Dsd årsrapport 2012, Engelsk

annual report

2012

The 157th year of operation

Cover art by: Fjellstrand og Karolina Adolfsson, Norled.

3 The DSD Group is dedicated to limiting environmental impact associated with the operation of ships and public transportation on land and to ensuring that transport is carried out in a manner that is considerate of the environment.

Our focus is on designing energy-optimized hulls and developing operations models that yield low energy consumption. DSD knows that all energy consumption results in direct or indirect pollution.

We want to use energy that is inherently low-impact, in terms of pollution. Norled is currently building the world’s first 100% emission-free car ferry, to be used on the Lavik-Oppedal connection. This will be an electric ferry where the batteries are charged with emission-free hydropower each time the ferry docks.

All of Norway’s major cities are situated by the sea. The fact that the only transport route with unlimited capacity and fully developed infrastructure is virtually unused, while accessibility on land becomes increasingly difficult, constitutes quite a paradox. A considerable potential lies waiting in the use of our fjords to move both passengers and freight.

Ship routes can be set up quickly and efficiently to meet specific needs, and then easily re-routed when and if alternative solutions are developed. Modern vessels yield minimal pollution, and they are very quiet. Sea routes should be considered as a natural element of modern public transportation for both passengers and freight.

Over the past ten years, Norwegian domestic ferries have been the world’s largest test lab for use of liquid natural gas (LNG) as fuel. The Norwegian authorities have been willing to fund new technology, thus promoting the development of clusters of expertise. The DSD Group has benefited from this by gaining knowledge and experience in the use of natural gas as fuel. The trend we are now seeing is toward construction of more and larger ships that run on LNG, along with construction of LNG plants, bunker stations, etc. The authorities’ commitment to

Photo: Tommy Ellingsen.

facilitating innovation through the contract that led to the zero-emission electric car ferry will open the door to a wide range of exciting opportunities.

The DSD Group aims to be a leader and a driving force when it comes to innovation and the environment. Tide owns more than 50% of regist­ ered gas buses nationwide, and has more than 50 years of experience with electric buses. Tide was also one of the first companies to introduce hybrid buses in Denmark. Three of Norled’s passenger ferries run on LNG, and the company has contracted two gas-powered car ferries. Nor Lines has begun a process to replace its coastal fleet by contracting two natural gas-powered freighters. These freighters have been developed in close cooperation with Rolls Royce, and won the prestigious “Next Gene­ ration Ship Award” during Nor-Shipping 2011.

In the international shipping segment, DSD has cooperated with other players to develop a concept for LNG-powered product tankers that will yield both significant environmental benefits and reduced fuel costs. Energy-efficient transport in all segments is good for the environment, while also providing a competitive advantage.

Steinar Madsen CEO

annual report 2012

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content Side

Group structure .............................. .................................................................................. 14 Milestones – DSD group history .. .................................................................................. 15 Main figures last 5 years .............. .................................................................................. 16 Important events ............................................................................................................... 17 Areas of activity ............................................................................................................... 18 The board of directors´annual report . ........................................................................ 110 Profit and loss account .................. .................................................................................. 16 Assets ............................................... .................................................................................. 17 Equity and liabilities ........................................................................................................ 18 Cashflow Statement ....................... .................................................................................. 19 Fleet list .............................................................................................................................. 20 Addresses . . ........................................................................................................................ 24

g r ou p stru c tu r e

DSD Shipping as

Det stavangerske dampskibsselskab as

MILESTONES IN DSD’s HISTORY

2013 Norled builds the world’s first CO2 emission-free electric car ferry for the Lavik – Oppedal route in Sogn og Fjordane.

2012 Norled begins operating the Bergen – Sogn og ­Fjordane express boat route.

2012 Norled orders two LNG-powered car ferries for the Tau connection.

2011 Nor Lines wins the Next Generation Ship Award at ­Nor-Shipping in Oslo, and contracts two environmen­ tally-friendly LNG-powered freighters from China.

2011 DSD takes over 100% of the shares in Tide Sjø AS, and the company is renamed Norled AS. 2011 Nor Lines becomes a wholly-owned subsidiary of DSD. 2010 DSD Shipping takes delivery of “Stavanger Bell” from Sumitomo in Japan, and now has seven Aframax ships built at this shipyard.

2009 The world’s three first LNG-powered passenger ferries are deployed to the Nesoddtangen – Aker Brygge route.

2007 Stavangerske AS is merged with Tide Sjø.

2007 Stavangerske AS builds three new carbon fibre express boats for the routes in Ryfylke, subsequently winning an award for universal design.

2006 Nor Lines establishes a nationwide ground transport system.

2004 Nor-Cargo is sold to Posten Norge AS. Nor-Cargo ­Shipping becomes Nor Lines AS. 2003 MF “Stavanger” – the first Norwegian aluminium ­catamaran car ferry is deployed to the Tau route.

2001 The North Sea traffic is transferred to the new company Sea-Cargo, where Nor Lines holds 39% of the shares.

2000 Allianse Informasjonssystemer ASA is bought and further developed into Rogaland’s largest IT company before it is sold in 2005.

1999 DSD buys 42.4% of the shares in HSD. 1997 RT builds the first Norwegian ferries in Poland.

1992 Boknafjorden Ferjeselskap wins the licence across the Boknafjord.

1989 DSD enters international shipping through DSD Shipping AS. 1989 Folke Hermansen becomes the sole owner of DSD. The company reorganises and establishes subsidiaries Rogaland Trafikkselskap (RT) and Nor-Cargo Stavangerske.

1988 DSD becomes part of RoNoTro, which bought Bergenske.

1986 The Westamaran “Fjordsol” receives an award for its universal design.

1978 Joint sailing Stavangerske – Mørerutene. Nord-Pool is established.

1971 DSD starts a Westamaran route in Puerto Rico.

1964 More efficient freight ship operation is improved through the delivery of two ships equipped with side doors, cranes and heavy lifting beams: “Rogaland” and “Akershus”.

1960 Norway’s first hydrofoil boat “Vingtor” is deployed to Norway’s first express boat route between Stavanger – Haugesund – Bergen.

1959 The dawn of a new age, with DSD receiving a licence for the Stavanger – Tau route, and building the first car ferry “Tau”.

