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2019

Annual report

The ocean segment

The main objective for the ocean segment is to strengthen its position as the RoRo shipping market leader with unrivalled high and heavy and break-bulk capabilities. The company will also take a leading position in the journey to zero emissions by prioritising Lean:Green service offerings and optimising core operations to reduce carbon footprint.

Summary of 2019

Total income was USD 3 141 million for the full year 2019, down 2% compared to 2018 due to lower volumes and less other operating revenue, primarily as a result of less chartering out activity. Higher net freight per CBM and increased fuel cost compensation from customers had a positive impact on revenues. Ocean volumes were down 6% compared to 2018. Commercial priorities where Wallenius Wilhelmsen has chosen not to renew contracts or carry cargo at unprofitable rate levels were an important driver behind the reduced volumes.

Volumes declined for most of the main trades in 2019, with the exception of the Asia-North America trade (+6%) which benefited from continued strong demand in the US. The largest decline was seen in the Atlantic trade (-14%). However, this was almost entirely due to unprofitable volumes not renewed in the Atlantic with impact from 1 January 2019. The Oceania (-4%) trade was also affected by a contract not renewed with impact from November 2019, with only a small decline in total volumes in 2019 due to more general demand weakening. Both the Europe-Asia (-10%) and Asia-South America (-12%) trades registered significant decline driven primarily by weaker demand, while Asia-Europe trade (-4%) declined partially as a result of rationalised sailings.

The high and heavy share increased to 29.4%, up from 28.3% in 2018 due to a combination of lower auto volumes and strong volumes in the high and heavy segment in the first half of the year.

Adjusted EBITDA for the ocean segment ended at USD 732 million in 2019, an increase of USD 200 million compared to 2018, including a USD 123 million positive impact from the implementation of IFRS 16. The increase in EBITDA, despite lower volumes, was driven by the performance improvement programme contributing about USD 50 million of improvements compared to 2018, better cargo mix and higher net freight per CBM, lower net bunker cost and a favourable currency impact as the USD strengthened throughout the year. In December 2019, we completed the transition to very low (0.5%) sulphur fuel oil (“VLSFO”) to comply with the IMO 2020 regulation in force from 1 January 2020. The cost of the transitions was about USD 8 million. This includes the cost of sloshing fuel tanks with marine gas oil to prepare for the change of fuel, and the additional cost of running on VLSFO for a period prior to 1 January 2020.

EBITDA was also affected by an increase to the provisions set aside for antitrust claims by USD 30 million, recognised as an operating expense, to cater for potential higher legal costs in disputed cases. Including this impact, reported EBITDA ended at USD 702 million.

The fleet

At year end 2019, the ocean business operated a core fleet of 123 vessels with carrying capacity of 867,400 car equivalent units (CEU) accounting for about 20% of the global car carrier fleet. The group owned 80 vessels, had 46 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) overall was stable throughout 2019, while the number of short-term charters varied during the year due to seasonal volume shifts. During 2019, the group took delivery of one newbuilding on WW Ocean’s account and EUKOR exercised one purchase option on chartered vessels. One vessel on long-term charter was redelivered upon expiry of the charter in December 2019. The number of owned vessels increased from 78 at the end of 2018 to 80 vessels by the end of 2019. Per end of 2019, the group retains flexibility to redeliver up to 11 vessels by end of 2020 (excluding vessels on short charter).

Wallenius Wilhelmsen has an ongoing newbuild programme for a total of four Post-Panamax vessels (8 000 CEU), with two vessels remaining to be delivered. Vessel number three is expected to enter service in the second quarter of 2020, and the fourth and last vessel under this programme is scheduled for delivery in Q4 2020. The outstanding instalments for these vessels are about USD 80 million. The newbuildings have been financed through bank facilities.