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Solvang ASA 4th quarter report 2013

27.02.2014
Shipping 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.

Introduction 
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 

days. 

 

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 

timecharter basis. 

 

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. 

 

Financial Risk 

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 

limited. 

 

General 

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 

classification dockings 



Link to the report

 

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