premuda · 000 year ended 31 december 2007 annual report and accounts 100th financial year this...
TRANSCRIPT
ann
ual
rep
ort
200
7
000
Year ended 31 december 2007Annual report and accounts
100th financial year
This report is based on Premuda's annual reportFor the period ending 31 December 2007.The Premuda financial statements were audited byDeloitte & Touche S.p.A. and are available in Italian.
Premuda
Board of Directors
Group's Structure
Group’s Fleet
Financial highlights
Premuda S.p.A.:
Management report
Financial Statements
Premuda Group:
Management report
Financial Statements
Notes
3
table of contents
5
7
9
11
13
27
35
51
59
4
Memorandum of Association of “Società di Navigazione G.L. Premuda”, Trieste, 21 December 1907.
Board of directors
chairman Alcide Rosina
deputy chairman Giacomo Costa
managing director Stefano Rosina
directors Raffaele AgrustiAmerigo BorriniClaudio CampanaAntonio Gozzi Anna Rosina Alessandro Zapponini
general managers Stefano Rosina Marco Tassara
Board of statutory auditors
chairman Giorgio Carbone
auditors Giuseppe Alessio VernìAlfio Lamanna
alternate auditors Luigi BarberiPier Luca Bubbi
Audit company
Deloitte & Touche S.p.A.
The mandate of the Board of Directors and of the Board of Statutory Auditors will expire once the Financial Statements at December 31, 2007 are approved.
Board of directors
5
6
“Costruire” - by Raimondo Sirottithpainting realized for the 100 Anniversary of the Company.
7
Group’s Structureat 31 December 2007
90%
Monaco
Premuda(Monaco) Sam
Premuda International Sah
100%
100%
Perth - Australia
Australian FPSO Management Pty. Ltd.
Premuda Spa
Luxembourg
100%Premuda (Atlantic) Inc.Houston - USA
Madeira
Moon Shipping - Serviçose Navegaçao Lda.
m/t. Four Atlantica m/t. Four Antarctica **
**
100%
MadeiraJep Navegaçao Lda.
m/v. Four Earth
100%
100%
100%Suezmax Navegaçao Lda.Madeira
Madeira
Four Vanguard - Serviçose Navegaçao Lda.
FPSO Four Vanguard
100%
Madeira
Madeira
Panamax Navegaçao Lda.
Premuda CharteringNavegaçao Lda.
TBN Aframax 114.700 dwt (2010)TBN Aframax 114.700 dwt (2010) TBN Aframax 114.700 dwt (2010)
100%
m/t. Four Islandm/t. Four Baym/t. Framuram/t. Four Springsm/t. Four Moonm/v. Four Etoilesm/v. Four Coalm/t. Four Sun *m/t. Four Smile *m/t. Four Schooner *m/v. Doric Spirit *
MadeiraBrig Shipping Lda.
TBN Bulk 34.000 dwt (2010)TBN Bulk 34.000 dwt (2010)TBN Bulk 35.000 dwt (2009)TBN Bulk 35.000 dwt (2010)TBN Bulk 35.000 dwt (2010)TBN Bulk 35.000 dwt (2011)TBN Bulk 35.000 dwt (2011)TBN Bulk 35.000 dwt (2011)TBN Bulk 35.000 dwt (2011)TBN Bulk 35.000 dwt (2012)
Madeira
Premuda BulkNavegaçao Lda.
100%
* : long term time-charter in** : long term bare-boat out(#) : 33% within vessels’ delivery
43%(#)
Holding Company
Ship-Management Company
Shipowning Company
Non Operative Company
Commercial Company
8
Chinese Sea: m/t. Four Moon at sea after the reconversion in tanker.
As at the end of March 2008 the Group's Fleet consists of the following:
tankers
FPSO
bulk carriers
new buildings
chartered in
* : renamed Stena Antarctica and Stena Atlantica (long-term bare-boat out)**: long-term time-charter in
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
name
Four Antarctica *
Four Atlantica *
Four Island
Four Bay
Framura
Four Springs
Four Moon
Four Vanguard
Four Coal
Four Earth
Four Etoiles
TBN
TBN
TBN
TBN
TBN
Four Sun **
Four Smile **
Four Schooner **
Doric Spirit **
Four Shinano **
Four Kitakami **
Four Mogami **
TBN (33%)
TBN (33%)
TBN (33%)
TBN
TBN
TBN
TBN
TBN
TBN
TBN
type
aframax Ice Class
aframax Ice Class
aframax tanker
aframax tanker
aframax tanker
aframax tanker
panamax tanker
FPSO
panamax bulk
panamax bulk
panamax bulk
aframax product
aframax product
aframax product
handy bulk
suezmax tanker
suezmax tanker
panamax tanker
handymax bulk
handymax bulk
handymax bulk
total owned tankers in service
total owned FPSO in service
total owned bulk carriers in service
total owned Fleet in service
handy bulk
handy bulk
handy bulk
handy bulk
handy bulk
handy bulk
handy bulk
handy bulk
handy bulk
handy bulk
handy bulk
total new buildings on order
handymax bulk
total chartered in tonnage
total fleet as at 31 March 2008
hull design
DH
DH
DH
DH
DH
DH
DH
DH
DB
DB
DB
DH
DH
DH
DH
DH
DH
DH
DH
DH
DH
DH
DH
DH
DH
DH
DH
DB
DB
DB
DB
DH
DH
year built
2006
2006
1995
1995
1993
1992
1984/2002
1992/2003
2000
1984
1984
2010
2010
2010
2009
2009
2010
2010
2009
2010
2010
2011
2011
2012
2003
2001
2000
2001
2008
2009
2009
2011
2011
dwt
114,800
114,900
94,000
94,000
94,000
94,000
65,100
670,800
94,000
94,000
74,400
78,000
54,500
206,900
971,700
114,700
114,700
114,700
34,000
34,000
760,100
160,000
160,000
73,100
52,500
56,300
56,000
56,000
613,900
2,345,700
34,000
34,000
35,000
35,000
35,000
35,000
35,000
35,000
35,000
35,000
9
Group’s Fleetat 31 March 2008
10
The 160,000 dwt suezmax tanker Four Sun at sea.
