Final accounts 1999 Concordia

REPORT ON FINAL ACCOUNTS, 1999 * Very weak freight market during the year * High scrapping rate. 35 (16) VLCCs scrapped * Result after financial net SEK -72.0 (114.0) million * Refinancing completed * Construction of Stena V-MAX proceeding according to plan * Continued effective ship operation with low operating and docking costs * Dry-docking as planned and budgeted. Result for 1999 The Group's revenue amounted to SEK 773.6 (1,102.9) million. The result after financial items was SEK -72.0 (114.0) million. The result after tax was SEK -62.5 (117.3) million, corresponding to a result per share after tax of SEK -2.30 (4.38) and after full conversion SEK -0.96 (2.79). Compared with the previous year, both sales and result were negatively affected by lower freight rates in 1999. The average freight rate during the year was USD 19,300 (33,700) per day for the ULCCs and USD 13,300 (24,400) for the VLCCs. The joint charter business with Stena Bulk diminished during the year with two Aframax tankers redelivered during the year and one VLCC due to be delivered in January, 2000. This leaves one profitable multi-year freight contract providing employment for one VLCC. Voyages in progress at year-end, where the operating expense was higher than the revenue, are charged to 1999. SEK 5 million has thereby been charged to 1999 instead of 2000. Accordingly, the result is lower than the forecast of SEK -65 million published earlier. Liquidity, financing and investments The Group's disposable liquid funds, including unutilised credit facilities, amounted to SEK 699.9 (128.1) million. The increase in the Group's liquidity is the result of a bank loan of USD 165 million raised during the spring which replaced an earlier bank loan of USD 65 million. This loan is intended to refinance the existing fleet and finance the two Stena V-MAX design VLCCs ordered at the end of 1998. The change in the financial net between 1998 and 1999 is primarily due to the advance repayment in 1998 of the USD 110 million Private Placement Loan raised in 1994. The sale of bonds, purchased in 1998, at a profit of SEK 6.8 million had a positive effect on the 1999 financial net. Investments during the year amounted to SEK 295 (255) million. A substantial portion of the investments consists of part payments relating to the two Stena V-MAX vessels under construction in South Korea. Equity ratio and net worth The equity ratio was 37% (42) while the adjusted equity ratio, i.e. including surplus values in ships, was 44% (51). After full conversion, these figures were 48% (56) and 55% (62), respectively. Compared with the end of last year, the equity ratio has fallen, mainly as a result of the increase in loans raised to finance the newbuildings. Shareholders' equity per share after full conversion amounted to SEK 19.70 (20.31) on 31-12-1999. The fleet was appraised on 30-11-1999 by three independent shipbrokers. The fleet's average value according to these appraisals was USD 157.2 (181.5) million, equivalent to SEK 1,340 (1,464) million. Compared with the end of last year, the ship values have fallen 13%. Net worth per share, before deferred tax, was estimated to be SEK 33.78 (38.14) as of 31 December. This corresponds to SEK 24.17 (26.64) after full conversion. Dividend The result level and liquidity are considered to be insufficient to warrant a dividend. Accordingly, the Board of Directors will propose to the Annual General Meeting that no dividend be paid for 1999. Last year, the dividend was SEK 0.50 per share. Market Freight market 1999 - ship revenues During the good shipping years of 1997 and 1998, with a healthy demand, Concordia was able to report a profit of SEK 270 million before tax. 1998 was positively affected to a certain degree by the fact that more oil was transported than was justified by consumption. Stocks were built up as oil price was decreasing. In 1999, the stocks built up were consumed and this resulted in lower demand for transportation. In other words, transportation intended for 1999 was utilised in 1998. At the beginning of 1999, oil prices were at a historically very low level of about USD 9.50 per barrel, even though the OPEC countries had cut production a number of times in 1998. In order to raise prices, OPEC decided to cut production by a further 15%. Some non-OPEC countries, including Norway and Mexico, followed suit and also reduced production. This decision, and the fact that it was loyally adhered to, resulted in sharply rising oil prices which, at the end of the year, had increased to 24.50 per barrel for oil from the Middle East. With rising oil prices, the oil companies' immobilisation of capital in oil stocks increases. Consequently, the oil companies are working actively to keep their stocks at a low level and this results in lower transportation volumes. Low stocks in combination with increased demand in cold weather can generate a sudden high demand for oil and tanker tonnage. This occurred last week and resulted in a shortage of large-tanker tonnage and thus rising freight rates. The combination of production cuts and reduced stocks caused demand for large-tanker tonnage from both the Middle East and West Africa to drop. The demand for transportation fell, mainly from the Middle East and round the Cape of Good Hope to the US, which is an important route for ULCC/VLCCs, from about 181 cargoes in 1998 to 103 in 1999. The number of cargoes for ULCC/VLCCs also fell on other routes, but not as heavily. The exception was South Korea, which increased its oil imports from the Middle East from about 2.1 million barrels per day to 2.3 million barrels per day during the year. According to Platou Economic Research, freight rates for Concordia-type VLCCs fell from USD 23,700 per day in 1998 to USD 11,000 per day in 1999. The average freight rate for Concordia's VLCCs was USD 24,400 per day in 1998 and USD 13,300 per day in 1999, which was USD 2,300 (700) higher per day than Platou's index. The Stena King and the Stena Queen, Concordia's two ULCCs, continued to trade between the Middle East and the US. In 1999, the average freight rate was USD 19,300 (33,700) per day. A portion of Concordia's bunker consumption was covered by forward contracts and this is not included in the TC net figures above. The forward contracts correspond to extra revenues of USD 800 per day. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/01/26/20000126BIT00300/bit0001.doc Full report http://www.bit.se/bitonline/2000/01/26/20000126BIT00300/bit0002.pdf Full report