes growth and sustainable profitability. Growth will be achieved both organically and through acquisition. The Group is also very open to the development of various partnerships aimed at broadening operations or implementing various investments and projects.
     
    The ambitions for growth will require investments in new tonnage and replacement tonnage. These include all divisions and will be conducted without jeopardizing the Group's financial targets. It also means the Group's tonnage requirements will be partly resolved through charter contracts and by external investors becoming wholly or partly involved in the fleet operated by the Group.
     
    The strategy for and development of the Group places major demands on quality, safety and the environment, as well as awareness of customer demands and a willingness to change.

    Full year 2006 in brief
     
    Generally favorable shipping trends and conditions were noted during 2006, resulting in good capacity utilization, and price levels were marginally higher than prices during 2005. Within Transatlantic's segment, demand was satisfactory for the Icebreaking/Offshore and European Services divisions, while some areas of the Transatlantic Services division noted gradually weaker demand for capacity, mainly for timber volumes exported to the US.
    The year was characterized by market investments and development of new operations in the European Services division, which were charged against earnings for the year. The investments are expected to generate significantly higher earnings in the long-term perspective.
     
    A comprehensive tonnage renewal process was started in Transatlantic Services' traffic. As part of the process, a number of older vessels were sold and several vessels were leased under short-term contracts, pending delivery of new tonnage. Negotiations are now being conducted with several shipyards. Also during the year, three Finn vessels (owned as well as chartered tonnage) were lengthened to meet increased demand for capacity from the forestry industry, which had a negative impact on the Transatlantic Services division's earnings during the first half of the year.
     
    As a result of extremely strong demand, the offshore market set new records during 2006. Capacity utilization and price levels increased sharply during the year, and the Icebreaking/Offshore division reported highly favorable operating profit. Two new anchoring vessels (AHTS) were ordered during the year, and an option was signed for two more vessels.
     
    The Group's operating profit for the full year improved considerably compared with the preceding year. The Icebreaking/Offshore division demonstrated a very distinct earnings improvement. The Industrial Shipping business area also improved its earnings, but not to the same extent.

    General developments in the fourth quarter
     
    The generally favorable trend of demand remained satisfactory during the fourth quarter. Capacity utilization was good in both Icebreaking/Offshore and European Services division of the Industrial Shipping business area. However, lower capacity utilization was noted in Transatlantic Services operations due to a continued decline in timber volumes to the US and some temporary disruptions in paper exports from Northern Europe to the US.
     
  • Earnings for Transatlantic Services improved, compared with the year-earlier period, which was extremely weak due to several disruptions to shipping. RoRo traffic in paper products and Transatlantic bulk operations both showed lower volumes than expected during the period.
    The division's operating result amounted to a loss of SEK 4 M (loss: 21).
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  • The European Services division reported higher available volumes, and earnings rose compared with a year earlier. The substantial investments in increased vessel capacity and marketing also continued during the fourth quarter.
    The division's operating results amounted to SEK 15 M (10).
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  • The operations of Icebreaking/Offshore noted continued strong development during the fourth quarter, which is normally a period of weak utilization due to difficult weather conditions. The business area operating results were sharply higher than a year earlier and amounted to SEK 67 M (20).
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    The consolidated operating profit for the fourth quarter increased by SEK 66 M, compared with the year-earlier period, and amounted to SEK 69 M (3).

    Consolidated earnings for full-year 2006
     
    The Group's net revenues for full-year 2006 were down 3% to SEK 2,252 M (2,334). The decline was due to a reduction in the number of vessels in the Group's external ship management assignments. Net revenues for both Group business areas increased by a combined total of 17%.
     
    The Group's operating profit for the year amounted to SEK 216 M (100) and profit before tax totaled SEK 207 M (314, excluding earnings from divested operations). A loss of SEK 9 M attributable to divestments of vessels is included in earnings for the year. Earnings for the preceding year were affected strongly by merger effects, divestment of the Group's Dry Cargo division.
     
    Net profit after tax totaled SEK 188M (314).

    (For complete report see attached file)

    About Us

    Viking Supply Ships AB (publ) is a Swedish company with headquarter in Gothenburg, Sweden. Viking Supply Ships A/S is a subsidiary of Viking Supply Ships AB (publ). In addition Viking Supply Ships AB (publ) has the subsidiary TransAtlantic AB. The operations are focused on offshore and icebreaking primarily in Arctic and subarctic areas as well as on RoRo and container feeder services mainly between the Baltic Sea and the Continent. The company has in total about 800 employees and the turnover in 2014 was MSEK 3,190. The company’s B-shares are listed on the NASDAQ Stockholm, Small Cap segment. For further information, please visit: www.vikingsupply.com

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