2003
(€ )428,672293,705117,375
(€/ )41,603
8,93328,33043,61412,103
4,969-
(€)0.190.080.10
2.184.88
4.2%9.1%
10.3%32.3%
/000
000
2004
(€/000)314,876150,845150,764
(€/000)70,968
9,48635,07564,60824,847
8,049-
(€)0.190.060.07
0.966.81
4.0%22.0%16.5%39.4%
Fixed assetsLiabilities net of current assets
(2) Net equity
EBITDA(3)Financial items
Depreciation(4)Cash-flow
(2)Net profit (5)Dividends
(6)Extraordinary dividends
(2)Net profit per share Dividend per ordinary share Dividend per saving share
Debt/equityCash-flow/financial charges
Average debt of costReturn on investment (ROI)
(2)Return on equity (ROE) Cash-flow/net equity
(1) : Financial statements prepared under IFRS Gaap(2) : Group's interest(3) : exchange differences not included(4) : net profit + depreciation(5) : on profit for the year - paid in the following year(6) : paid in December 2007 to celebrate the Company’s Centennial
* : par value 0.50 € after splitting
2005
(€/000)285,971109,485167,292
(€/000)64,865
6,12929,29956,80725,376
8,451-
(€)0.180.060.07
0.609.27
4.0%22.6%15.2%32.2%
(1) (1)
Financial highlights
2006
(€/000)324,768133,646185,208
(€/000)58,448
5,45724,13652,12924,108
8,451-
(€)0.17
0.06 0.07
0.689.55
4.8%17.1%13.0%27.3%
(1)
(*) (*) (*)
(*) (*) (*)
(*) (*) (*)
11
2007
(€/000)347,565140,057207,438
(€/000)69,745
7,90923,80959,04033,118
8,4518,450
(€)0.24
0.06 0.07
0.647.46
5.5%19.5%16.0%28.5%
(1)
(*)
(*)
(*)
13
Management Report Premuda S.p.A.
15
Dear Shareholders,
First of all we wish to remind you that your Company's Board of Directors for the years 2005, 2006 and 2007 included Raffaele Agrusti, Amerigo Borrini, Claudio Campana, Giacomo Costa, Antonio Gozzi, Alcide Rosina, Anna Rosina, Stefano Rosina and Alessandro Zapponini.
The Chairman of the Board is Alcide Rosina, whose powers include, amongst others, legal representation towards third parties as well as ordinary and extraordinary administration, excluding however those acts reserved by law to the Board, as well as acts having economic relevance with amounts exceeding certain limits, such as: sale and purchase of ships; contracts for the employment of vessels exceeding 36 months; acquisition and ale of subsidiaries; granting of medium/long-term loans to subsidiaries; provision of guarantees.
The Managing Director is Stefano Rosina, legal representative towards third parties, in charge of running and coordinating the commercial activity and fleet operations, as well as the activity and administration of Group Companies.
The Deputy Chairman is Giacomo Costa, Independent Director.
The Board has established two Committees, one for Internal Control and one for Remuneration. The purpose of the Committee for Internal Control is to address issues related to the company's activities with proposals and consultancy functions. Its members are Giacomo Costa and Claudio Campana. The meetings of this Committee are attended by the Chairman of the Board of Statutory Auditors.The members of the Committee for Remuneration are the Chairman Alcide Rosina, Raffaele Agrusti and Antonio Gozzi. The role of this Committee is to advise the Board of Directors on matters relating to the remuneration of the Chairman and the Managing Director and to set the remuneration criteria for the Senior Management of the Company and the Group. The meetings of this Committee are also attended by the Chairman of the Board of Statutory Auditors.
In 2007, the Board of Directors convened on six occasions. The meetings were all attended by the Board of Statutory Auditors. The attendees received, pursuant to a well-established procedure, updated information on: market performance, commercial coverage and technical management of the Fleet, dynamics of costs and profit/loss, performance and activity of subsidiaries, financial position, as well as all other operations and events concerning management.
During the Financial Year there were no unusual transactions in relation to the ordinary business management to report and there were no significant non-recurrent transactions with related parties or determining a conflict of interest.
16
In 2007, as in the year before, the only inter-group transactions that took place were related to the Group's operational structure and were all concluded with or between subsidiaries or affiliated companies. These transactions mainly consisted of management activities, time-charters and financial support to which ordinary fees or remunerations were applied, always consistent with normal practice and carried out at market value.
All transactions, whether intra-group or with related parties, are summarised in the appendix to the Notes.
The activities carried out by our subsidiaries and affiliates during the Financial Year are detailed hereunder. Nonetheless, we refer you to the Notes for further information on each company.
International S.A.H., Luxembourg, a wholly-owned subsidiary, is the holding company for the Group's foreign assets. Its Financial Statements for 2007 showed a profit of € 13,290,124 (€ 20,446,390 in 2006)
owns the following companies
, Madeira, a wholly-owned subsidiary, placed an order for two 34,000 dwt bulk carriers with a Vietnamese shipyard basis contractual delivery 2008/2009 (now expected 2010) for a cumulative investment of approximately USD 57 Mln. The Company also ordered eight 35,000 dwt bulk carriers to a Korean shipyard for delivery 2009/2012 for a cumulative investment of approximately USD 290 Mln. In February 2007 the Company ordered four 53,000 dwt bulk carriers that were subsequently resold in August 2007 for a cumulative profit of approximately USD 24.30 Mln. In the financial year 2007 the Company booked an overall profit of € 15,970,602 (€ 379,340 in 2006)
, Madeira, formerly a 75% subsidiary, now wholly-owned, at the beginning of the year owned the panamax bulk carrier Four Euro, sold in February 2007. In 2007 the company booked a cumulative profit of € 8,436,607 (our share € 6,327,455) compared to 15,422,063 in 2006 (our share € 11,566,547)
1.0 Premuda
.
Premuda International S.A.H. :
1.1 Brig Shipping Lda.
.
1.2 Premuda Bulk Navegaçao Lda.
.
Subsidiaries or affiliates
17
1.3 Moon Shipping Serviços e Navegaçao Lda.
.
1.4 JEP Navegaçao Lda.
.
1.5 Panamax Navegaçao Lda., Madeira
.
1.6 Four Vanguard Serviços e Navegaçao Lda.
.
1.7 Australian FPSO Management PTY LTD
.
