A good year for JL
2007 was a very good year for JL with best ever results, confirming the Group’s overall growth strategies and financial capacity.
JL’s share of the result totalled USD 341.5m, up from USD 124.4m in 2006, cf. Figure 1. This included profits of USD 79.1m from the disposal of vessels and other assets, up from USD 43.7m in 2006. Return on invested capital was 38.4% compared to 25.7% in 2006. Results were better than expected and proved to be the best ever for JL.
Lauritzen Bulkers was the main contributor to JL’s net earnings but Lauritzen Kosan, Lauritzen Tankers and Lauritzen Reefers all made positive contributions to results.
After more than a century in the reefer business, JL’s operational involvement in this market was terminated with the sale of the 50% holding in NYKLauritzenCool to NYK Reefers Limited. The transaction marked JL’s exit from the reefer business and also the end of a constructive partnership with NYK.
Lauritzen Bulkers continued its build-up in Handysize, Handymax, Panamax and Capesize vessels through additional newbuilding contracts and deliveries of newbuildings and second-hand vessels. At year-end 2007, Lauritzen Bulkers controlled some 85 bulk carriers.
Lauritzen Kosan took delivery of the first of a series of technologically innovative and environmentally friendly ethylene gas carriers and continued to expand its ethylene carrier fleet with additional newbuilding contracts. At year-end 2007, Lauritzen Kosan controlled 42 gas carriers.
Lauritzen Tankers added eight additional MR product tanker newbuilding contracts to the newbuilding portfolio. A start was also made on converting a ferry into an Accommodation and Support Vessel (ASV) for offshore oil production. At year-end 2007, Lauritzen Tankers controlled 12 vessels.
At the end of 2007, JL’s newbuilding portfolio comprised a total of 66 vessels, including 41 bulk carriers, 9 gas carriers, and 16 product tankers. Partners will add another 12 newbuildings to the fleet controlled by JL.
During 2007, JL controlled an average fleet of 147 vessels compared to 184 vessels in 2006. The decline was due to JL’s exit from the small gas carrier segment at the end of 2006 and from the reefer business in 2007; however, deliveries of newbuildings will expand the JL controlled fleet considerably in coming years.
JL’s order book of own vessels at year-end 2007 represented a total value of approximately USD 1,950m, up from approximately USD 820m at year-end 2006.
JL’s fleet expansion has almost been entirely self-funded. However, credit lines were set up during the year to support the significant expansion of the fleet in the coming years.
JL’s robust balance sheet with a solvency ratio of 71% at year-end 2007 provides room for further growth with additional investment capacity at a minimum of USD 1bn.
During 2007, investments in fleet expansion amounted to USD 542.3m compared to USD 364.8m in 2006. Divestments amounted to USD 206.9m compared to USD 121.1m in 2006. Total invested capital amounted to USD 1,086.8 at year-end 2007, up from USD 630.2m at year-end 2006, cf. Figure 2.
New initiatives were taken to attract, develop and retain a group of highly talented, competent and motivated staff, and JL’s shore-based organisation has been strengthened to comply with JL’s growth strategy.
During 2007, a LEAN project was introduced to provide further support for JL’s growth strategies, enhancing its ability to cope with constantly changing business conditions.
JL’s historic headquarters in Copenhagen was reopened in September 2007 after extensive renovation and refurbishment works.
Outlook for 2008
In 2007, shipping markets were volatile and dry bulk market rates reached their highest levels ever. In 2008, shipping markets are expected to remain volatile, partly because deliveries will exceed the 7% global fleet growth in 2007, partly because of financial turmoil in late 2007 early 2008, and the subsequent easing of monetary policies is expected to affect exchange rates, commodity prices and freight rates.
At the beginning of 2008, the world order book amounted to some 500m dwt, or more than 45% of the existing world fleet. Half the current order book was contracted in 2007 at rising prices.
The amount of new tonnage entering the world fleet in coming years is likely to prove challenging for shipping markets, as demand for crews, spare parts, and management of all types of shipping activity including ports and infrastructure is expected to increase rapidly.
Despite the expected slowing of the world economy, the freight markets in which JL is engaged are on average expected to remain at healthy levels and in spite of ever-increasing operating costs, 2008 is expected to be a another year with satisfactory earnings. Profits before tax are expected to be at the same level as the one of 2007 and will include gains from vessel disposals that have already been agreed.
Changes in activity levels including sale and purchase transactions, fuel and other commodity prices and overall world economic developments may influence forecast results.
