Results
Odfjell's consolidated net result after tax was USD 45 million for 2002 compared to USD 60 million in 2001. The freight levels softened through the first three quarters, but rates improved in the fourth quarter of 2002. Earnings before interest, taxes, depreciation and amortisation (EBITDA) for 2002 were USD 159 million, compared to USD 203 million in 2001. Operating result (EBIT) was USD 72 million, compared to USD 124 million in 2001, including then a sales gain of USD 3.5 million.
Operating expenses as well as general and administrative expenses were higher than in 2001, mainly due to a weaker USD and the incorporation of our 50% share of the new tank terminal in Singapore. Net interest expenses for 2002 were USD 27 million compared to USD 41 million in 2001, a reduction due to lower interest rates.
The average USD/NOK exchange rate for 2002 was 7.97 compared to 8.98 for 2001. The USD/NOK rate weakened substantially from 9.01 at year-end 2001 to 6.96 at year-end 2002. The USD weakening positively impacted our currency hedging portfolio and cash balances in NOK, but increased our non-USD costs expressed in USD. The currency gain in the period was USD 15 million compared to a cost of USD 14 million last year. The weaker USD also lead to higher deferred taxes, primarily related to unrealised currency gain on net USD-debt in the NOK accounts for vessels owned under the Norwegian tonnage tax system.
Fourth quarter 2002 net result was USD 14 million compared to USD 6 million in the first quarter, USD 16 million in the second quarter and USD 10 million in the third quarter of this year.
The preliminary Norwegian Accounting Act concerning impairment of fixed assets, equivalent to IAS 36, has been implemented by the company as from 2002. There was no impairment realised as there is a margin over and above book values.
Business segments
Global trade
EBITDA for 2002 was USD 101 million compared to USD 150 million in 2001. Operating profit (EBIT) was USD 41 million in 2002 compared to USD 94 million in 2001 (including, then a sales gain of USD 3.5 million.). Lower freight rates and volumes lead to time-charter income expressed in USD per day being 16% lower than 2001. The time-charter income was 6% higher in the fourth quarter 2002 compared to the third quarter 2002 with stable, but high bunker prices. The average price of bunkers in 2002 was USD 144 per ton, compared to USD 126 per ton the previous year. Operating expenses on a comparable fleet basis were 5% higher in 2002 than in 2001 caused by a weaker USD.
On 28 June 2002, we took delivery of the 37,500 tdw. newbuilding Bow Chain from Kleven Florø AS.
In the fourth quarter 2002, Odfjell entered into agreements with Stocznia Szczecinska Nowa, in Poland for the construction of six advanced chemical tankers of 39,500 tdw. with fully stainless steel cargo tanks. The ships will be delivered in six-month intervals from June 2003 to December 2005. Furthermore, we have an option to increase the order by two ships with deliveries in 2006. The average price per ship is about USD 54 million. Four of the contracts were originally the contracts we had with Stocznia Szczecinska Porta Holding S.A. in Poland that were cancelled due to the yard being declared bankrupt on 29 July 2002. Pre-delivery payments and interest thereon were refunded us.
Regional trade
EBITDA for 2002 was USD 15 million compared to USD 14 million the preceding year. EBIT for 2002 was USD 7 million compared to USD 6 million in 2001.
During the year Odfjell Asia increased its fleet by three ships to now fourteen.
Tank terminals
EBITDA for 2002 was USD 38 million, an improvement from USD 35 million in 2001. EBIT for 2002 was USD 22 million compared to USD 23 million in 2001.
The EBITDA of Odfjell Terminals (Houston) was USD 18 million compared to USD 15 million in 2001. Odfjell Terminals (Rotterdam) showed an EBITDA of USD 15 million for 2002 compared to USD 18 million in 2001. Our share of the terminal in Singapore and the two terminals in China made an EBITDA of USD 5 million.
In 2002 Odfjell acquired 50% of Korea Petrochemical Industry Company's (KPIC) newly built chemical tank terminal in Onsan/Ulsan, Korea. The terminal changed name to Odfjell Terminals (Korea) Co Ltd.