1948 The birth of the motto “The white fleet”. The local ferries are painted white with yellow smokestacks.

1947 MS “Haugesund”, formerly “Kilbirnie”, is the main connection across the Boknafjord.

1939 MS “Fjorddrott” is delivered, attracting considerable attention with its 140-foot length, lounges for 405 passengers, and room for 12–14 cars. “Fjordrott” is ­deployed to the route to Haugesund and Sand – Sauda in correspondence with the railway and bus link to Oslo.

1938 DSD takes over the Sand – Ropeid ferry route. In 1945 it procures a modern drive-through car ferry – “Ropeid”.

1938 The “Ekspress II” sister ship is deployed, inspiring the term “sea bus”.

1937 Technical Manager Ludvig Thorsen revolutionises the local liner design in Norway by building a light ship with a long, narrow hull powered by a diesel engine.

“Ekspress” is launched from the company’s own shop in Klasaskjæret.

1934 DSD contributes share capital to Det Norske Luftfartsselskap (DNL) in Norwegian Air Lines, and becomes a shipping agent for the seaplane routes with a dedicated floating dock at Klasaskjæret.

1930 DSD starts joint-sailing with Bergenske in Danzig and Gdynia, with sporadic calls at Königsberg.

1924 DSD begins collaborating with Bergen LIoyd between Trondheim, the cities in Western Norway and StettinLübeck.

1922 The shipping line starts an international route to Leith and Grangemouth.

1919 DSD takes an ownership stake in Hurtigruten and gives Stavanger a weekly link to the route between Bergen and Kirkenes. From 1919 to 1940, DSD is the only company to run a regular post, freight and passenger service along the entire Norwegian coast.

1912 The Sandnes/Stavanger – Kristiania coastal steamer is expanded with “Austri” and “Vestri”, which are equipped with refrigeration units to ensure fast and hygienic transport of meat to the capital.

1909 The Bergen railway opens, and DSD expands the night route with the newly built “Bergen”.

1904 “Kong Olaf” is deployed to a new express route between Sandnes/Stavanger and Kristiania – to secure rapid transport of agricultural products from Jæren.

1897 DSD enters into a joint-venture with Sandæs Dampskibs-­ Aktieselskab to operate the night route between Sandnes, Stavanger and Bergen. It is agreed that HSD would be responsible for the correspondence with the local ferries in Sunnhordland.

1885 DSD enters the travel/tourism segment, providing signifi­ cant funding to “Suldal” on the Suldalsvannet lake to promote tourism between Sand and Røldal.

1879 DSD looks to the international market, with a summer mail route between Kristiansand and Fredrikshavn in Jutland, Denmark.

1868 DSD receives its first modern screw steamer “Stavanger”, which is deployed on the route between Kristiania and Bergen starting in the spring of 1868. The coastal route becomes one of the country’s most important trunk routes.

1855 DSD is established on 12 February 1855 to build and operate the “Ryfylke” paddle steamer on the first ­commercial boat routes in Ryfylke.

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annual report 2012

main figures last 5 years Amounts in NOK mill.

Turnover EBITDA Operating profit Profit before tax

2008

2009

2010

2011

2012

3 399 441 80 -119

3 775 724 308 329

3 932 765 319 209

4 965 627 -75 -274

4 884 519 -176 -280

Fixed assets Current assets

4 791 836

5 596 1 239

5 954 1 224

6 183 1 145

4 593 564

Equity Interest Bearing Debt Net Interest Bearing Debt Cash Balance Marketable Securities

1 590 3 030 2 881 149 278

2 167 3 618 2 947 671 205

2 303 3 742 3 066 676 114

1 911 4 203 3 719 484 0

1 553 2 872 2 684 188 0

Total balance sheet Equity Ratio

5 627 28,3 %

6 836 31,7 %

7 179 32,1 %

7 328 26,1 %

5 158* 30,1 %

Return on investment Return on equity

1,2 % -6,7 %

8,4 % 17,5 %

5,8 % 9,4 %

-6,9 % -13,0 %

-8,1 % -16,2 %

Cash & Cash Equivalents Current ratio

427 152 %

876 176 %

790 148 %

484 119 %

188 59 %

* DSD ownership in Tide ASA was reduced to 49 % as per year end 2012. Tide ASA is hence not consolidated in the Group.

Photo: Ole Dag Kvamme.

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Det stavangerske dampskibsselskab as

IMPORTANT EVENTS IN 2012 • Norled completes its first year of operation as an independent company, following the demerger from Tide ASA. • Norled wins an environmental ferry contract in Sogn, a ferry contract in Troms and several express boat tenders in Hordaland.

• Norled contracts the world’s first electric car ferry and several other vessels based on contracts awarded during the year.

• DSD Shipping withdraws four ships from the charter with Sanko, as a result of Sanko’s financial problems and outstanding hire payments.

• DSD Shipping enters into two-year contracts for two of the Group’s product tankers.

• 2012 is the first year of operation in which all of Tide’s contracts have been subject to a tender process.

• Tide begins operating a route in Kolding, Denmark on 1 July.

• Tide receives ISO 14001 certification.

• Tide wins back the tender for operation of the ­Austevoll route.

Events after the balance sheet date • Norled wins the Volda – Folkestad – Lauvstad ferry tender in Møre og Romsdal and Launes – Kvellandstrand and Andabeløy – Abelsnes in Vest-Agder.

Its express boat contract between Haugesund and Stavanger is renewed.

• DSD Shipping enters into a 12-month charter party for an Aframax ship. Three more Aframax ships are entered into the RSA pool.

• Tide is awarded the contract for running the route in Nordmøre and in Fredricia municipality in ­Jutland.

• Tide starts operation at Austevoll, after winning back the contract.

