"Strategic achievements reduce risk and increase agility" J. Lauritzen publishes Annual Report for 2019
Annual Report for 2019
“Although poor market conditions in both bulk and gas carrier markets impacted our result for 2019, many strategic actions were taken to strengthen our business and reduce risk for 2020 and beyond,” says CEO Mads P. Zacho, adding that:
“We now have less market exposure and we have increased our commercial flexibility. With our businesses now established as two independent organisations, we can pursue consolidation in the small gas carrier industry and further develop Lauritzen Bulkers’ digitally-driven and asset-light business model in the handysize bulk carrier market.”
Main initiatives and events
- Lauritzen Bulkers’ risk profile was rebalanced through a reduction of our long-term commitments. This was substituted by increased activity in short-term (0-4 months) trading. We also increased our commercial flexibility, mainly by using Freight Forward Agreements (FFAs) as a risk mitigation tool.
- As part of our asset-light strategy in dry bulk, seven handysize bulk carriers were sold during the second half of 2019. Redelivery of time-charter tonnage and changes to cargo cover led to a further reduction of our market exposure.
- Towards the end of 2019, Lauritzen Bulkers succeeded in securing additional cargo coverage for the early part of 2020.
- The continued development of our dry bulk activities included the opening of a commercial office in Dubai and strengthening of our research unit to support short-term trading and active management of our long-term position. The increased focus on short-term trading resulted in a positive contribution of USDm 10 to the net result.
- The separation of Lauritzen Kosan and Lauritzen Bulkers as two independent business entities was initiated with the aim pursuing consolidation in the small gas carrier industry and further development of Lauritzen Bulkers’ asset-light business model in the handysize bulk carrier market.
Our result for 2019 was impacted by poor bulk markets, in particular at the beginning of the year, and a weak gas carrier market in the second half of the year. The outcome was a result of USDm (105) compared to USDm (24) in 2018. Overall results were disappointing.
The result was significantly impacted by special items totalling USDm (44) related to impairments, while the 2018 result included special items totalling USDm 25 mainly related to the use of provisions for onerous contracts and the reversal of impairments on vessels. The impairments will have a corresponding positive effect on our result in the coming years.
During 2019, we controlled an average fleet of 104 vessels compared to 109 vessels in 2018.
Outlook for 2020
Despite the current uncertainties, in particular relating to the Coronavirus (COVID-19), our result for 2020 is expected to be better than in 2019. An expected moderate improvement of the gas carrier market and improved profitability in Lauritzen Bulkers due to an increased focus on low-risk, short-term trading activities and net cost from special items in 2019 (which are not expected to be repeated in 2020) will have a positive impact on the 2020 result.
However, the magnitude of the impact from the Coronavirus is extremely difficult to predict and could potentially impact our 2020 result to a significant degree.
After year-end events
On 12 March 2020, J. Lauritzen obtained support from our owner, Lauritzen Fonden, to improve the capital structure. The agreement is that Lauritzen Fonden will increase the share capital with nominal DKK 50,000 at a value of USDm 20 in cash before the end of June 2020.