1.8
.
1.9
.
1.10
.
, Madeira, a wholly-owned subsidiary, is the owner of two aframax Ice-Class tankers, which were delivered in May and November 2006 and chartered to the Stena Group under long-term bare-boat agreements. The company closed the Financial Year with a profit of € 10,227,503 (€ 4,258,023 in 2006)
, Madeira, a wholly-owned subsidiary, owns the panamax bulk carrier Four Earth, which was purchased in February 2006. The financial result shows a profit of € 1,038,968 (a loss of € 2,203,395 in 2006)
, a wholly-owned subsidiary, remained virtually inactive during the year, showing a profit of € 13,121 (a loss of € 97,397 in 2006)
, Madeira, a wholly-owned subsidiary, owner of the FPSO Four Vanguard, deployed in Australia since 2003 for crude oil extraction. In 2007 the company booked a profit of € 1,646,503 (a loss of € 2,987,384 in 2006) after a € 7,500,000 vessel depreciation charges
, Australia, a wholly-owned subsidiary, in charge of the technical and operational management of the FPSO Four Vanguard. In 2007, the company booked a profit of AU$ 289,094 (approximately € 172,205) after a profit of AU$ 493,104 in 2006
Premuda (Monaco) S.A.M., a 90% subsidiary, in charge of the commercial and operational management of all of the Group's foreign-flagged units, which logged a profit of € 40,829 (a profit of € 33,224 in 2006)
Premuda (Atlantic) Inc., Delaware, a wholly-owned subsidiary, which handles the chartering of our fleet in American waters. In 2007 the company booked a loss of US$ 103,900 (a profit of US$ 22,615 in 2006)
Suezmax Navegaçao Lda., Madeira, a wholly-owned subsidiary which provides administrative services to the other Madeira-based subsidiaries . The company generated a loss of € 14,820 (a loss of € 136,469 in 2006)
18
Premuda international S.A.H. also holds a 43% stake in Premuda Chartering Navegaçao Lda., Madeira, which ordered three 114,700 dwt product carriers from Samsung shipyard basis delivery in 2010 with a cumulative investment of approximately USD 225 Mln, of which USD 150 Mln related to third parties. The Company booked a loss of € 206,808. According to the agreement with the other shareholders (Efibanca S.p.A. and Messina Group), the Premuda International's stake will be reduced to 33,33% upon delivery of the vessels.
As already anticipated in the Annual Report 2006, in the Semi Annual Report 2007 and in the Notes to the present Report, we disposed of our 25% stake in Sider Navi S.p.A. Please refer to the above mentioned documents for any information.
Please refer to the Consolidated Financial Statements for a more detailed analysis of the markets in which the Company and its subsidiaries operate.
In line with the existing legislation in the majority of EU countries, Italy introduced, with the Tonnage Tax, a flat-rate income tax for shipping companies. According to this tax regime, income generated by ships listed in the International Register is assessed on tonnage. The adoption of this new tax regime is on a voluntary basis, however, once implemented it must remain in force for a minimum period of ten years and must cover all owned units. Premuda S.p.A. formally adopted it on January 1st 2005
The average exchange rate euro/dollar was 1.3702 (1.2556 in 2006). At the end of 2007 the euro/dollar exchange rate was 1.4721 (1.3170 at the end of 2006), with a 10.50% year-on-year depreciation of the US currency (a 20.90% drop since end 2005).It is important to underline that our revenue is almost exclusively generated in dollars and the fleet value is marked-to-market in the same currency, whereas only some of the costs are normally sustained in dollars. Consequently, a strong dollar generally has a positive effect, both in terms of Balance Sheet as well as Profit and Loss. On the other hand, the effect of converting Dollar - denominated loans into Euros at the year - end exchange rate is also to be taken into account
Premuda's common stock was regularly listed on the Stock Exchange. It is to be noted that 73,361,991 shares were exchanged in 2007 (81,241,820 in 2006). The total traded value through the Stock Exchange was €/Mln 114.50 (about €/Mln 134 in 2006). According to data provided by Borsa Italiana S.p.A., our stock had a positive performance of 2.79% on an annual basis, compared to -8% of the MIB index.
.
.
Miscellaneous data and information
19
Based on the data available, as at the end of 2007 the Company had 4,351 shareholders (5,676 in 2006)
The stakeholders Navigazione Italiana S.p.A. and Assicurazioni Generali S.p.A., members of the Shareholders' Agreement 2005-2007, have renewed it for a further period of three years until December 2010. The agreement (as the previous ones) is aimed to ensure consistent and steady management control. This agreement forbids the transfer of the allocated shares and regulates the appointment of the Company officers, identifying Navigazione Italiana S.p.A. as the sole body in control of Premuda S.p.A. through the Shareholder's Agreement without, however, exercising management and co-ordination activities, pursuant to art. 2497 of the Italian Civil Code.The Agreement refers to n. 62,925,000 ordinary shares (44.70% of the ordinary share capital) which were allocated by:Navigazione Italiana S.p.A. (29.80%)Assicurazioni Generali S.p.A. (14.90%).
Duferco Italia Holding S.p.A., which in 2004 had already reduced its allocated stake from 10% to 5%, consistent with such strategy and due to the (mainly) financial nature of its investment, opted to definitely exit the agreement. Nevertheless, Duferco has expressed its satisfaction at the results thus far achieved by the Premuda Group and confirms its unconditional confidence in the Company and its Management
stThe Financial Statements as at 31 December 2007 were audited by Deloitte & Touche S.p.A., whose appointment for the three-year period 2007-2009 was
rdapproved at the Shareholders' Meeting of 23 April 2007.Deloitte & Touche S.p.A. also audited the half-year Report 2007
In accordance with the provisions of art. 2428 of the Italian Civil Code, we hereby inform you that
Company did not carry out any research and development activity Company does not own treasury sharesCompany does not own shares or quotas of parent companies
of the subsidiaries own Company sharesCompany has implemented a hedging strategy for risks arising from the
variations in exchange rates and interest rates through derivative financial instruments. Further details are available in the Notes to the Financial Statements
The shares held and/or traded by Directors, Statutory Auditors and General Managers are mentioned in a specific prospectus drawn up in accordance with art. 79 of the Regulation implementing the Legislative Decree No. 58/98 (T.U.F.) enclosed with the audited Italian Financial Statements.