The first gas ferry for the Tau connection is launched in Poland.

annual report 2012

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areas of activity FERRIES AND EXPRESS BOATS

The Norled AS ferry and express boat company employs about 1,000 people and has 71 vessels. The company operates 30 ferry and express boat routes in Troms, NordTrøndelag, Sør-Trøndelag, Møre og Romsdal, Sogn og Fjordane, Hordaland, Rogaland, Vest-Agder, and the Oslo fjord. Norled is devoted to environmentally-friendly car

and passenger transport, and operates three gas ferries in the Oslo fjord. In 2011, the company ordered two new gas-powered car ferries that will serve the Stavanger – Tau route starting in the first quarter of 2014. Norled won an environmental tender competition for operation of the Lavik – Oppedal route on E39 in Sogn og Fjordane. The tender assignment will start in 2015, and the focus of the project has been on developing the ultimate environmentally-friendly ferry. In Q4 2012, Norled contracted a battery-­operated ferry that runs exclusively on electric ­power, recharging every time it docks to allow cars and passengers to disembark and embark. This will be the world’s first 100% emission-free ferry.

Nearly all of Norway’s ferry and express boat routes are now subject to competitive tender processes. Operations will therefore be Norled’s primary focus, with special emphasis on refining the existing contract portfolio, participating in new tenders, and consolidating positions where contracts held by the company come up for new bids.

FREIGHT

With a staff of more than 350, Nor Lines runs a freight liner operation along the Norwegian coast, in the North Sea and the Baltic Sea. The company also operates terminals and handles associated distribution activities. An extensive ground transport system, along with forwarding, clearing and overseas transport operations, are supported by the company’s 13 terminals in Norway. Nor Lines is represented by partners in 30 Norwegian ports and 10 Northern European ports, in addition to a network of distribution and forwarding partners. All freight capacity on the Hurtigruten boats is managed by Nor Lines.

At year-end, Nor Lines’ liner operation consisted of 10 freighters; seven of which are wholly-owned and managed by the Group. The company also functions as a commercial broker for 2–3 freezer ships in the North Sea and Baltic Sea. The company’s fleet is due for renewal. Two LNG-powered freighters were contracted in the autumn of 2011 from Tsuji Heavy Industries, and will be added to the company’s routes in 2014.

Nor Lines is the market leader in sea transport of gene­ ral cargo in Norway, and has a significant market share of regular routes to/from Norway in the North Sea and Baltic Sea. Over the past few years, Nor Lines has built a compre-

hensive transport system on land, including the railway as an important component on many routes. The goal is to offer competitive and environmentally-sound transport solutions.

Nor Lines owns 39% of Sea-Cargo, which operates five general cargo and ro-ro vessels on regular routes between Western Norway and England, Scotland, the Netherlands and Denmark, along with three ships on industrial contracts, and one ship on a contract route primarily serving windmill projects.

Det stavangerske dampskibsselskab as

INTERNATIONAL SHIPPING

DSD Shipping as DSD Shipping AS is a fully-integrated shipping organi­ sation, established in 1989 and, with offices in Stavanger and Singapore.

The company has an office staff of 23, and 400 officers and crew members from China, Romania, India, the Philippines, Croatia, Poland and Norway. DSD Shipping is responsible for technical and commercial operation of the Group’s international tankers.

At the end of the year, DSD Shipping was responsible for operation of 12 crude oil and product tankers where DSD is the owner or has an ownership stake. The fleet currently consists of seven Aframax crude oil tankers and five product tankers of different sizes: one LR2, two MRs, and two 16,500-dwt intermediate ships.

The fleet is modern, with an average age of just 6 years.

The ships are contracted to charterers such as AET, Vitol, Vela, Maersk, and the RSA and Taurus pools.

BUS TRANSPORT

Tide ASA, with its main office in Bergen, is one of the largest bus companies in Norway and Denmark. Tide is listed on the Oslo Stock Exchange, and DSD is the largest owner with 49% of the shares. DSD’s parent company holds a ­further 28%, and the Group thus controls 77% of the shares.

The company’s core activity is bus transport, largely contracted by the public sector. In Norway, Tide operates routes in Hordaland, Rogaland and Sør-Trøndelag. The Danish activity is in Fyn and South Jutland. 2012 was the first year of operation in which all contracts were subjected to a competitive tender process.

Tide also has extensive express and airport express bus ope­rations, and considerable involvement in charter travel and tour activities. Tide’s primary task is to ensure safe transport of passengers to their destination at all times – every minute, every day – year-round. The entire enterprise achieved environmental certification in December 2012 (ISO 14001).

Public transport is an important sector in our modern soci­ ety, and it will become even more important in the years to come. Social responsibility, greater emphasis on the environment and presumed high population growth in the

major cities will only add to the importance of this industry.

Tide intends to consolidate its position in this landscape.

The company has secured contracts worth more than NOK 10 billion, including options. Tide currently employs over 2,500 people, and operates a fleet of 1,200 buses.

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annual report 2012

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2012 REPORT BY THE BOARD OF DIRECTORS

THE NATURE OF THE BUSINESS AND ITS MAIN OFFICE

The DSD Group, with its parent company Det Stavangerske Dampskibsselskab AS (DSD), is a company domiciled in Norway, with its main office in Stavanger. Transport operations have been the company’s primary activity since its establishment in 1855. Today the enterprise is concentrated on four business areas: International Shipp­ ing, Freight, Ferry and Express Boat Operation, and Bus Transport.

The four business areas are organised in a limited lia­ bility company. The maritime enterprise is mainly whollyowned by DSD, while the bus enterprise is a listed company with DSD as the largest owner.

FERRY AND EXPRESS BOAT OPERATION: NORLED AS Norled is one of the country’s largest providers of passenger and car transport by sea. Norled AS has 71 vessels in a number of ferry and express boat routes along the coast of Norway from the Oslo fjord to Nord-Troms. In 2012, Norled transported 8 million cars and 18 million passengers under various contracts with counties and the State.

These contracts represent a contract reserve of NOK 10 billion. Norled has 1,100 employees and a main office in

Stavanger, with regional offices in Bergen, Ålesund and Oslo.

FREIGHT: NOR LINES AS Nor Lines, headquartered in Stavanger, is a transport and logistics company that runs a freight liner operation along the entire Norwegian coast, as well as the North Sea and the Baltic Sea, along with a comprehensive ground transport system, forwarding activities, terminal activities and associated distribution activities. The company has 13 branch offices along the coast. At the end of the year,

Photo: Kristin Ellefsen.

