Annual report

Financial review 2018

Consolidated financial results

The merger between Wilh. Wilhelmsen ASA and WallRoll AB in April 2017  materially impacted the consolidated historical financial statements for 2017. Therefore, the financial information for 2017 used for comparison with 2018 figures is based on the unaudited proforma income statement for first quarter 2017, as well as actual figures for the last three quarters of 2017.

Total income for Wallenius Wilhelmsen was USD  4 065 million for the full year of 2018, up 6% compared to 2017 (proforma revenue). The increase in total income was driven by stable net freight and increased surcharges related to bunker adjustment clauses (BAF) for the ocean segment and growth in the landbased segment.

For 2018, EBITDA ended at USD 601 million which included costs of about USD5 million related to the restructuring and realisation of synergies. EBITDA adjusted for these items, came in at USD 606 million, a decline of 14% compared to last year’s adjusted EBITDA of USD706 million (based on proforma figures). The performance shortfall was largely driven by the ocean segment, which was negatively impacted by bunker prices, a planned reduction in contracted HMG volumes, lower rates, and unfavourable currency movements in the first part of the year. The negative development was partly balanced by underlying positive volume development, especially for high & heavy, and increased realisation of synergies.

Net financial expenses were USD 166 million for the full year of 2018. Interest rates increased during the year, but had only a marginal negative impact due to a large portion of debt being secured through a hedging programme (interest rate swaps not directly linked to specific loans and/or facilities). Net financial expenses were positively impacted by USD 32 million in unrealised gains from interest rate hedges and negatively impacted by USD 21 million in currency movements/derivates and USD 7 million in losses on bunker hedges purchased in November 2018.

Wallenius Wilhelmsen recorded a tax expense of USD 20 million for the full year of 2018. The tax expense included withholding tax on dividends from EUKOR of USD 7 million and a reclassification of a provision between WW Ocean and EUKOR with a deferred tax effect of USD 11 million.

Profit for the full year of 2018 was USD 58 million.

Financial position and capital structure

Wallenius Wilhelmsen had an equity ratio of 38.8% at the end of 2018, up from 36.2% at the end of 2017. The liquidity position is good, with cash and cash equivalents of USD 484 million and around USD 335 million in undrawn credit facilities. The group had total interest-bearing debt of USD 3 585 million at the end of 2018. Outstanding bonds were about USD 380 million with the remainder consisting of bank loans and leasing commitments. The group was in compliance with all loan covenants at year-end 2018.

Several financing arrangements were concluded during 2018. In April 2018, Wallenius Wilhelmsen finalised the project to establish a legal and funding structure consistent with the business unit structure. As part of this process, all ship loans in Wallenius Logistics AB and Wilhelmsen Lines AS were either refinanced or amended to allow for the restructuring. In addition, the WW Solutions credit facility was increased from USD 250 million to USD 400 million, EUKOR refinanced four vessels for a total of USD 120 million, and WW Ocean refinanced seven vessels for a total of USD325 million. Wallenius Wilhelmsen ASA also issued a NOK 750 million unsecured bond, with a floating interest rate coupon set at three-month NIBOR plus 3.00% p.a. and maturity date on 13 September 2021.

Cash flow

Net cash flow from operating, investing and financing activities was negative by USD 312 million in 2018.

The net cash flow from operations amounted to USD 261 million. Net cash flow from operations was negatively impacted by the EUR 207 million settlement with the European competition authorities and customer settlements of USD 11 million.

Net cash flow from investing activities was negative USD 174 million, mainly related to execution of a vessel purchase option, final instalments for the first HERO newbuilding delivered in May 2018, regular drydockings, the acquisition of Syngin and a few other landbased investments.

Net cash flow from financing activities, which was significantly impacted by the all the refinancings throughout the year, ended at negative USD 399 million. The main items were net proceeds from issue of debt of USD 1 280 million, repayment of debt of USD 1 455 million, interest payments of USD 177 million, realised derivatives of USD 30 million and USD 17 million in dividends to the minority shareholders in EUKOR.

Going Concern Assumption

Pursuant to section 4, sub-section 5, confer section 3, sub­section 3a of the Norwegian Accounting Act, it is confirmed that the annual accounts have been prepared under the assumption that the enterprise is a going concern and that the conditions are present.