Freight rates expressed in USD per day were approx. 10% lower than average 1999. However, during the 1st quarter 2000 freight levels were on par with 4th quarter 1999. High bunkers costs negatively impacted the results during the period under review. Comparable fleet operating cost expressed in USD was approx. 12% lower than the average of 1999. Odfjell Terminals (Baytank) had a result of USD 2 mill. (USD 2 mill.). Group administrative costs were at similar level as the corresponding period in 1999. Increase in depreciation and financial expenses is primarily a consequence of deliveries of newbuildings.
CURRENCY/FINANCE
With consolidated reports in USD the accounts are less influenced by exchange rate developments. The average NOK/USD exchange rate was 8.22 (7.66). Net currency loss amounted to USD 2 mill. (USD 0 mill.).
Group liquid assets as of 31 March 2000 amounted to USD 216 mill. compared to USD 218 mill. as of 31 December 1999. Availability under credit facilities amounted to USD 25 mill. as of 31 March 2000, compared to USD 50 mill. as of 31 December 1999.
SHAREHOLDER INFORMATION
During the first three months of the year the price of the Odfjell A-share rose by 29%, from NOK 101 to NOK 130. Correspondingly the B-share increased from NOK 95 to NOK 119, an increase of 25%. The Oslo Stock Exchange shipping index fell by 1%. Earnings per share for first three months of the year were negative USD 0.34 (negative USD 0.17) and cash flow per share was USD 0.35 (USD 0.44).
So far this year Odfjell bought back 1.81% of its A-shares (269,000) at an average price of NOK 126.60 per share and 9.13% of its B-shares (636,600) at an average price of NOK 117.91 per share, at a total cost of NOK 109.1 mill., and now holds approx. 4.14% of the total number of shares in the company.
SEACHEM TRANSACTION
Odfjell ASA and Ceres Hellenic Shipping Enterprises Ltd., the latter the owner of the pool company Seachem, entered into an agreement on 18 February 2000 to unite their respective chemical logistics assets. Seachem is the world’s fourth largest chemical tanker operator, with approx. 20 ships in the size range of 11 - 45,500 dwt currently in operation. Seachem has an orderbook of eight sophisticated stainless steel newbuildings of 40,000 dwt for delivery in 2001 - 2003. Accordingly, Odfjell will issue new shares in exchange for nine chemical tankers aggregating 335,000 dwt built 1986 - 1988 plus four newbuildings aggregating 160,000 dwt for delivery 2001 - 2002. Additionally, Odfjell will purchase 100% of the shares in Seachem. The balance of the Seachem fleet will be commercially managed by the combined company.
The transaction translates into equals an investment of about USD 360 mill. As part settlement, Odfjell will issue a total of approx. 4.9 mill. shares, divided into approx. 3.35 mill. A-shares and 1.57 mill. B-shares, at an agreed price of NOK 208 per share, in total the equivalent of about NOK 1 billion worth of equity. The agreed share price values Odfjell at approx. NOK 4.6 billion prior to the issue of any new equity and, the combined company at approx. NOK 5.6 billion.
The transaction is motivated by the common objective of achieving a degree of industry consolidation. Through this agreement both parties see large potential for added efficiency in the overall operation of the combined fleet and, thereby being able to deliver a better service to its customers, and to enhance the financial results through rationalised trading patterns and overall better fleet utilisation. This will be achieved by further utilising Odfjell’s long-term expertise in the management and organisation of the transportation of bulk chemicals, and through drawing further upon Ceres’ expertise in technical ship management. Importantly, the solid financial standing of Odfjell will be maintained through the private placement.
Seachem’s newbuildings are sophisticated stainless steel chemical carriers, and will by and large satisfy Odfjell’s deep sea fleet renewal requirements the next few years. The Group’s turnover is expected to increase from about USD 570 mill. to about USD 690 mill. during the first 12 months after amalgamation. Book equity increases to about NOK 3.8 billion and, prior to the delivery of the aforementioned four newbuildings, total assets increase to about NOK 11.3 billion.
Headquarters of the combined company will be Bergen, Norway. Branch offices on five continents will be integrated within the new structure. Ceres will continue ship management of the vessels acquired by Odfjell. Odfjells operating company, for vessels in global trade lanes, will change name from Odfjell Tankers AS to Odfjell Seachem AS.
The agreement is subject approval by Odfjell’s General Assembly, which will take place 26 May 2000.
BOTLEK TANK TERMINAL (BTT)
Odfjell ASA entered into an agreement in April with Koninklijke Vopak N.V. to acquire the Botlek Tank Terminal B.V. in Rotterdam, the Netherlands. Following to the merger last year of Van Ommeren and Pakhoed into Vopak, the European Commission imposed on the latter to divest of this terminal.
BTT is the largest tank terminal in the Antwerp-Rotterdam-Amsterdam area and the single largest terminal in Europe. Rotterdam is the main transition and gateway port of the European petrochemical industry to world markets, and a main port of Odfjell. BTT compromises about 300 storage tanks totalling 1.533.000 cbm. capacity. Of the total, 510.000 cbm. is storage for chemicals and 1.023.000 cbm. is storage of mineral products. Additionally, the facility include a distillation plant as well as a water purification plant.
The acquisition of BTT further emphasises Odfjell’s increased focus on integrated transport solutions. It is part of Odfjell’s strategy to invest in tank terminals in important regions of chemical distribution, where synergies can be achieved with Odfjell’s other business activities. Odfjell has its own tank terminal in Houston, USA as well as partially owned terminals in China, and also works closely with six associated terminals in South America.
FLEET DEVELOPMENTS
On 21 January 2000, Odfjell took delivery of M/T "BOW CENTURY" from Kværner Florø. The remaining newbuilding program at Kværner Florø consists of two vessels with delivery in 2001 and 2002.
Subsequent to the Seachem transaction the total fleet aggregates 90 vessels, both trading globally and regionally, whereof 49 ships will be wholly or partly owned. Additionally, Odfjell owns and operates tank terminals and tank containers.
PROSPECTS
On account of a continued influx of newbuildings we expect the rest of the year to remain weak. As from next year the Board of Directors expect a considerably reduced growth on the supply side which, combined with the effect of consolidation, as well as encouraging growth estimates for the global economy, prospects from 2001 are improved. Through the Seachem transaction and the acquisition of BTT the company has significantly strengthened its position as a total logistics provider to the petrochemical industry
Bergen, 10 May 2000
The Board of Directors of Odfjell ASA