Det stavangerske dampskibsselskab as

it operated a fleet of nine pallet, refrigerated cargo and side-port ships on fixed routes, as well as three freezer ships in the spot market. Nor Lines also hires and operates the entire cargo capacity of the Hurtigruten boats.

Nor Lines has 208 employees along the coast from Fredrikstad to Hammerfest, and 200 maritime personnel employed on the company’s ships. Nor Lines owns 39% of Sea-Cargo, a liner shipping company based in ­Bergen, which operates nine ships that mainly operate in the North Sea basin.

INTERNATIONAL SHIPPING: DSD SHIPPING AS DSD Shipping is a fully-integrated shipping organisation with 23 employees who manage DSD’s international shipping fleet from the main office in Stavanger and branch office in Singapore. The fleet consists of seven crude oil tankers and five product tankers of various sizes. This is a modern fleet with an average age of just six years.

BUSES: TIDE ASA

Tide ASA, with its main office in Bergen, is one of the largest bus companies in Norway and Denmark. Tide is listed on the Oslo Stock Exchange. DSD owns 49% of the shares, and DSD’s parent company, Folke Hermansen AS, owns a further 28% of the shares. The Group thus controls 77% of the shares. The company’s core activity is bus transport, largely contracted by the public sector. In Norway, Tide ope­rates routes in Hordaland, Rogaland and Sør-Trøndelag. The Danish enterprise is located in Fyn and South ­Jutland. Tide also has comprehensive express and airport express bus operations, as well as considerable involvement in charter travel and tour activities. The company’s contract reserve, including the option periods, is over NOK 10 billion. Tide employs more than 2,600 people, and ope­rates a fleet of 1,200 buses.

CONTINUED OPERATION

In accordance with Section 3-3a of the Accounting Act, the conditions for continued operations are present.

ACCOUNT OF THE FINANCIAL STATEMENT

At the end of December 2012, DSD sold 28% of Tide ASA to its parent company. In the consolidated financial statements, Tide ASA therefore is not consolidated on the balance sheet, while it is consolidated all year in the income statement. The income statement is therefore comparable with previous years, while the balance sheet must be seen in light of Tide ASA being recorded as an affiliated company in 2012.

2012 was the DSD Group’s 157th year of operation.

The Group’s turnover was NOK 4,884 million, compared with NOK 4,965 million in 2011. The EBITDA was NOK 519 million, a decline from NOK 627 million in 2011; with NOK 82 million of which being due to higher gains on sales of assets in 2011. The operating result was a loss of NOK 176 million, compared with a loss of NOK 75 million in 2011. The result after tax was a loss of NOK 248 million, compared with a loss of NOK 258 million in 2011.

The main reason for the poor result is significant acc­ ounting write-downs in international shipping. The poor market in crude oil and product tankers has led to a strong decline in charter rates. The value of crude oil and product tankers has consequently dropped significantly. This led to the Group also in 2012 implementing write-downs on wholly-owned and partly-owned ships, with a negative impact on the accounts of NOK 293 million. The corresponding write-downs in 2011 were NOK 266 million.

The Group has thus written down NOK 559 million over the past two years.

The EBITDA is stable, but somewhat lower than in 2011. This is due to poorer earnings in Tide and International shipping, and NOK 82 million in lower gains on sales of assets compared with 2011. The Group’s total investments were NOK 447 million, and are mainly related to building new ships for Norled and Nor Lines. At the end of the year, the Group had nine vessel-building projects; seven vessels for Norled and two for Nor Lines.

Financing has been secured for all vessels, except for a Norled ferry that was contracted in the fourth quarter. The Group’s interest-bearing debt has been reduced by NOK 1,310 million. NOK 441 million of this is related to a net reduction in debt, and the outstanding amount is due to Tide no longer being consolidated in the balance sheet.

The Group’s net liquid assets were NOK 188 million as at 31 December 2012. This is a decline of NOK 296 million, and must be seen in relation to the significant reduction in debt, and the Group having nine ships under construction which will not generate a cash flow until they are deployed. The Group had drawn NOK 105 million in lines of credit as at 31 December.

The total capital at the end of the year was NOK 5,158 million, compared with NOK 7,328 million the previous year. The equity share as at 31 December 2012 was 30%, compared with 26% as at 31 December 2011. The reduced balance and improved equity share must be seen in relation to Tide no longer being consolidated.

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annual report 2012

BUSINESS AREAS Norled AS In 2012, the company completed its first year of operation as an independent company following the demerger from Tide ASA in 2011.

Norled focused on building its organisation, with main emphasis on increased expertise in innovation and deve­ lopment of new vessels and concepts. This is an important priority in order for the company to meet an increasing need for environmentally-friendly public transport solutions. In 2012, the company won several contracts where innovative solutions were an important premise. This has led to Norled now having seven vessels under construction; two of which will run on natural gas, and the world’s first electric car ferry. This ferry is a result of the tender process for operation of the Lavik – Oppedal ferry route on the E39 across the Sognefjord, where the environment was an important factor in contract award. The concept was nominated for the Next Generation Ship award at Nor-Shipping 2013, and was also nominated for a ­global award at Sustainia100.

The company’s financial results are still affected by some older weak tender contracts that are gradually being phased out. Despite the higher bunker costs in 2012, the company showed improved results, and the EBITDA rose

by NOK 34 million, adjusted for 2011 gains. In relation to the size of the operation and the capital employed, the results achieved are not considered satisfactory.

Norled consistently focuses on safety work, and has continued a positive declining trend in undesirable operational incidents.

Nor Lines AS Nor Lines showed positive development in 2012. The company has taken advantage of the financial crisis since 2008 to implement necessary reorganisation, with focus on increasing efficiency, cost reductions, quality assurance and regularity. This has led to improved results. The market has improved somewhat, but competition in domestic and European transport is still tough. There is a growing political focus on shifting cargo from road to sea, and the authorities’ work on a commercial shipping strategy is expected to have a positive impact. There is broad political support for political goals to transport more cargo by means of commercial shipping rather than by road. Nor Lines is well-

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Photo: Kristin Ellefsen.

positioned to participate in the positive trend. In 2014, the company will take delivery of two LNG-powered vessels.