.
.
.
:
- the ;- the ; - the ;- none ; - the
.
20
All information required by art. 123 bis of T.U.F. is enclosed with this report and is also available at website in the investor relations area. This also includes the annual report of compliance with the self regulation code for listed companies.
A plan for the remuneration of, and incentives to, the “Top Management” is in force, as recommended by the Remuneration Committee and resolved by the Board of Directors.
The plan refers to the 2005-2006-2007 year period and consists of three elements:
a) an annual compensation, based on the financial result logged in each year, equal to 5% of the consolidated net profit generated by the Company exceeding 5% of the consolidated Net Equity at the beginning of the period. This amount is allocated: 50% to the Chairman, 25% to the Managing Director, 10% to the General Manager and the residual 15% is shared amongst other Managers.
b) a compensation based on the growth of the Group's net equity in the 3-year period, payable at the end of 2007. This compensation is equal to 5% of the differential between the “consolidated Net Equity” at the end of the period and the “consolidated Net Equity” at the beginning of the period, increased by 15%; the proportional allocation is as detailed in item a).
c) a nominal “stock option” plan (so-called “phantom stock”) with a compensation equal to the differential between the monthly average of Premuda stock price on the option allocation date and its price in the week preceding the option declaration. as listed on the Milan Stock Exchange This plan was approved and ratified by the Shareholders' Meeting of 23 April 2007.
The options refer to a maximum cumulative amount of 2,700,000 shares per st year and are to be exercised within 36 months starting from January 1 of
the following year. The options assigned refer to 1,350,000 shares for the Chairman, 810,000 for the Managing Director and 540,000 for the General Manager.The initial share value is € 1.80 for the options assigned in 2005, € 1.497 for the options assigned in 2006 and € 1.525 for the options assigned in 2007. To date, the General Manager has exercised 540,000 options and the Managing Director has exercised 400,000, all of them referred to year 2006.
The 2007 compensation amount to be paid to the “Top Management”, as per items a) and b) has already been charged to the Profit & Loss account through a specific provision of €/Mln 2.55. This amount is in addition to the pro-rata provisions accrued in the past two years to cover the multi-annual premium as per point b) above, to be paid upon approval of the Annual Report 2007.
www.premuda.net
21
We have also already booked in our Financial Statements a liability of approximately €/Mln 1.10 covering the “fair value” of the residual stock option plans as described in item c).
In conformity with the Legislative Decree 196/2003 (concerning the protection of Privacy) the Company has set up the relevant implementation plan chart.
We hereby inform you that, as already applied for the 2006 Annual Report, the 2007 annual Financial Statements of Premuda S.p.A. have been prepared in accordance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The impact of the transition to IFRS on the initial Balance Sheet as at December 31, 2004 and on both Balance Sheet and Profit & Loss for the year 2005 were reported in the Italian version of both the 2006 Semi Annual Report and the 2006 Annual Report: please refer to them.
The financial position is summarized (in '000 euros) in the following table; at the end of the financial year our net financial exposure was €/Mln 42.44 (€/Mln 47.98 as at end 2006) with a cash availability of €/Mln 6.57.
All Premuda S.p.A.’s loans are currently denominated in Euro. The amount of borrowings and their structuring appear to be entirely satisfactory in relation to the size and quality of our Fleet and its ability to generate adequate cash flow.
Financial Position
at 31.12.2006
200 28,025 28,225
-(19,305)
- (19,305)
8,920
20,478 20,478
(77,377) (77,377)
(56,899)
(47,979)
Financial Position
CashOther liquid assetsTotal liquid assets
Short term bank debtShort term portion of long-term debtOther short-term debtTotal short-term debt
Short-term net debt
Loan to controlled companiesLong-term financial credit
Long-term bank debtLong-term debt
Total long-term net borrowing
Total net borrowing
at 31.12.2007
149 6,417 6,566
-(19,484)
- (19,484)
(12,918)
28,000 28,000
(57,518) (57,518)
(29,518)
(42,436)
22
Credit risk:
Liquidity risk:
Exchange risk:
The Company is exposed to the credit risk affecting the shipping industry: an activity towards a limited number of clients, usually major companies or shipping operators. This risk is, however, significantly reduced by our standard payment rules (in advance for time charter hire and within completion of discharge for spot voyages) and by the large availability of information on clients' credit standing.Receivables are monitored at all times and, when necessary, impaired, based on historical experience and on newly available information on clients' standing.At the account-closing date, less than 2.50% of receivables had been due for over one year. Of these, about 14% consisted of demurrage, usually requiring a longer period for agreement and settlement. Please refer to the Notes for a more detailed analysis.
Cash-flow, financial requirements and liquidity are strictly monitored and assessed in order to efficiently manage the Company's financial resources. Short- and long-term cash requirements are regularly assessed in order to ensure timely and adequate acquisition of financial resources, as well as proper employment of cash excess. Please refer to the Notes for any information regarding the repayment schedule of long-term loans.
Certain assets and liabilities are exposed to risks arising from exchange rate fluctuations (mainly related to the Euro/Dollar rate). It is company's policy to partially cover this risk by derivative hedging instruments as well as by natural hedging. As at the end of 2007 the main USD-denominated assets and liabilities are summarized as follows:
The USD-denominated loans, converted into Euro by cross-currency swap, are not included in the above data.
Riskmanagement
AssetsCash and cash equivalentCommercial creditFinancial creditOther creditTotal
LiabilitiesBank debtsSuppliersFinancial debtsOther debtsTotal
US$/000
5,8765,235
-1,310
12,421
-6,749
-656
7,405
23
Significant events after the balance sheet date and business outlook
Please refer to the Notes for a deeper analysis of the most important Dollar-denominated balance sheet items.
According to the sensitivity index, should the average and the year-end exchange rates Euro/Dollar for 2007 be the same as in the previous year (1.2556 & 1.3170 respectively), both the Net Profit and the Net Equity would be increased by Euro/Mln 4.20, all other factors unchanged.
Interest rate risk: The majority of long-term bank loans are based on floating interest, therefore, the Company is exposed to interest rate fluctuation risk. It is Company's policy to reduce such a risk through financial derivatives, fixing the interest rates for certain periods. Please refer to the Notes for all information on the financial derivatives transactions entered by the Company.
