Solvang ASA 1st quarter report 2012

Shipping activities yielded NOK 11.2mill in Q1 2012 compared to NOK 7.8 mill during the same period in 2011. The result from the ship-owning companies (equity method) was NOK 11.4 mill. The result before tax was NOK 16.8 mill compared to NOK 9.4 mill for same period in 2011. The securities portfolio contributed with NOK 6.3 mill, compared to NOK 1.8 mill for same period in 2011.

The first quarter in 2012 has seen a different earnings mix compared with the fourth quarter of 2011 between the VLGC, LGC and Ethylene. The strong VLGC rates in fourth quarter corrected sharply down in December and have stayed at depressed levels to late April. The market outlook remains positive for fully-refrigerated ships, and second quarter has significantly improved to a more satisfactory level.
On time charter basis freight earnings for first quarter 2012 were NOK 46.2 mill compared to NOK 43.7 mill for same period in 2011, an increase of 6%. The Baltic Index, although staying at a low level, has increased from an average of around USD 40/ton in first quarter 2011 to an average of around USD 45/ton in first quarter 2012. A continued low USD/NOK exchange rate together with high bunker prices had negative impact on the results.
The ethylene market was significantly weaker than same period last year, mainly due to reduced volumes out of Arabian Gulf, as well as international sanctions against Iran.  
VLGC 82k cbm
The Solvang Group have one 82k cbm VLGC ship, which is on time charter until August 2016 on a market based hire.
The Solvang Group ordered another VLGC ship in February at HHI, Korea, with delivery in Q4 2013. The ship is secured with a 5 years time charter. The Group then has two VLGC ships on order.
LPG export volumes out of the Arabian Gulf is a central driver for this market and export volumes remained high up until December 2011, where freight volumes and rates were negatively impacted by production delays and maintenance shutdown. The rates stayed at a low level throughout the first quarter, with only minor sideways changes in the USD/ton price index. The outlook for this segment is still strong and towards the end of April the rates have recovered significantly following increased freight volumes out of Arabian Gulf and mainly Qatar.
Panamax VLGC 75k cbm
The Solvang Group have one Panamax VLGC on long term time charter and one in the spot market. As a result of the drop in VLGC market, the rates for Panamax VLGCs have dropped accordingly. However, the one VLGC operating in the spot market has successfully utilized the Panamax size feature, and have been able to differentiate from other VLGCs and traded with a solid premium compared to the market.  
LGC 60k cbm
As previously reported the market for ships in the LGC segment has had a positive trend over the recent years. Earnings are 30% higher on time charter basis during first quarter 2012 compared to same time in 2011. Particularly the market in the West has been the centre of attention with arbitrage opportunities from USA to Europe. As such, several time charters have been available in the market at relatively strong terms, and the main part of this segment is now tied up in short / long term time charter, with a positive outlook for 2012. 
Ethylene 12-17k cbm
For the ethylene ships, freight rates dropped at the end of fourth quarter 2011 and into first quarter 2012 with lower production and maintenance shutdowns at our contract customers’ facilities, as well as sanctions against Iran affecting the spot market. However, towards the end of the first quarter and in April these issues have been resolved and other Ethylene exporters have increased volumes to bridge the lost volumes from Iran. The outlook for 2012 is softer compared with 2011, but still firmer than expectations at the beginning of 2012.  
There have been no incidents with a particular impact on the financial accounts during the period.
The Solvang Group will have three scheduled classification dockings in 2012.
Stavanger, 10th May 2012
The board of Solvang ASA

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