This will result in even more efficient and environmentallyfriendly transport. Nor Lines’ results were not satisfactory in 2012 either, but there was a NOK 33 million improvement in the EBITDA. DSD Shipping AS

2012 was a challenging year in international tanker ope­ ration, which has performed poorly since 2008. Several players have had to restructure, and major players have gone bankrupt. DSD has performed well during the financial crisis, and benefited from its conservative freighting strategy, with a focus on utilising the fleet on long contracts. Unfortunately, the tanker crisis also affected DSD when Sanko Steamship Co. in Japan found itself in a situation during the year where it was no longer able to meet its obligations. This led to DSD in June 2012 having to withdraw four ships from its contracts with the company.

This, together with a further two ships having completed their long-term contracts, led to a considerable increase in the Group’s market exposure, and the results declined.

The Group is now operating these ships in the spot market through DSD Shipping.

DSD Shipping has had good experience with opera­ ting ships. In 2012, the Group also had a positive profit contribution from the segment, adjusted for write-downs, even though the EBITDA weakened by NOK 33 million. In 2009–2012, the Group had a positive profit contribution

Det stavangerske dampskibsselskab as

and oil price, as well as credit risk. The goal is to mode­ rate the financial risk as much as possible. Risk is continuously monitored, and financial derivatives are used to reduce such exposure.

of NOK 320 million from its tanker venture. A decline in values in the same period led to write-downs of NOK 559 million, compared with NOK 293 million in 2012.

Tide ASA Tide had a challenging year in 2012. The industry is being reorganised after the contract form changed from local, long-term operating contracts to open tenders that comply with the EEA rules. 65% of all bus routes in Norway are now subject to competitive tender. At the end of 2011, much of Tide’s production changed from the old contract regime to new tenders. All production at Tide is now based on tenders. The current design of tender contracts creates challenges, as profitability is normally weak at the beginning of the tender period, but gradually improves. Together with a challenging beginning of operations and associated start-up costs, this led to poor results for Tide last year.

The EBITDA weakened by NOK 55 million, adjusted for gains. Despite poor financial results, Tide showed good improvement in key figures for sick leave, overtime and customer satisfaction. During the year, the company built compe­titiveness through organisation-building and optimising operations.

FINANCIAL RISK Goals and strategy The Group is exposed to financial risk relating to the business areas. This is mainly linked to currency, interest rates

Market risk The Group is exposed to fluctuations in exchange rates, especially USD, as part of the company’s revenues are in foreign currency. The Group seeks to neutralise currency risk in that activities with earnings and associated debt servicing in a foreign currency also borrow in the same currency.

A large share of the interest rate exposure is hedged through compensation clauses in public transport contracts. For International Shipping, the Group actively decided to hedge part of the interest risk through derivatives.

The Group is exposed to the developments in oil prices and bunker consumption. A high oil price has been a significant burden on the Group’s results during the past few years. Contract regulation has improved significantly in recent years in ferry and express boat operation, and the risk will therefore decline.

The credit risk is considered to be moderate. The counterparty risk for International Shipping has increased after several years of poor earnings. For Ferries and Express Boats, the counterparty is the State and county administrations, with a low counterparty risk.

The Group’s liquidity risk is considered acceptable.

A persistently poor market in international shipping has weakened liquidity and may pose a further burden on the Group over time. Today, four of the Group’s wholly-owned ships run on contracts that generate a positive cash flow after servicing debt, but the rates now achieved by the five ships in the spot market are insufficient to cover both interest and instalments. The Group’s loan agreements contain financial requirements. The Group met these requirements as of 31 December 2012. A persistently poor market in international shipping may lead to a need for further easement of some of these requirements.

At the same time, the stable cash flow from the ferry and express boat operation offers a predictability that leads the board to consider the Group’s liquidity risk to be acceptable.

WORKING ENVIRONMENT AND EMPLOYEES

At year-end, the DSD Group had 3,705 employees. The DSD Group wants to be an attractive workplace with a good working environment. It therefore places great emphasis on health, safety and the environment. There is good collaboration between employees, the employee representatives and management. In 2012, the Group continued the work of reducing sick leave. This proved to be beneficial in every business area, and resulted in 7.7% sick leave; a reduction from 8.3% in 2011. This is not satisfactory, but a step in the right direction.

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annual report 2012

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ENVIRONMENTAL REPORTS

The Group’s ships have been certified internationally and nationally in accordance with the “International Management Code for Safe Operation of Ships and Pollution Prevention” (the ISM code). Passenger vessels and ferries exceeding 400 GRT hold valid IAPP and IOPP certificates in accordance with the requirements of the Norwegian Maritime Directorate. In international shipping, both ships and the company hold ISO 9001/2008 certification. The Group has established procedures for whistle-blowing, conflict handling and reporting of bullying/harassment.

Guidelines have been adopted in the Group’s working environment committees, and the organisation has been informed of them.

GENDER EQUALITY

The Group’s goal is to be a workplace with full equa­ lity between women and men. The Group has drawn up guidelines to ensure that there is no gender-based discrimi­ nation in matters such as pay, promotion and recruiting.

Transportation and maritime activities are traditionally male-dominated industries. The Group employs 590 women; i.e. 15.7% of its workforce. Female representation on the corporate management team was 25%. It was 20% on the board of the parent company.

DISCRIMINATION

The purpose of the Anti-discrimination Act is to promote equality, ensure equal opportunities and rights and to prevent discrimination based on ethnicity, national origin, descent, skin colour, language, religion or belief. 30% of the administrative employees at DSD Shipping in Norway have a different national origin. The Group is working actively and in a purposeful and planned manner to promote the objectives of the Act in its business activities. The activities include recruitment, salary and working conditions, promotions, development options, and protection from harassment. The Group’s goal is to be a workplace where there is no discrimination due to disability. The DSD Group sponsors NHO Rogaland’s Global Future integration programme.

The nature of the Group’s activities entails an impact on the external environment. The company emphasises early implementation of requirements stipulated by the authorities to reduce pollution. Installation of environmentallyfriendly technology is emphasised in new builds to reduce emissions to the extent possible. The Group works actively to reduce the use of diesel within ferry and express boat operation, bus transport and freight, and an increasing percentage of the Group’s vessels now use natural gas.