According to the sensitivity index, should interest rates for the year 2007 be on average higher/lower by 100 basis points, both the Net Profit and the Net Equity would decrease/increase by Euro/Mln 0.50, all other factors unchanged and all derivative transactions duly considered.
Freight rates volatility risk:The Company operates in a very volatile freight market. Risks related to market rates fluctuations may be reduced by long-term time-charters or by derivative contracts (Forward Freight Agreements, FFA's). According to the sensitivity index, a 10% variation of 2007 average freight rates would have affected both Net Profit and Net Equity by Euro/Mln 1.50, all other factors unchanged. This variation refers only to the time/vessel portion still uncovered at the beginning of the year (thus, subject to market volatility).
As to management conduct of the Company and business outlook , we have no particular issue to underline; nonetheless, we invite Shareholders to examine the Consolidated Annual Report 2007.
Dear Shareholders,
Premuda S.p.A. closed the 2007 financial year with a net profit of €/Mln 3 after depreciation charges of €/Mln 11.80 (net profit of €/Mln 12.20 after depreciation charges of €/Mln 12.10 in 2006). The cash flow for 2007 was €/Mln 14.80 (€/Mln 24.30 in 2006).
We recommend the following profit allocation for the year 2007:
The above recommendations correspond to 25.50% of the consolidated net profit attributable to the Group. Distributed profit, unchanged from the previous year (excluding the extraordinary dividend of € 0.06 per share paid in December 2007 to commemorate the centennial of the Company), correspond to a dividend of € 0.06 per common share and € 0.07 per savings share.
After distribution of the proposed dividends, shareholders' equity will be:
To provide a proper overview of the Group led by Premuda S.p.A., we attach the Management Report on the Consolidated Financial Statements, which shall be an integral and substantial part of this report. This Management Report provides, compared with information given in relation to previous financial years, additional elements on the markets we operate in, on fleet performance, on costs and revenues of the employed vessels, on all significant events occurred after the account-closing date, on the business outlook.
24
- Net income
- Plus retained earnings from previous years
- Profits available for distribution
- to ordinary shares
- to savings shares
- retained earnings
€
€
€
€
€
- Share capital
- Legal reserve
- Other reserves
- Retained earnings
- Total
equal to 0.784 per share.€
€
€
€
€
€
3,004,466
14,881,615
17,886,081
(8,445,690)
(5,246)
9,435,145
70,418,225
14,083,650
16,445,023
9,435,145
110,382,043
25
Dear Shareholders,
The Year 2007 is number 100 since the establishment of the Company (Trieste, December 21, 1907).
Not many shipping companies can show such a long history and we are very proud of our origin and activities.Nowadays Premuda is an important entity, well known and respected in the international shipping community, which can look at the future with utmost confidence.
We wish to express our gratitude to Capt. G.L. Premuda (founder of the Company); to all those that, during the course of this century, worked with and for the benefit of the Company; and to all of the Group's employees for their precious cooperation, ashore and at sea, and assure them of our gratitude and firm confidence for the future.
26 March 2008 the Board of Directors
27
Financial Statements Premuda Spa
28
ASSETS
Fixed Assets
Tangible fixed assets
Vessels
Real estate
Other fixed assets
Participations
Controlled companies
Associated companies
Other companies
Other financial assets
Loans
Other investments
Total Fixed Assets
Current Assets
Inventories
Consumables
Voyages in progress
Receivables
Clients
Prepayments
Other receivables
Financial current assets
Cash and cash equivalents
Total Current Assets
TOTAL ASSETS
Premuda SpaBalance Sheet on 31 December 2007 (Euro)
at 31.12.2007
at 31.12.2006
118,151,458
116,590,203
846,051
715,204
55,757,966
55,754,170
-
3,796
28,002,111
28,000,000
2,111
201,911,535
3,732,963
1,977,114
1,755,849
8,758,354
3,833,649
3,099,470
1,825,235
282,075
6,283,702
19,057,094
220,968,629
124,376,165
123,048,891
900,011
427,263
61,257,966
55,754,170
5,500,000
3,796
20,480,015
20,477,904
2,111
206,114,146
3,697,816
2,080,941
1,616,875
11,786,733
6,639,746
3,015,674
2,131,313
180,921
28,044,102
43,709,572
249,823,718
29
at 31.12.2006
at 31.12.2007LIABILITIES AND
SHAREHOLDERS' EQUITY
Shareholder’s Equity
Share capital
Legal reserve
Other reserves
Retained profit
Profit for the year
Total shareholder’s equity
Long-Term Liabilities
Bank loans
Provisions
Provision for staff leaves
Total Long-Term Liabilities
Current Liabilities
Bank loans
Suppliers
Corporate tax
Accruals
Other debts
Total Current Liabilities
Total Liabilities
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY
70,418,225
14,083,650
16,445,023
14,881,615
3,004,466
118,832,979
57,518,037
600,000
939,235
59,057,272
19,483,593
9,383,108
483,437
6,697,633
7,030,607
43,078,378
102,135,650
220,968,629
70,418,225
14,083,650
16,445,023
19,571,105
12,209,887
132,727,890
77,376,725
700,000
1,459,931
79,536,656
19,305,234
6,882,014
310,465
6,874,402
4,187,057
37,559,172
117,095,828
249,823,718
31
Premuda SpaIncome Statement on 31 December 2007 (Euro)
year 2007
year 2006
Net revenue
Voyage costs
Time-Charter revenues
Charter hire
Running costs
Fleet margin
Profit on vessel sale
