Solvang ASA 4th quarter report 2013
27.02.2014Shipping activities yielded NOK 5.4 million in Q4 2013, where NOK 7.5 million came from the ship-owning companies (equity method), compared to NOK 19.8 million during the same period in 2012, where the ship-owning companies contributed with NOK 19.4 million. The full year 2013 yielded NOK 46.2 mill, where NOK 47.9 mill came from the ship-owning companies, compared to the result for 2012 of NOK 59.7 mill, where the ship-owning companies contributed NOK 57.6 mill. The result before tax for 2013 was NOK 63.8 million compared to NOK 64.1 million in 2012. The reduced earnings from the shipping activities come mainly from significantly lower income in the ethylene segment, as well as the planned completion of 10 classification dockings.
The strong VLGC market from second and third
quarter continued into the fourth quarter on high
export volumes of LPG from the Middle East
exporters, as well as high export volumes from
USA, where USA is the main reason the
seasonal market slowdown in fourth quarter did
not occur in 2013. The LGC fleet is securely
employed on shorter and longer timecharter,
with stable rate levels. The ethylene segment,
which had high export volumes in second
quarter, saw a significant decrease in third
quarter, and a further weakening in export
volumes in the fourth quarter, resulting in the
lowest export volumes in several years.
On time charter basis Solvang’s share of freight
earnings for the fourth quarter 2013 was NOK
46 million, down NOK 6 million from same
period in 2012, where improved freight earnings
for VLGC and LGC segment was offset by the
drop in the ethylene segment. For the full year
2013, Solvang’s share of freight earnings was
NOK 183.7 million, compared to NOK 197
million in 2012, representing a 7% reduction.
The reduction in freight earnings comes mainly
from significantly lower earnings in the ethylene
segment, as well as the completion of 10
scheduled classification dockings, which
reduced revenue earning days by about 210
The Baltic Index, which remained at a high level
all of the second half of 2013, averaged for the
fourth quarter at USD 61/ton, up from the
average in fourth quarter in 2012 of USD 44/ton.
For 2013 the average was USD 59/ton, up from
the average in 2012 of USD 56/ton. For 2013,
with relevant bunker prices, the average of USD
59/ton is the equivalent of USD 1 million per
month on timecharter basis.
Contract coverage for the fully refrigerated
vessels, VLGC and LGC, are at 91% for 2014,
with only three ships coming available during
second half of 2014. The Ethylene tonnage
operates mainly in the spot market.
VLGC 82k-84k cbm
The Solvang Group has one 82k cbm VLGC ship,
which is on time charter until August 2016 on
market related hire, and took delivery of two 84k
cbm VLGC in June and December 2013. Both
ships are on timecharter, where the first is on a
short timecharter until September 2014, while the
ship delivered in December 2013 is on timecharter
until December 2018.
The LPG export volume out of the Arabian Gulf is
a central driver for this market, along with the
increasing export out of USA. Into the second
quarter the market improved considerably from
increased export volumes from Saudi Arabia and
Qatar, as well as increased export from USA,
predominantly from the Enterprise terminal in
Houston. The high activity remained well into the
fourth quarter, when freight rates fell on lower
export volumes out of USA due to cold weather
causing higher internal consumption. The average
Baltic Index freight rate for the fourth quarter was
USD 61/ton, the equivalent to USD 1.1 million per
month on timecharter basis; this was up from USD
44/ton during the same period in 2012, which was
equivalent to USD 0.55 million per month on
Panamax VLGC 75k cbm
The Solvang group has two Panamax VLGCs, one
on long-term timecharter, and one on short
timecharter. Both vessels operate in the market in
the West, which has been consistently stronger than
the East during 2012 and 2013, mainly due to
fewer available ships and high repositioning costs
deterring speculative positioning of ships from East
to West. The Panamax VLGCs have a favorable
position in the market as there are only four such
ships in the world, and these Panamax VLGCs
have successfully utilized this unique position to
achieve higher freight rates compared to the VLGC
market in general.
LGC 60k cbm
The LGC segment has stabilized on a good level
after the considerable increase from 2011 to 2013. Earnings are now 5% higher on time charter basis
for fourth quarter in 2013, compared with the
fourth quarter in 2012. The main reason for the
continued strong LGC market has been a gradual
shift in the ammonia trade from short to long haul
trade routes, where the LGCs provide economic
benefits to charterers. The high ammonia activity
has been from the Black Sea to the USA, but also
from the Black Sea to Asia. Main reasons are a
considerable reduction in gas exports from
Trinidad, that increases the export demand from the
Black Sea, as well as sanctions against Iran. The
segment has as such a positive outlook for 2014.
Solvang ordered two 60k cbm LGC vessels in June
with delivery in the first and second quarter of
2015, and contracted an additional 60k cbm LGC
vessel in January 2014 with delivery in the third
quarter of 2015.
Ethylene 12-17k cbm
Ethylene segment came to a standstill during the
third quarter and remained subdued during the
fourth quarter which was characterized by very low
export volumes out of Saudi Arabia, mainly from
production problems. Total export volume from the
Middle East was at the lowest in several years, and
about 800,000 tons less than in 2012. As a result
2013 was a year with considerably lower freight
rates compared to recent years. Prospects in this
segment are uncertain with already high and still
growing order book.
The Solvang group’s investments in ships, which
are owned through participation in ship owning
companies with joint responsibility, are all USD
based, and the group’s revenue is all USD based.
The group’s risk in currency exposure is as such
There have been no incidents with a particular
impact on the financial accounts during the period.
Transactions with related parties are as per the
guidelines set within the code. The Group's
principal broker for sale & purchase is Inge
Steensland AS. There are also parallel investments
made with companies within the Steensland group.
All transactions are done at market terms.
The Solvang Group has completed three scheduled
classification dockings in fourth quarter 2013. In
2013 ten classification dockings has been
completed. For 2014 there are two scheduled
Link to the report
Making Heavy Fuel Oil Clean
Exhaust gas recirculation (EGR) combined with previous measures reduces NOx emissions from heavy fuel oil by up to 80 % in a typical LPG tanker. The concept is a potential game changer for Norwegian domestic shipping.
The greenest and most fuel efficient VLGC ever
Solvang’s new-builds (84k cbm) at Hyundai Heavy Industries are two of the most fuel efficient LPG carriers ever built, in addition they are some of the world’s largest ships for transporting liquefied petroleum gas.