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 H&H and breakbulk capabilities, while taking a leading position in the journey to zero emissions by digitalising the supply chain and driving operational effectiveness.

Summary of 2020

Total revenue was USD 2,327m for the full year 2020, down 26% compared with 2019 due to 23% lower volumes YoY, lower net freight per CBM in part due to a negative trade mix development, reduced fuel compensation and a decline in other revenue partly due to low vessel charter out activity.

Volumes declined for all trades in 2020 due to the rapid drop in the first half of the year as COVID19 halted production and economic activity across the world. Decline in volume was also impacted by a few contracts that were not renewed in Q4 2019 as a result of commercial priorities. All the main trades have seen significant improvement during the latter half of the year because of a strong rebound in auto volumes, with some trade lanes ahead or in line with Q4 2019 during Q4 2020, while others still lag significantly behind.

Asia-North America trade volume dropped rapidly and ended down 16% compared to 2019 but rebounded on strong demand and ended the year with higher volumes in Q4 2020 than Q4 2019 on solid auto and H&H volumes. Volumes in the Atlantic dropped by 17% compared to 2019, but in the fourth quarter were at the same level as in Q4 2019 as a strong recovery of auto volumes both eastbound and westbound made up for slightly weaker H&H volumes. Europe-Asia trade was down 22% YoY as volumes fell steeply in the first half of the year, but Q4 2020 ended only 6% below Q4 2019. Volumes fell by 26% in Asia-Europe trade due to COVID19 effects and contractual developments and lagged 14% behind Q4 2019. Despite significant improvements in Q4, Europe-North America-Oceania trade was among the hardest hit and volumes fell 44% compared to 2019, partly due to COVID19 impacts and a contract which was not renewed at the end of 2019, with Q4 2020 still significantly behind Q4 2019 with 24%.

The H&H share increased to 31.1%, up from 29.4% in 2019, as H&H volumes proved more resilient than automotive volumes in the trough following the pandemic.

Adjusted EBITDA for the ocean segment ended at USD 469m in 2019, down USD 264m (-36%) compared to 2019. EBITDA was negatively impacted by reduced volumes and net freight rate per CBM of USD 41.3 down 3% YoY, while cargo mix of H&H held up. Ship operating expenses were up 8% over 2019 – partly on delivery of newbuilds during 2019 and 2020, costs relating to cold lay-up and inefficiencies caused by the pandemic situation. Costs relating to cargo, fuel and voyage expenses are variable and account for approximately 70% of total costs in the ocean segment. As volumes fell these costs were managed down in line with the volume decrease and further supported by lower fuel prices in 2020 compared to 2019. The average fuel price decreased by 12% compared to 2019. Combined with efficiency measures such as lower sailing speeds and tighter fuel inventory management, this ensured a positive net fuel cost (bunker cost less surcharge) effect of USD 40m when adjusting for changes in cargo volume and bunker volume. Additionally, the company utilised the flexibility available in the fleet and redelivered seven leased vessels as well as placed 15 vessels in cold lay-up. Two vessels were recycled in 2020 and another two are classified as held for sale at the end of the year.

The fleet

At year-end 2020, the ocean business operated a core fleet of 118 vessels, excluding short-term time charters, with carrying capacity of 816,500 car equivalent units (CEU) accounting for about 20% of the global car carrier fleet. The group owned 83 vessels, had 35 vessels on long-term charter contracts and 18 vessels were on short-term time charters (contracts up to one year) as of year-end 2020. The tonnage market showed extreme fluctuation due to COVID19 and the group managed capacity with the cold lay-up of 16 vessels and short-term time charters throughout the year. During 2020, the group took delivery of one newbuild on WW Ocean’s account, while one American Roll-on Roll-off Carrier vessel and one EUKOR vessel were recycled. Seven vessels on long-term charter were redelivered upon expiry of the charter in 2020. Twenty vessels were reclassified from leased to owned (see ‘note 10 – Right of use assets’). The number of owned vessels increased from 64 at the end of 2019 to 83 vessels by the end of 2020. At year-end 2020, the group retained flexibility to redeliver up to three vessels by end of 2021 (excluding vessels on short charter).

Wallenius Wilhelmsen has an ongoing newbuild programme for a total of four Post-Panamax vessels (8 000 CEU), with one vessel remaining to be delivered. Vessel number three entered service in October 2020 and the fourth and last vessel under this programme is scheduled for delivery in Q2 2021. The outstanding instalment for the vessel is about USD 39m and the company has a USD 50m bank financing available for the vessel at delivery.