There was comprehensive innovation work in all of the business areas in 2012, with focus on energy efficiency and the environment. Gradual reductions were achieved in fuel consumption through improvements that focus on attitude-building work and good route planning. The Group is an active partner in developing new vessel concepts, energy-efficient engines and propellers, and use of alternative fuels like biofuel, natural gas and electric power.

The DSD Group wants to lead developments, and is a driver and innovator in environmentally-friendly transport.

In 2012, Tide ASA operated over 50% of the gas bus fleet in Norway. Today, Norled operates three LNG-powered passenger ferries and is building two LNG-powered car ferries. In Q4, the company contracted the world’s first electric car ferry. Nor Lines is building two gas-powered freighters that will represent a renewal of the coastal fleet and offer environmental benefits by replacing older tonn­ age.

OWNERSHIP, ETC.

DSD is a wholly-owned subsidiary of Folke Hermansen AS. Yuhong Jin Hermansen is the largest shareholder of Folke Hermansen AS and a director on DSD’s board. The company’s objective is profitable operation to secure a satisfactory return on invested capital. No changes were made to the ownership or corporate management team in 2012. The board was expanded by one member through the election of Ole Melberg.

FUTURE DEVELOPMENTS

2012 was a challenging year for the Group.

Even though the company has a conservative freighting strategy in international shipping, it was affected by the cancellation of four charter parties. The tanker market is

Caption: Nor Lines’ new LNG-powered freighter.

15 continue, and for 2013 to be a break-even year for the company.

The DSD Group wants to be a leading driver of environmental innovation. The Group invests in environmentally-friendly assets and improved energy efficiency in every segment, and constantly works to achieve further improvements. Energy-efficient transport yields a competitive advantage, while also being better for the environment. Use of environmentally-friendly transport also helps support the customer’s reputation as being environmentally responsible.

Overall, the board expects results to improve in 2013.

The development in the global economy and its consequences for international shipping and oil prices are the greatest uncertainty factors.

The board would like to thank all employees for their good efforts in 2012.

RESULT FOR THE YEAR AND ALLOCATIONS

The board proposes the following allocation of the annual result of Det Stavangerske Dampskibsselskab AS: Valuation differences fund Other equity Total allocations

– 319 110 84 361 – 234 749

The company’s distributable equity as at 31.12.2012 was NOK 461 million.

Photo: Tommy Ellingsen.

challenging, and poorer results from operation and writedowns in the segment led to the Group incurring significant losses. The board believes that 2013 will be another challenging year for international tanker operation, but expects a better market balance and profitability in the long term.

Norled is showing a positive result and profitability trend. During the year, the company strengthened its market share and consolidated its position as a leading player. New tenders are yielding greater profitability, and the board expects better results as old contracts are replaced with new ones.

Nor Lines is showing improved profitability. The work to improve quality and regularity has yielded results, and constant work is being done to make further improvements. The company has built a comprehensive and well-functioning sea-based logistics network, and is wellpositioned to take active part in shifting freight from road to sea, which is also a general objective expressed by politicians. The company will further improve its product by renewing its fleet. The board expects the results to continue to improve in 2013.

2012 was a challenging year for Tide. Starting much of the production under a tender regime was expected to impair results, but start-up costs and high oil prices made the results much weaker than expected. In spite of this, the trend for the company is good. The board expects this to

Stavanger, 29 April 2013 The board of Det Stavangerske Dampskibsselskab AS:

Erik Eik Chairman of the board

Steinar Olsen Deputy chairman

Yuhong Jin Hermansen Board member

Jon Bøthun Board member

Ole Melberg Board member

Steinar Madsen CEO

annual report 2012

16

profit and loss account Parent

01.01–31.12

2012 2011 (Amounts in NOK 1.000)

Group Note 2012 2011

650 257 Operating revenues 16,18 4 884 362

4 965 109

11 562

10 397

6 591

5 139

-17 503

-15 279

320

311

0 -17 823

Salery cost

3,11

2 102 660

2 018 076

Other operating costs

3,21

2 263 045

2 319 576

EBITDA 518 657 627 457 Depreciation on tangible fixed assets

0 Write-Downs

-15 590

12

429 303

452 460

12

265 000

250 000

Operating profit/loss -175 646 -75 003

-194 069 -217 021

Profit from investments in subsidiaries

2

0 0

-13 225

-15 145

Profit/loss associated companies

2

-19 670

5 806

0

-6 909

Profit from short-term investments

8

0

-6 909

-207 294 -239 075

Profit from investments -19 670

-1 103

8 267

48 352

Financial income

9

68 208

149 974

-30 022

-29 343

Financial expenses

9

-224 527

-223 633

0

-39 008

Unrealised agio/disagio

9

71 337

-124 488

-21 755

-19 999

Net financial items -84 982 -198 147

-246 872 -274 664

Ordinary profit before tax -280 298

-274 253

Tax on ordinary profit

31 879

16 236

-248 419

-258 017

-12 036

8 089

-234 749 -264 867

Profit after minority interest -236 383

-266 106

Allocation on the result

-319 110 -337 941

Valuation difference fund

Other equity

12 123

9 797

14

-234 749 -264 867

Annual profit before minority interests

0

Minority interests

84 361

0

73 074

-234 749 -264 867

Total allocated

15

17

Det stavangerske dampskibsselskab as

assets Parent

01.01–31.12

2012 2011 (Amounts in NOK 1.000)