Tank containers
EBITDA for 2002 showed an improvement to USD 5 million compared to USD 3 million in 2001. EBIT for 2002 was USD 2 million compared to a break-even level in 2001. The market for tank containers remains soft and the improvement is a result of strong focus on cost and improved internal processes.
Key figures
Return on equity was 8.5%, return on total assets was 5.0% and return on capital employed (ROCE) was 5.7% in 2002. Return on the market capitalisation as per 31 December 2002 was 13.2%, caused by the share trading at a discount to book value.
Earnings per share amounted to USD 2.02 (NOK 16.10) in 2002 compared to USD 2.43 (NOK 21.81) in 2001. Cash flow per share was USD 5.90 (NOK 47.02) compared to USD 5.78 (NOK 51.89).
As per 31 December 2002 the Price/Earnings ratio (P/E) was 7.8 and the Price/Cashflow ratio was 2.7. Based on book value per share the EV/EBITDA multiple is 8.1 while, based on market value per share as per 31 December 2002, the EV/EBITDA multiple is 6.9. Interest coverage ratio (EBITDA/Net interest expenses) improved in 2002 to 6.2 compared to 5.1 for 2001.
Finance
Cash and bonds as of 31 December 2002 were USD 230 million compared to USD 213 million as of 31 December 2001.
Interest bearing debt decreased from USD 960 million as per year-end 2001 to USD 957 million per 31 December 2002. Net interest bearing debt was USD 727 million as per 31 December 2002. The equity ratio was 33% as per 31 December 2002 and the current ratio was 2.9.
Shareholder information
At year-end 2002 the Odfjell A-shares were trading at NOK 110 (USD 15.8), a reduction of 18.5% compared to NOK 135 (USD 15.0) year-end 2001. The B-shares were also trading at NOK 110 (USD 15.8) at year-end, in NOK down 17.9% from NOK 134 (USD 14.9) year-end 2001. However, the share price expressed in USD increased during the year by 5.3% and 6% respectively for the A- and B-share. Dividend of NOK 8 per share was paid to the shareholders in May 2002 (a direct yield on average share price of 6.3%).
By way of comparison, the Oslo Stock Exchange benchmark index fell by 31.1% and the transportation index declined by 34.6% during the year. The A-shares peaked at NOK 163 (USD 19.1) and fell to NOK 101 (USD 13.7) at its lowest point during the year whilst the corresponding figures for the B-shares were NOK 157 (USD 18.3) and NOK 101 (USD 13.6).
During 2002 we acquired 413,710 A-shares at an average price of NOK 116.65 per share and 762,600 B-shares at an average price of NOK 115.64 per share, representing 5.1% of the total shares in the company.
Since 1 January 2002 we have had a market maker agreement with Pareto Securities ASA.
The Annual General Meeting will be held on 5 May 2003 at 16:00 hours at the Company's headquarter. The Board recommends a stable dividend of NOK 8 (USD 1.15) per share for 2002, equal to NOK 173.5 million (USD 24.9 million). Based on the average share price in 2002 the direct yield, through dividend, in 2002 equals about 6.3%.
Prospects
World economic growth is still low, particularly in the OECD area. There is still uncertainty as to the length of the current downturn and its impact on the chemical tanker industry. We expect a stable market in 2003 compared to 2002. The clean petroleum products market and bunker prices are volatile and presently influenced by geopolitical factors.
We expect lower net interest expenses in 2003, as we have fixed this exposure. The USD has weakened substantially over the last year which consequently will negatively impact our expenses in other currencies than USD. Our currency hedging program, however, will at current USD level give a currency gain of about USD 30 million in 2003, of which USD 12 million so far has been realized. Our hedging program also covers 2004 and 2005 where we have hedged estimated non USD-cost at USD/NOK rates around 9.00.
As a consequence of the above as well as the improved results in the fourth quarter 2002, we expect a better net result in 2003 as compared to 2002.
Bergen, 11 February 2003
THE BOARD OF DIRECTORS
OF ODFJELL ASA