Administrative expenses
Other income/(costs)
Depreciation
Operating profit
Financial items
Profit before tax
Tax on profit
Net profit for the year
Net profit per share
81,259,997
(9,981,069)
71,278,928
(24,626,925)
(18,638,232)
28,013,771
3,493,581
(13,172,942)
1,045,487
(11,752,668)
7,627,229
(4,222,763)
3,404,466
(400,000)
3,004,466
0.021
87,118,002
(8,923,505)
78,194,497
(23,585,355)
(19,894,363)
34,714,779
3,374,335
(9,585,603)
(92,683)
(12,150,804)
16,260,024
(3,265,286)
12,994,738
(784,851)
12,209,887
0.087
32
A) NET CASH POSITION AT YEAR START
B) CASH FLOW FROM OPERATING ACTIVITIES Profit for the year Unrealized exchange differences Interest charges (P&L) Interest income (P&L) Tax on income Depreciation Net change in other provisions (Profit) / loss on assets disposal Net change in Staff’s leave provision Subtotal: Cash flow from operating activities before working capital changes
Change in receivables Change in inventories Change in suppliers and other current liabilities Net change in deferred taxation Total cash flow from operating activities
C) CASH FLOWS FROM INVESTING ACTIVITIES Investments in assets: - tangible - financial Sale of tangible fixed assets Sale of financial fixed assets Interest income (cash) Total cash flow from investing activities
D) CASH FLOW FROM FINANCING ACTIVITIES Repayment of bank loan Net change in financial fixed assets Interest charges (cash) Dividends Other changes Total cash flow from financing activities
E) CASH FLOW OF THE PERIOD (B + C + D)
F) NET CASH POSITION AT THE END OF THE PERIOD (A + E)
8.738.868
3,004,4661,059,4605,410,122
(2,874,214)400,000
11,752,668(100,000)
(4,539,068)(520,696)
13,592,738
2,927,225(35,147)
3,859,476-
20,344,292
(6.101.821)-
4,112,9276,500,0002,874,2147,385,320
(19,858,688)(7,522,096)(5,388,210)
(16,901,123)1,746
(49,668,371)
(21,938,759)
(13,199,891)
(373,491)
12,209,887760,839
4,955,183(2,282,969)
784,85112,150,804
250,000(3,411,609)
(94,857)
25,322,129
(1,262,776)(1,627,413)
(902,030)230,426
21,760,336
(3,523,477)(4,250,000)27,248,699
-2,282,969
21,758,191
(19,535,005)(1,477,904)(4,943,379)(8,450,936)
1,056(34,406,168)
9,112,359
8,738,868
Premuda SpaCash Flow Statement (Euro)
year 2007 year 2006
33
Statements of changes in Shareholder’s Equity (Euro)
14,083,650
---
-
-
14,083,650
---
-
-
-
14,083,650
LegalReserve
18,547,460
(8,450,936)9,473,527
1,054
-
19,571,105
-
12,209,887
1,746
-
14,881,615
RetainedProfit
-
(8,450,936)
(8,450,187)
9,473,527
--
(9,473,527)
-
--
-
-
3,004,466
3,004,466
12,209,887
12,209,887
(12,209,887)
Total
128,967,885
-
-
1,054
132,727,890
1,746
(8,450,936)
12,209,887
-(8,450,936)
-
(8,450,187)
3,004,466
118,832,979
16,445,023
---
-
-
16,445,023
---
-
-
-
16,445,023
OtherReserve
70,418,225
---
-
-
70,418,225
---
-
-
-
70,418,225
ShareCapital
--
-
-
-
---
-
-
-
-
-
-
As at 31.12.2005
2005 Profit Allocation
- to legal reserve
- to dividends
- to retained profit
Various
2006 Net Profit
As at 31.12.2006
2006 Profit Allocation
- to legal reserve
- to dividends
- to retained profit
Extraordinary dividend
Various
2007 Net Profit
As at 31.12.2007
Reserve for premium on
issued shareProfit for the Year
(1) : available to cover future losses(2) : of which € 3,666,410 to be taxed when used other than to cover future losses(3) : of which € 2,827,699 not to be distributed
(1) (2) (3)
35
Management Report on the consolidated financial statements
37
Dear Shareholders,
As occurred over the past four years, 2007 also benefited from broadly sustained rates markets for all of the Group's activity sectors, despite high volatility and significant differences between the various fleet segments. Tanker markets particularly showed a declining trend, whilst dry bulk markets reached sky-high levels, unheard of in the past. The large, continuous, increase of the fleet size was (particularly for dry cargo) absorbed by a booming Chinese economy, which provided demand of tonnage with its huge volumes of raw and manufactured goods. Scenarios for each sector are outlined below.
In 2007 the tanker fleet grew by 5.54% over 2006, exceeding 385 million deadweight tons. This strong growth confirms recent years’ trend (over 30% increase in the last five years). Most noteworthy is the 2007 shipyards’ “orderbook”, with deliveries stretching until 2012: at the end of year, the tanker orderbook was 159.40 Mls ts dwt, or 41.30% of the current trading fleet (134.50 Mln ts or 36.90% in 2006). New orders for 865 vessels, including chemical tankers, were placed in 2007.
2007 scrapping volumes remained as low as 3.20 Mln ts dwt, confirming recent years' trend (3 Mln ts dwt scrapped in 2006 and 4.20 Mln ts dwt in 2005); consequently, scrap prices reached US$ 510/ton in 2007 (US$ 410/ton in 2006 and US$ 305/ton in 2005).
In 2007, sale and purchase transactions for second-hand tonnage kept a sustained pace, both in terms of volumes and prices. Sales involved 397 units of 36.00 Mln ts dwt worth US$ 14.70 Bln ( 2006: 321 units of 28.8 Mln ts dwt were sold, worth US$ 12.30 Bln). Of these 397 vessels, 52 were VLCC, 42 suezmax, 68 aframax and 235 handysize.
No doubt freight rates were satisfactory, though 9% lower on average compared to the record level of 2004/2006, as shown in table 5 below.
Further details on this sector are presented in the following tables.
Tanker sector
38
Table 1 shows demand for tanker tonnage and volumes of seaborne transportation of crude oil and refined products: little (0.50%) or no variation in total volumes between 2007 and 2006.
