Interim report for Concordia maritime ab (publ)

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INTERIM REPORT FOR CONCORDIA MARITIME AB (publ) 1.1 - 30.9 2001 · Profit after financial net: SEK 198.2 (131.6) million · VLCCs continue to generate good revenues due to freight contracts · V-MAX tankers, Stena Vision and Stena Victory, delivered and employed on profitable T/C contracts · Forecast for 2001 unchanged: SEK 250 million Sales and result Consolidated sales amounted to SEK 959.6 (903.5) million. The profit after financial items was SEK 198.2 million (131.6, which included a profit of 25.5 on the sale of ships). The profit per share after tax was SEK 4.08 (4.37) and after full conversion SEK 3.83 (2.67). Sales are distributed geographically over the following markets (in %): US 32, Saudi Arabia 28, UK 4, South Africa 9, Switzerland 11, Japan 6, India 7 and others 3. The distribution of net sales is based on the respective customer's domicile. VLCC Despite the weak market since April, coverage in the form of freight contracts and Freight Futures enabled Concordia's VLCCs (Very Large Crude Carriers) to maintain a good average freight rate of USD 31,000 (21,300) per day the first nine months. The average freight rate for the third quarter was USD 29,600. About USD 18,000 per day is required to cover the vessels' daily running costs and capital costs (breakeven) in 2001. ULCC Concordia's ULCCs (Ultra Large Crude Carriers) Stena King and Stena Queen were hard hit by the freight market downturn during the second quarter with an average freight rate of only USD 14,400 per day. Mainly as a result of good freight rates for the Stena King in September, the average freight rate during the third quarter improved to USD 28,000 per day. The average freight rate was USD 33,400 (27,600) per day for the period January-September. Breakeven for these two vessels is about USD 19,000 per day. V-MAX The first Stena V-MAX tanker, the Stena Vision, was delivered at the end of April and was followed by the second vessel, the Stena Victory, at the end of June. After their first voyage on the spot market, both vessels were delivered to the American oil company Sunoco on 3-year time- charter contracts. The Stena Victory was named on 10 October at a ceremony at Rehoboth Beach, Delaware, US, by the state governor, the Honourable Ruth Ann Minner. The ship's godmother expressed her satisfaction with the V-MAX concept, which will result in much higher safety on the Delaware River. Other vessels The self-discharging salt carriers Kure and Conveyor are signed to satisfactory charters. The Conveyor was redelivered in accordance with her contract at the beginning of October and will be sold for scrap. The sale is expected to generate a small surplus. The Kure's contract has another year to run. Dry-docking During the third quarter, one VLCC was dry-docked according to plan. The reduced income due to the planned dry-docking, has affected the profit for the period in an amount of SEK 5 million. The total reduced income due to the dry-dockings for the 9-month period amounted to SEK 40 million. Allocations for shipyard costs are distributed evenly during the period between dry-dockings. The vessels are regularly dry-docked about once every third year. Management and operation During the period, the fleet continued to be operated with a focus on safety and quality and the cost of ongoing ship operation remained at a low level. Hydrostatically balanced loading (HBL) is now utilised on Concordia's remaining four Concordia Class VLCCs. HBL is an environmental protection system introduced by the UN agency The International Maritime Organisation (IMO) for vessels more than 25 years old and reduces the risk of oil spills caused by grounding and other hull damage. The classification societies' quality system, CAP, which, among other things, specifies true hull strength in addition to the basic classification requirements, has become increasingly important when chartering older vessels. This benefits Concordia, which has had its vessels CAP classified with very good results for many years. Equity Equity per share after full conversion is SEK 32.79 (25.20). The SEK/USD exchange rate on 30-09-2001 was 10.66 (9.68). Liquidity and financing The Group's disposable liquid funds, including unutilised credit facilities, amounted to SEK 337.8 (903.4) million on 30-09-2001 while the corresponding figure on 31-12-2000 was SEK 724.5 (699.9) million. In accordance with the terms of the financing agreement, some excess liquidity has been blocked in a separate account with the financing banks. On 30-09-2001, SEK 43.4 million was blocked in this way. The Group's existing fleet is financed via a credit facility of originally USD 165 million raised during the spring of 1999. This credit facility is amortised on an ongoing basis and amounted to USD 145.6 million at the end of the period. Convertible debenture loan In 2000, the major part of the outstanding convertible loan stock was converted into shares and the convertible debt fell from SEK 237.7 million to SEK 65.6 million during the year. During the first nine months of 2001, the conversions continued and the convertible debt was reduced to SEK 18.0 million. The convertible debenture loan falls due on 30 April, 2002 and conversion may take place until 1 April, 2002. During the period, conversion resulted in the number of shares increasing by 4,139,426 shares to 46,332,400 shares. Investments Investments during the period totalled SEK 558 million and consisted of payments relating to the V-MAX tankers Stena Vision and Stena Victory, now delivered. No investments were made in the third quarter. It can be noted that the new vessels now comprise approx. 