Annual report

Financial review 2020

Consolidated financial results

Total revenue was USD 2,958m for FY 2020, a decrease of 24% compared to FY 2019, with lower revenues for both the ocean and landbased segments due to COVID19. Ocean revenues were down 26%, which was driven by lower volumes by 23%, lower net freight per CBM, reduced fuel compensation and a decline in other revenue partly due to low vessel charter out activity. The decline in volumes were due to a combination of the impact of COVID19, generally slower markets and the impact of reduced volumes related to a few contracts that were not renewed in Q4 2019 as a result of commercial priorities. Landbased revenues were down 20% as volumes dropped sharply with temporary OEM plant closures and production cutbacks as a direct effect of COVID19 during H1 2020 before gradually improving in the second half, with annual volumes down 27% compared to 2019.

EBITDA ended at USD 473m for FY 2020 compared to USD 805m in 2019. EBITDA was also negatively affected by two items not included in the adjusted EBITDA; USD 55m increase to the anti-trust provision and USD 7m of foregone instalments due to planned scrubber installations being cancelled. Excluding these effects, adjusted EBITDA ended at USD 536m, down 36% compared to adjusted EBITDA in 2019, with the ocean segment EBITDA down 36% and the landbased segment EBITDA down 34%. For an explanation of the definition of adjusted EBITDA, please refer to the section on ‘Reconciliation of alternative performance measures’ in the Annual Accounts.

Depreciation and amortisation amounted to USD 451m in 2020 versus USD 498m in 2019 reduced due to lower value of leased assets during the year after redeliveries of leased assets. Wallenius Wilhelmsen recognised impairment losses of USD 90m, of which USD 44m is related to four vessels: Two of the vessels were recycled during Q2 and Q3 at estimated sales price, while the remaining two vessels are still classified as assets held for sale as of 31 December 2020 to an estimated scrap value of USD 5m. The company also booked an impairment charge of USD 40m on the goodwill allocated to the landbased activities. The main reason for the impairment was the downward adjustment of the forecast for this segment as COVID19 hit, coupled with a reduction of the anticipated growth rate. Lastly, the group recognised an impairment of USD 5m related to software under development.

A put-call structure exists in the shareholder agreement with the minority shareholders for the investment in EUKOR Car Carriers (EUKOR). Any changes in the valuation of the net derivative is recognised in the profit and loss statement. During 2020, the change in the value of the derivative was USD 16m recognised as a loss (the corresponding value change in 2019 was a USD 52m gain) under Other gain/(loss) in the income statement. The movements during the year have been because of changes in the value of the EUKOR shares, which were driven by uncertainties related to the estimated cash flows due to the COVID19 pandemic.

Net financial expenses were USD 223m versus USD 247m in FY 2019. Interest expense including realised interest derivatives was USD 166m, down by USD 35m versus FY 2019. Net financial expenses were further impacted by USD 31m in unrealised derivative losses, including USD 57m loss related to interest rate derivatives, USD 1m gain related to bunker derivatives and USD 25m gain related to FX derivatives. In FY 2019, unrealised derivative losses were USD 18m.

The group recorded a tax income of USD 4m in 2020, compared with an expense of USD 10m in 2019. The tax income is partly due to the authorities in Korea cancelling a withholding tax case on dividends from EUKOR to Wallenius Logistics AB for the period 2010-2014, resulting in recognition of a tax income of USD 5m. The tax income was also due to the group’s recognition of deferred tax assets related to tax losses in the landbased segment.

Net loss for the full year of 2020 ended at USD 302m.

Financial position and capital structure

Wallenius Wilhelmsen had an equity ratio of 34.3% at the end of 2020, down from 37.5% at the end of 2019. The liquidity position is solid, with cash and cash equivalents of USD 654m and USD 326m in undrawn credit facilities. The group had total interest-bearing debt and net debt of USD 4,081m and USD 3,427m respectively at the end of 2020. Outstanding bonds were about USD 476m with the remainder consisting of bank loans and leasing commitments.

As a result of site closures in the landbased business due to lockdowns, Wallenius Wilhelmsen noted in the Q1 2020 report that there was a risk of a breach of a NIBD/EBITDA covenant in a revolving credit facility for the group’s subsidiary Wallenius Wilhelmsen Solutions. An agreement is in place with the relevant lenders to waive this covenant for the remainder of 2020 before gradually being reset in 2021.

For the ocean business, the company agreed with the banks of Wallenius Wilhelmsen Ocean (WW Ocean) to defer instalments of about USD 70m, previously scheduled for the second half of 2020, to strengthen the cash position during the period of reduced activity caused by COVID19. As at the end of Q4, all agreed amounts are deferred and scheduled repayments resume in January 2021. The deferred instalments are scheduled to be repaid during the life of each facility but remain a priority to prepay in order to allow dividends from Wallenius Wilhelmsen ASA.

The group complied with all loan covenants at year-end 2020.

Several financing arrangements were concluded during 2020. At the onset of global lockdowns, USD 50m was secured in extra liquidity financing, of which half is in a KRW denominated revolving credit facility. In August, Wallenius Wilhelmsen ASA completed a new senior unsecured bond issue of NOK 2 billion (USD 220m). Net proceeds from the bond issue were used for partial repurchase of USD 66m of other outstanding bonds during the third quarter. The group has entered into two sale and leaseback agreements for two vessels for a total of USD 90m. The arrangements are regarded as financing arrangements and the liabilities related to this total of USD 90m have been classified as bank loans. Three vessels were refinanced with bank debt in the second half of the year at a total amount of USD 75m. In addition, the group has drawn USD 40m on previously concluded financing in connection with scrubber installations.

Cash flow

The group generated USD 256m of positive net cash flow from operations, investing and financing activities in 2020.

The net cash flow from operations amounted to USD 615m, partly bolstered by a USD 141m decrease in working capital through the year.

Net cash flow used in investing activities was USD 130m. The most significant investing activities were the USD 41m final instalment for the third HERO newbuilding in September, USD 35m for scrubber installations and regular dry dockings of approximately USD 35m.

Net cash flow from financing activities was negative USD 229m. The main items were net proceeds from issue of debt of USD 557m, repayment of debt of USD 598m, interest and interest derivative payments of USD 166m and realised derivatives of USD 19m.

Going concern assumption

Pursuant to relevant sections 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.