Stena Line€s financial report for 1998

Stena Line's financial report for 1998 The Stena Line Group is an international transport and travel service company and one of the world's largest ferry companies. The route network comprises 12 strategically located ferry routes, including one lift-on/lift-off container route for freight, in Scandinavia and around the UK. In addition the Company has interests in three other ferry routes through its ownership in P&O Stena Line and its arrangements with another ferry operator. As a consequence of the following significant events the result of the operations for the full year 1998 and 1997 are not comparable. On March 10, 1998 Stena Line's English Channel routes, Dover-Calais and Newhaven-Dieppe, were transferred to P&O Stena Line Ltd, a jointly-owned company in which Stena Line has a 40% proprietary share. In order to facilitate comparisons, comments on the results are given both including and excluding these routes. In August 1997 Harwich International Port was sold. Highlights 1998 Revenues, excluding the English Channel operations, rose by one percent to SEK 7,550 million compared to SEK 7,485 million in 1997. On Stena Line's routes average freight rates increased 5% and average passenger fares increased 4%. Income before income taxes showed a loss of SEK 324 million in 1998 compared to a profit of SEK 151 million for 1997. The result for 1998 has been adversely affected by restructuring costs of SEK 79 million. In addition, the restructuring expenses of P&O Stena Line, and other one time costs at Stena Line relating to the establishment of P&O Stena Line adversely affected the result by SEK 174 million. The result for 1997 was positively affected by one time events of net SEK 128 million. The Company experienced operational problems on the Hook of Holland-Harwich route during 1998 that led to the cancellation of 20% of the passenger traffic. The 1998 results were also adversely affected by a downturn in trading on the Halmstad-Grenå and Varberg-Grenå routes. The English Channel operation had a poor performance during the period January 1 to March 9, before the formation of P&O Stena Line, resulting in a loss of SEK 118 million before taxes. The operating profit in P&O Stena Line has developed better than planned, with income before restructuring expenses and sale of assets of SEK 717 million. The equity to assets ratio increased to 24 % from 23 %, and the net debt to equity ratio changed to 2.5 times from 2.4, compared to the previous year. At year end, the total available cash and cash equivalents, including committed, unutilized credit facilities, were SEK 1,503 million in 1998. Commentary According to EU legislation, tax and duty free sales will be abolished effective from July 1, 1999. However, the EU has not yet established the rules and regulations for operations after this date. A possible extension was discussed at the EU Head of States meeting in Vienna in December 1998. Further discussions will take place at the EU Economic and Finance Ministers meeting in the middle of March and at the EU Head of States meeting at the end of March 1999. Stena Line has over the past years prepared for the abolition of tax and duty free sales in 1999. Major investments have been made in ships and ports, P&O Stena Line has been established, a new customer oriented organisation has been created and a comprehensive cost reduction programme has been implemented. The Group has also been refinanced and stands financially strong. The implementation of these changes placed significant financial and operational strain on the Company. However, Stena Line now enters 1999 with a business prepared to act aggressively in the market with even stronger customer focus. In Scandinavia a revised business plan will lead to a workforce reduction of approximately 800 employees within the onshore and onboard organisations. Stena Line plans to implement this restructuring in September this year following the high season. Technical modifications and operational refinements of the HSS vessels will enhance the performance and reliability of the HSS services. The management of Stena Line's hotels has been outsourced to Scandic Hotels from the first of January 1999. The declining result on the Halmstad-Grenå route, combined with the poor outlook, led to the closure of the route in January 31, 1999. P&O Stena Line has exceeded expectations, especially on the Dover-Calais route. The Newhaven-Dieppe route was closed down on January 31, 1999, due to weak future earnings expectations. During the first quarter 1999, the two multipurpose vessels Stena Germanica and Stena Scandinavica, which operate on the route between Gothenburg and Kiel, are being converted to add freight capacity reflecting demand on this route and to meet new safety legislation. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/02/25/19990225BIT00010/bit0001.doc Entire report http://www.bit.se/bitonline/1999/02/25/19990225BIT00010/bit0002.pdf Entire report