Annual report

The ocean segment

Wallenius Wilhelmsen’s main objective for the ocean segment is to strengthen its position as the RoRo shipping market leader with unrivalled high & heavy and breakbulk capabilities.

Summary of 2018

Total income was USD 3 220 million for the full year 2018, up 3% compared with 2017 (proforma) due to increased fuel cost compensation from customers. Ocean volumes were relatively flat despite reduction in contracted Hyundai Motor Group (HMG) volumes due to strong underlying volume development in the first half of the year. The Oceania and Asia-South America trade experienced growth, while the volume development for Atlantic, Asia-Europe and Europe-Asia trade was flat. Furthermore, the Asia-North America trade decreased substantially as the largest reduction of HMG volumes took place here. The high & heavy share increased to 27.9%, up from about 25.6% in 2017 due to positive development in the high & heavy segment.

EBITDA in 2018 ended at USD 528 million, which included costs of about USD 4 million related to the restructuring and realisation of synergies. EBITDA adjusted for these items came in at USD 532 million, a decline of 13% compared to 2017 (proforma). The performance shortfall was largely driven by higher bunker prices, reduction in contracted HMG volumes, lower rates, and unfavourable currency movements. The negative development was only partly offset by underlying positive volume development, especially for high & heavy, and increased realisation of synergies.

The fleet

At year-end 2018, the Ocean business operated a core fleet of 123 vessels with carrying capacity of 866,000 car equivalent units (CEU) accounting for about 20% of the global car carrier fleet. At year end, the group owned 78 vessels, had 48 vessels on long term charter contracts and net three vessels were on short-term time charters out (contracts up to one year). The size of the core fleet (owned and long term charters) was stable throughout 2018, while the number of short-term charters varied during the year due to seasonal volume shifts. Currently, the group retains flexibility to redeliver up to 12 vessels by 2020 (excluding vessels on short charter).

During 2018, the group took delivery of one new building on WW Ocean’s account and EUKOR exercised one purchase option on chartered vessels. The number of owned vessels increased from 76 vessels in 2017 to 78 vessels in 2018.

Three Post-Panamax vessels are under construction, with combined capacity of 24,000 CEU. Two of these vessels are expected to enter service in 2019 and one is scheduled for delivery in early 2020. The outstanding instalments for these vessels are USD 120 million. The new buildings have been financed through regular bank facilities.

In June 2018, Wallenius Wilhelmsen decided to initiate a programme to retrofit scrubbers on 20 vessels over the next few years, increasing the number of vessels in the fleet with scrubbers to 25. Total cost for the scrubber installations (including off-hire costs) are estimated to USD 120-130 million. The scrubbers will be retrofitted during scheduled dry-docking to minimise the impact on operations, and will be financed through available cash, existing credit facilities, and new scrubber tranches for selected ship loans.