The tables below show the development of the tanker fleet in recent years, including new tonnage deliveries, scrapping and newbuilding orderbook.
year
20002001200220032004200520062007
(Table 1) Quantities transported by sea (millions of tons)
quantity
1,6561,6841,6671,7701,8501,8851,9331,924
quantity
518544543582621671728725
crude oil change
- 1.7%
-1.0%6.2%4.5%1.9%2.5%
- 0.5%
products change
- 5.0%-0.2%7.2%6.7%8.1%8.5%
- 0.4%
VLCCSuezmaxAframaxPanamaxSmallTotal
+ 200,000120/200,000
80/120,00055/80,00010/55,000
(Table 2) Tanker fleet at end Order book of the year (Mln dwt ts) as of end 2007
56.822.131.5
9.739.3
159.4
38.7%40.4%41.1%40.3%47.4%41.3%
2003
126.143.458.914.662.1
305.1
2004
131.745.762.316.565.6
321.8
2005
139.449.568.018.970.6
346.4
Total % of Fleet 2006
142.352.771.721.676.0
364.3
2007
148.354.776.424.082.3
385.7
VLCCSuezmaxAframaxPanamaxSmallTotal
+ 200,000120/200,000
80/120,00055/80,00010/55,000
(Table 3) Newbuilding d dwt ts)eliveries/scrapping (Mln )
2003
10.02.23.21.22.9
19.5
11.83.78.31.65.2
30.6
2004
1.11.52.31.01.97.8
8.94.25.62.76.7
28.1
2005
0.30.31.60.51.44.1
9.24.07.03.26.2
29.6
2006
0.30.20.50.31.73.0
5.84.15.53.27.4
26.0
2007
--
0.92.10.23.2
8.84.16.03.2
10.332.4
39
The age profile of the tanker fleet is indicated in table 4.
The world fleet's age is obviously a significant element for the assessment of its future development and tonnage supply growth. During the last few years, the average age has progressively decreased and it is evident that the renewal process will proceed according to the volume of new deliveries and the tonnage due for compulsory demolition in upcoming years (with particular reference to 2010).
Table 5 shows average freight rates (USD/day, time-charter equivalent) for spot voyages, related to different tonnage classes.
VLCCSuezmaxAframaxPanamaxSmallTotal
+ 200,000120/200,000
80/120,00060/80,00010/60,000
(Table 4)
Age profile of the tanker fleet as at 1st September 2007 (Mln dwt ts)
0-9 years
82.831.143.515.441.5
214.3
10-14 years
26.68.5
10.20.69.5
55.4
15-19 years
30.810.812.8
2.36.9
63.6
> 20 years
7.93.78.84.9
21.246.5
total
148.154.175.323.279.1
379.8
av.age
9.39.09.39.0
12.010.8
clean: 20/35,000 dwt vessels used to transport clean petroleum productsaframax: 80/110,000 dwt vesselssuezmax: 110/160,000 dwt vesselsVLCC: modern construction 250/320,000 dwt vessels
year
19971998199920002001200220032004200520062007
(Table .5) Average freight rates for spot voyages
$/g 15,71812,486
9,87218,46724,95013,94022,03227,70729,95427,17426,016
$/g 21,10916,42513,05933,15030,75918,95434,21249,59241,65039,35635,810
$/g 23,75321,27715,18939,39030,42018,64741,64874,97553,57953,09744,825
$/g 34,69131,96819,77550,35336,01722,02952,43396,05560,31963,07357,147
cleanchg
- - 21%- 21%
87%35%
- 44%58%26%
8%- 9%- 4%
aframaxchg
- - 22%- 20%154%- 7%
- 38%80%45%
- 16%- 6%- 9%
suezmaxchg
- - 10%- 29%159%- 23%- 39%123%
80%- 29%
- 1%- 16%
VLCC chg
- - 8%
- 38%155%- 28%- 39%138%
83%- 37%
5%- 9%
40
In 2007 the bulker fleet grew at a rate of 6.50% overtaking, for the first time, (both in number of vessels and total tonnage) the tanker fleet, reaching 392.30 Mln ts dwt.
At the end of 2007, the bulk-carrier orderbook was 222.5 Mln ts dwt or 56.80% of the current trading fleet (82.40 Mln dwt ts or 22.30% of the active fleet in 2006).
2007 scrapping volumes were only 0.40 Mln ts dwt, the lowest value for the past decades, mainly due to high tonnage demand and exceptionally high freights levels. Scrap prices went from USD 390 to USD 470 per displacement ton (+20.50%).
In 2007, second-hand sales transactions reached record levels, both in volumes and prices. Sales involved 752 units equivalent to 45 Mln ts dwt and USD 23.60 Bln in value (2006: 580 units for 35.30 Mln dwt ts and USD 13.5 Bln). Of these 752 vessels, 90 were capesize, 182 panamax, 185 handymax and 295 handy.
Freight rates were extremely satisfactory, as shown in table 5 below. The average returns for the year, both for Capesize and Panamax vessels, were 145% higher than in 2006. In the first few months of 2008 the market broadly held the same values; at the moment it is difficult to predict a significant decrease of rates, at least short term basis, also taking into consideration projections given by “futures”. Over the last few months dry bulk rates have boomed despite a strong tonnage supply growth resulting from newbuilding deliveries; this trend is totally due to the “voracity” of the Chinese economy, gobbling up ever growing volumes of raw materials, semi-finished goods and energy resources. In some periods freight rates were also positively affected by inadequate port facilities, unable to cope with huge volumes, thus causing heavy congestion, especially at loading terminals.
Further details on dry bulk sectors are reported in the following tables. Table 1 shows the volumes of seaborne transportation of dry bulk commodities. Over the last five years, a significant increase occurred, from 2,291 Mln ts in 2003 to 2,790 Mln ts in 2007 (+21.80%).
bulksector
year
20002001200220032004200520062007
(Table 1) Quantities transported by sea (millions of tons)
minerals
449451481516588661721789
coal
524556579632654680707726
grain
264260271264275272292293
other
806829839879952951983982
total
2,0402,0962,1702,2912,4692,5642,7032,790
changes
-2.7%3.5%5.6%7.8%3.8%5.4%3.2%
41
The tables below show the development of the bulker fleet in recent years, including newbuilding deliveries, scrapping and shipyards' orderbook.
The world fleet's age profile is obviously a key element to estimate the fleet's future pattern and, therefore, tonnage supply growth. It is, however, noteworthy that, over the last few years, the fleet's average age has gradually decreased: it is, therefore, apparent that the renewal process will continue, as a result of massive newbuilding deliveries.
Table 5 shows the progress of bulk freight rates for spot voyages (USD/day - time charter equivalent), for different tonnage classes (Clarkson index).