65% of Concordia's fixed assets. Related company transactions and charter cooperation with Stena Bulk The joint charter business between Concordia and Stena Bulk consists of a multi-year freight contract which is roughly equivalent to the employment of one VLCC. Concordia's four VLCCs and Stena's VLCC Stena Conductor are operated in a pool where the profit is divided equally per vessel. In order to hedge the revenues generated in the pool for VLCCs together with Stena Bulk, two vessels have been time-chartered and a freight swap equivalent to the capacity of 1.3 VLCCs has been signed. The contract expires at the end of 2001 and corresponds to a freight rate of about USD 36,000 per day. Cooperation with other departments at Stena, such as Marketing, Technology, Finance, Bunker and Insurance, remains unchanged. Stena's subsidiary Northern Marine Management is responsible for the management of Concordia's two ULCCs. Concordia's subsidiary Universe Tankships performs management assignments for two of Stena's large tankers. Market The market continued to be very weak at the beginning of the third quarter with freight rates for ULCCs and VLCCs at about USD 15,000 and USD 10,000, respectively. At the end of August, several oil companies began to replenish their stocks, which had dropped to a low level following consumption during the summer. The market for VLCCs improved rapidly despite OPEC's production cuts. On 11 September, terrorists attacked New York and Washington. This tragic event had an immediate impact on the oil and tanker market. Companies, which had previously delayed their purchases, quickly tried to cover their requirements and this drove up the demand for tanker transportation. However, the rising trend came to a halt when OPEC announced that its members' production would be adjusted to meet the demand for oil. In the opinion of many analysts, the attack would reduce global growth as a whole, which, in turn, would result in lower oil consumption. The price of crude oil dropped to USD 20 per barrel. Activity on the tanker market remained at a high level and at the end of the period, the freight rates for ULCCs were about USD 40,000 per day and about USD 25,000 per day for our type of VLCC. There is, however, considerable uncertainty as regards the rest of the year and there is a large risk that the market will develop negatively as a result of the weaker world economy and the effects of the tense situation in the Middle East. [REMOVED GRAPHICS] 25 tankers had been scrapped or sold to the offshore industry by the middle of October while 20 tankers had been delivered during the same period, which meant that the net effect on the fleet was negligible. The ULCC and VLCC fleet is estimated to consist of a total of 447 vessels. VLCC Delivered Order book Scrapped/Offshore 2001 23 (Jan-Oct) 8 25 (Jan-Oct) 2002 43 2003 26 2004 5 New regulations from IMO for phasing out older vessels International regulations for phasing out single-hull tankers were agreed on at IMO's meeting in April. Concordia participated in this process and was one of the proponents of phasing out being based on quality criteria as well as age. Compared with the earlier proposal, these new regulations will increase the lifespan of Concordia's fleet. The original proposal would have resulted in a loss of more than 20 ship years; this figure has now been reduced to 7 ship years. Forecast for 2001 In the Report on the Final Accounts for 2000, the Board forecasted a profit for the whole of 2001 of about SEK 250 million after the financial net. After a very strong first quarter, the full-year forecast was raised but after the dramatic weakening of the market, the forecast was scaled back to its original level in the interim report for the first six months. The third quarter generated a profit of about SEK 60 million and the fourth quarter is expected to generate a profit at about this level. Accordingly, the forecast for the full year, a profit of about SEK 250 million after financial items, remains unchanged. This corresponds to a profit of about SEK 4.80 per share after full conversion. The result is based on an estimated freight rate for unfixed days of USD 15,000 for VLCCs and USD 20,000 for ULCCs. A change in the freight rates of USD 1,000 per day for the rest of the year would affect Concordia's annual profit by about SEK 2 million. Reports The result for the full year will be presented on 14 February. In addition to the presentation of the result for the full year, Concordia also publishes three interim reports. Historical and current reports, together with other information, can be found on our web site www.concordia-maritime.se. Further information may be obtained from: Lars Carlsson, President, tel.+46 31-85 50 03 or +46 704-85 50 03 Hans Norén, Financial Manager, tel.+46 31-85 51 01 or +46 704-85 51 01 Jonas Kamstedt, tel.+46 31-85 50 80 or +46 704-85 50 80. Accounting principles and methods of calculation The Swedish Financial Accounting Standards Council's recommendation RR9 (Income Taxes), which came into force on 01-01-2001, has resulted in a change of accounting principle. Information for the comparison years has been adjusted in accordance with the recommendation. This change in principle results in a deferred tax claim. The effect of this on equity is shown in the specification of changes in the Group's equity. In other respects, the accounting principles and methods of calculation applied are the same as those applied in the latest annual report. This interim report has been prepared in accordance with the Swedish Financial Accounting Standards Council's recommendation RR20 (Interim Reports) and other applicable recommendations and statements that came into force on 01-01-2001 or earlier. This interim report has not been examined by the Company's accountants. Gothenburg, 19 October, 2001 CONCORDIA MARITIME AB Lars Carlsson President ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/10/22/20011022BIT00660/bit0002.doc The full report http://www.waymaker.net/bitonline/2001/10/22/20011022BIT00660/bit0002.pdf The full report

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