Group Note 2012 2011

Assets

Intangible assets

0

0

Other intangible assets

12

4 000

6 629

0

Deferred tax asset

14

6 629 0 Total intangible assets 4 000

4 000

0 0 4 000

Tangible fixed assets

4 908

5 183

123 132

Land and buildings

12

6 121

48 156

Means of transport and other operating equipment

12

8 539

1 368 883

0

0 Ships

12 3 623 758

4 265 529

0

0

Periodic maintenance

12

40 259

16 956

0

0

New building contract ships

12

509 873

202 453

5 031

5 315

Total tangible fixed assets 4 188 550

5 901 977

Long-term investments 1 703 498

2 223 595

220 579

49 387

6 732

4 092

151

513

Investments in subsidiaries

2

Investments in associated companies

2

Loans to Group companies Other receivables

4,7

0 0 378 981

228 410

0 0

4,7,11

13 587

25 953

8

5 932 19 602

Investments in shares and ownership interests

7 960

22 210

1 936 892

2 297 189

Total long-term investments 400 528

276 573

1 948 552

2 302 504

Totale non-current assets 4 593 079

6 182 551

Current assets

0 0 Inventories 13 45 884 44 725

Receivables

0

0

79 335

117 576

540

144

79 875

117 720

Trade receivables Receivables on Group companies

7

Other receivables

7

216 574

347 666

3 000 0 111 653

268 699

Total receivables 331 227 616 365

Investments

43

43 43 Total investments 43 43

43

Marketable Securities

8

43 43

21 479

48 444

101 397

166 207

Total current assets 564 655 1 145 287

2 049 949

2 468 711

TOTAL ASSETS 5 157 734 7 327 838

Cash and cash equivalents

5

187 501

484 154

annual report 2012

18

equity and liabilities Parent

01.01–31.12

Group

2012 2011 (Amounts in NOK 1.000)

Note 2012 2011

Equity

Called-up and fully paid equity

445 288

445 288

Share capital

15

445 288

445 288

233 854

233 854

Share premium reserve

15

233 854

233 854

679 142

679 142

Total called-up and fully paid equity

679 142

679 142

Retained earning

389 499

708 609

Valuation difference fund

467 130

400 669

Other equity

Group funds

872 068

1 122 811

Minority interests

2 112

108 916 1 231 727

856 629

1 109 278

Total retained earnings 15 874 180

1 535 771

1 788 420

Total equity 1 553 322 1 910 869

debt

Provision for liabilities

6 223

4 252

Pension liabilities

11

46 470

83 320

0

4 932

Deferred tax

14

118 795

172 431

6 223

9 184

Total provisions 165 265 255 751

Other long-term liabilities

215 000

399 462

Liabilities to financial institutions

162 968

156 233

Liabilities to group companies

7

0

17 955

Other long-term debt

6

377 968

573 650

6, 10

2 871 240

4 182 143

0 0 1 166

20 382

Total other long-term debt 2 872 406

4 202 525

Short-term debt

451

149

0

0

358

671

125 287

94 060

3 891

2 577

129 987

97 457

514 178

680 291

2 049 949

2 468 711

220 807

318 329

14

11 664

17 003

Indirect taxed payable

69 508

146 970

Debt to group companies

17 955 0

Account payable Taxes payable

7

Other short-term debt

246 807

Total short-term debt 566 741

476 391 958 693

Total debt 3 604 412 5 416 969 Total equity and liabilities 5 157 734

7 327 838

Stavanger, 29 April 2013

Erik Eik Chairman of the board

Steinar Olsen Deputy chairman

Yuhong Jin Hermansen Board member

Jon Bøthun Board member

Ole Melberg Board member

Steinar Madsen CEO

Det stavangerske dampskibsselskab as

19

cash flow statement Parent 01.01–31.12 Group 2012 2011 (Amounts in NOK 1.000) Note 2012 2011

Cash flow from operating activities -246 872 -274 664 Profit before tax -280 298 -274 253

320 311 Depreciation and amortisation 12 429 303 452 460

0 0 Depreciation of main/intermediate class 12 12 013 8 043

0 0 Write-downs tangible assets 12 265 000 250 000

0 0 Write-downs intangible assets 0 0

0 0 Loss/(gain)from sale of fixed assets 12,21 -16 626 -98 126 194 069 217 021 Profit from investments in subsidaries 0 0 13 225 15 145 Profit/loss from investments in associated companies 2 19 670 -5 806 21 755 26 908 Net financial items 84 982 205 056

0 0 Changes in inventory 13 -18 495 3 639

0 0 Changes in accounts receivable 5 091 -113 261

302 -8 Changes in accounts payable -116 -15 121

1 971 2 062 Changes in pension liabilities 11 -10 697 5 427

0 0 Taxes 14 -16 888 -11 558

341 1 197 Changes in other accrual items 92 567 35 455 -14 889 -12 028 Net cash flow from operations 565 506 441 955

Cash flow from investments

0 0 Payments received from sale of tangible fixed assets 12 174 950 188 652

0 0 Payment received from financial assets 0 89 611

-36 0 Disbursements from puchase of tangiable fixed assets 12 -447 032 -941 922

0 -212 075 Net cash effect consolidation 2 51 219 -89 460

0 Payments received from sale of shares 0 0 -79 973 0 Increase equity subsidaries 0 0 130 646 107 712 Payments received from sale of shares 20 958 111 009 17 250 34 501 Dividend received 15 399 15 501

2 745 931 Received group contribution 0 0

0 -5 000 Called-up capital other investments -1 510 -5 000

332 0 Payments received from other investments 332 1 349 70 964 -73 931 Net cash flow from investments -185 684 -630 260

Cash flow from financing -29 368 -24 000 Interest paid 9 -171 732 -126 285

2 046 4 903 Interest received 9 10 678 14 246

59 1 844 Realised agio/disagio 9 -773 19 770

0 74 000 Payments received from new long-term borrowing 6,10 1 430 664 873 084 -184 462 -8 978 Payments from repayment of long-term debt 6,10 -1 934 220 -546 929 -17 955 0 Payment other long term debt -19 216 0

-2 640 -40 000 Disbursements from lending to group companies 0 0

0 111 709 Payments received from lending to group companies 0 0

Payments received from long-term borrowing 6 735 7 366 0 0

from Group companies

0 -61 008 Disbursement Group companies loans 0 0 142 545 0 Net change receivables Group companies 7 14 955 0

0 0 Disbursements from reduction of bank overdraft 0 -99 931

0 0 Disbursements from repayment of short-term debt 0 -2 591

0 0 Disbursement/payment received to/from minority 2,10 -1 521 -122 615

0 0 Disbursement from dividend -5 310 -11 808 -83 040 65 836 Net cash flow from financing -676 475 -3 059 -26 965 -20 123 Net change in cash through the year -296 653 -191 364 48 444 0 Cash 01.01. Cash and cash equivalents 484 154 675 518 21 479 -20 123 Cash and cash equivalents 01.01.–31.12.

187 501 484 154

325 369 Tied-up assets (source tax deduction) 1 056 1 173

annual report 2012

20

fleet list pr. 31.03.13 Tankers DSD Shipping MT «Stavanger Prince» MT «Stavanger Viking» MT «Stavanger Blossom» MT «Stavanger Bliss» MT «Eagle Stavanger» MT «Eagle Sydney» MT «Stavanger Bell» MT «Stavanger Breeze» MT «Stavanger Eagle» MT «Stavanger Bay» (50 %) MT «Stavfjord» (30 %) MT «Star Viking» (30 %)

Built 2002 2004 2007 2008 2009 2009 2010 2004 2004 2004 2009 2009

Coastal liners Nor Lines MS «Baltic Betina» (30 %) MS «Cometa» MS «Nordvik» (50 %) MS «Nordvåg» (50 %) MS «Nordjarl» MS «Nordkyn» MS «Nordvær» MS «Sunnmøre» MS «Tananger» MS «Nordkinn» (BBC + Purchase options)

1983 1981 1978 1979 1985 1979 1986 1985 1979 2006

Size 110.000 dwt.

105.000 dwt.

105.000 dwt.

105.000 dwt.

105.000 dwt.

105.000 dwt.

105.000 dwt.

47.000 dwt.

45.000 dwt.

105.000 dwt.

16.000 dwt.

16.000 dwt.

3229 4450 2540 2540 2400 1797 2067 2067 4450 2500

dwt. dwt. dwt. dwt. dwt. dwt. dwt. dwt. dwt. dwt.

21

Det stavangerske dampskibsselskab as

fleet list pr. 31.03.13 Ferries Norled

Built

MF Austevoll

1979

Brt-cars-passengers 769-35-200

MF Bjørnefjord

1990

2 871-105-390

MF Bømlo

1972

1 206-73-260

MS Dronning

2009

600

MF Etne

1979

1 660-94-390

MF Fedjefjord

2001

MF Finnøy

1999

MF Fitjar

1973

740-35-195

MF Fjordveien

2001

MF Foldøy

1999

MF Folgefonn MF Frafjord

Built Brt-cars-passengers

MF Kvam

1977

839-35-147

MF Kvinnherad

1978

839-42-248

MF Lauvstad

2007

884-50-145

MF Melderskin

1985

1 974-112-400

MF Os

1978

838-35-147

2 232-42-130

MS Prinsen

2009

600

1 935-101-350

MF Ropeid

1969

551-33-141

MF Sand

2007

879-50-255

3 368-79-300

MF Sjernarøy

1999

1 656-48-200

1 656-48-200

MF Stavanger

2003

2 434-114-393

1998

1 182-76-299

MF Stord

1987

2 871-107-390

1979

739-34-165

MF Strand

1982

1 479-64-422

MF Folkestad

2005

1 910-90-295

MF Strandebarm

1971

743-21-195

MF Hardingen

1993

2 631-86-399

MF Sveio

1975

662-26-200

MF Hidraferja

2001

595-36-128

MF Tidefjord

2008

2 980-120-350

MF Hidrasund

1972

113-10-98

MF Tidesund

2008

2 980-120-350

MF Hidrasund ll

1969

307-23-128

MF Ullensvang

1986

2 871-106-399

MF Hjelmeland

1992

1 183-76-400

MF Utstein

1975

821-36/47-240

MF Hordaland

1979

1 184-64-298

MF Vikingen

1992

2 631-86-399

MS Huldra

1974

438

MF Ytterøyningen

2006

632-38-160

MF Høgsfjord

1992

1 183-76-400

MF Ølen

1977

904-51-255

MF Jondal

1974

748-35-195

MF Ørland

2006

875-50-190

MS Kongen

2009

600

Photo: Samferdselsfoto.

annual report 2012

22

fleet list pr. 31.03.13 High-speed crafts Norled

Built

Brt-passengers

Built Brt-passengers

MS Baronen

2009

330-250

MS Tedno

2007

54-85

MS Baronessen

2008

228-180

MS Teisten

2006

278-180

MS Espeværekspressen

1991

46-42

MS Tideadmiral

2010

398-280

MS Fjordbuen

2005

22-50

MS Tidebris

2001

224-180

MS Fjorddrott

2007

226-180

MS Tideekspress

2008

416-296

MS Fjordfart

2007

226-180

MS Tidecruise

2008

179-147

MS Fjordkatt

2007

226-180

MS Tidelyn

2009

192-125

MS Fjordsol

2005

98-97

MS Tidevind

2008

190-147

MS Frøya

2012

190

MS Tiderose

2009

192-147

MS Fjord Molde

2005

97-97

MS Tranen

2006

278-120

MS Lyse Ekspress

1988

47-60

MS Tyrving

2002

224-180

MS Lysefjord (66 %)

2006

230-85-12 pbe

MS Vingtor

2012

290

MS Njord

2012

290

MS Vøringen

1995

103-79

Photo: Samferdselsfoto.

Det Stavangerske Dampskibsselskab AS Kongsgårdbakken 1 Postboks 40 4001 Stavanger Telefon: +47 51 84 56 11 Telefax: +47 51 84 56 03 www.dsd.no e-mail: mail@stavangerske.no

DSD Shipping AS Kongsgårdbakken 1 Postboks 848 4004 Stavanger Telefon: +47 51 84 56 00 Telefax: +47 51 84 56 01 www.dsd-shipping.no e-mail: mail@dsd-shipping.no

Norled AS Stavanger Børehaugen 1 Postboks 839 Sentrum 4004 Stavanger Telefon: +47 51 86 87 00 Telefax: +47 51 89 54 25 www.norled.no e-mail: post@norled.no

Nor Lines AS Nedre Holmegate 30 Postboks 655 Sentrum 4003 Stavanger Telefon: +47 51 84 56 50 Telefax: +47 51 84 56 51 www.norlines.no e-mail: norlines@norlines.no

grafica hundsnes

Tide ASA Møllendalsveien 1A Postboks 6300 5893 Bergen Telefon: +47 05505 Telefax: +47 55 23 87 01 www.tide.no e-mail: post@tide.no