CapesizePanamaxHandymaxHandyTotal
+ 100,00060/100,000
40/60,00010/40,000
(Table 2) Trading fleet as at end of year (Mln dwt ts)
Order book as at end of 2007
Total
113.747.942.418.5
222.5
% of fleet
86.7%44.2%55.4%24.5%56.8%
2003
93.580.157.271.3
302.1
2004
102.186.461.172.7
322.3
2005
110.893.766.474.1
345.0
2006
120.8101.7
71.473.9
367.8
2007
131.1108.4
76.675.6
391.7
CapesizePanamaxHandymaxHandyTotal
+ 100,00060/100,000
40/60,00010/40,000
(Table 3) Newbuilding deliveries/scrapping (Mln dwt ts)
2003
0.60.60.62.24.0
5.01.93.31.4
11.6
2004
0.00.00.10.30.4
7.46.34.11.9
19.7
2005
0.20.20.20.41.0
2006
0.30.50.70.41.9
8.87.25.42.0
23.4
10.88.65.01.4
25.8
2007
-0.10.10.20.4
9.77.26.12.4
25.4
(Table 4)
Age p rofile of the bulker fleet as at 1st September 2007 (Mln dwt ts)
0-9 years
55.81.2
51.034.513.9
156.4
10-14 years
16.310.721.717.2
9.575.4
15-19 years
7.310.5
8.44.83.6
34.6
> 20 years
14.211.524.918.247.7
116.5
total
93.633.9
106.074.774.7
382.9
VLBC CapesizePanamaxHandymaxHandy
+ 160,000100/160,000
60/100,00040/60,00010/40,000
av.age
8.317.411.711.820.115.3
The substantial development of the off-shore petroleum sector is holding its remarkably positive trend determined by the high level of crude oil prices. There are currently 130 FPSO in service with a dramatic growth over the last decade and 50 new buildings under construction.
The existing and scheduled FPSO can be broadly divided in two groups:
The first group is mainly characterized by high technology and a high level of investment, operating in deep-waters high-potential oilfields. The complexity of the equipment is also due to the growing exploitation of wells yielding ever increasing gas volumes together with crude oil. This involves working with gas processing facilities to enable transportation by gas carrier vessels.
The second group of FPSO, technologically less complex, requires a lower level of capital investment and involves shallow to medium depth petroleum wells yielding a smaller percentage of gas in relation to the crude oil extracted.
VLCC are the best suited vessels for conversion into FPSO for Brazilian and West African oilfields, wheres aframaxes are the most in demand for Far Eastern and Australian markets, currently undergoing a substantial development.
Despite its significant complexity and the high levels of investments required, the FPSO sector will most likely continue its expansion as a result of booming demand for crude oil.
The following changes occurred to the Group's Fleet during 2007:
- in February: the controlled company Premuda Bulk Navegaçao Lda., Madeira, (then 75% participated) sold the 64,200 dwt panamax bulk Four Euro, built 1984. The transaction generated a profit of €/Mln 8.30;
- in May: Premuda S.p.A. sold the 51,300 dwt panamax tanker Four Lochs, built in 1981, with a profit of €/Mln 3.50.
year
20002001200220032004200520062007
(Table 5) Average freight rates for spot voyages
$/g 24,72415,52411,65437,56370,39551,61343,178
111,757
$/g 10,700
8,7097,284
19,09133,95022,93121,42749,349
$/g 8,9708,2068,761
16,70631,98724,02022,58347,582
capesize chg
- - 37%- 25%228%
87%- 27%- 16%159%
panamaxchg
-- 19%- 16%162%
78%- 32%
- 7%130%
handymaxchg
-- 9%
6%93%91%
- 25%- 6%
110%
FPSOsector
The Fleet
42
During the year, the following investments were also implemented for vessels that, by year-end, had not yet started operating:
- in February: the controlled company Brig Shipping Lda., Madeira, ordered from the State-controlled Vietnam Shipyards four 53,000 dwt bulk-carriers, delivery 2009/2010, with an estimated total investment of US$ 144 Mln; the contracts were resold in August with a net profit of about US$ 24.30 Mln;
- in May: the controlled company Brig Shipping Lda., Madeira, ordered from the Korean shipyard SPP Shipyards Co. six 35,000 dwt handy bulk-carriers for delivery 2009-2011, with an estimated total investment of US$ 212 Mln;
- in October: the controlled company Brig Shipping Lda., Madeira, ordered from the Korean shipyard SPP Shipyards Co. two additional 35,000 dwt handy bulk-carriers for delivery 2011-2012, with an estimated total investment of US$ 78 Mln.
Changes to Premuda's owned Fleet that occurred after year-end:
- in March: the controlled company Brig Shipping Lda., Madeira took over a company which had ordered two 34,000 dwt handy bulk-carriers for delivery 2009, with an estimated cumulative investment of approximately €/Mln 48.
The consistency of the Company Fleet at the date of this report is hereby detailed on page 9.
The management of the Premuda fleet, both tankers and bulk carriers, has been carried out smoothly and eventless. The use of available vessel-time is summarised in the following table, and includes time spent for routine survey and drydock on five vessels.
Compared with 2006, time available for commercial operations has decreased due to the higher number of vessels undergoing routine drydock and due to increasing time lost waiting for employment, resulting from tonnage demand volatility throughout the year.
ManagementInformation
43
year
20032004200520062007
includes vessel positioning to drydock(*):
% of vessel/time:
commercialoperations
89.0%93.3%95.2%95.0%90.7%
waiting for employment
3.1%1.1%0.3%0.6%2.3%
technical off-hires (*)
7.9%5.6%3.8%4.4%7.0%
44
The next table reports the daily income booked by our vessels on a “time-charter equivalent” basis over the last five years, subdivided into the most possible homogenous categories.
It should be noted that, in time-charter contracts, voyage operating costs associated with the utilization of the vessel such port costs, canal transit rights, fuel, etc., are borne by the charterer.
The following table shows the running costs incurred by our vessels, subdivided into the most possible homogenous categories. Running costs include insurance, crew, maintenance and repairs, spares and stores, lubricants, classification, security and safety costs etc.; general expenses and voyage costs associated with the commercial utilization of the vessels (such as port costs, canal transit rights, fuel, etc) are not included.
The overall increase in daily running costs occurred in 2007 is mainly due to:- the significant extent of extraordinary repairs carried out during routine
drydocks;- a general increase in manning costs (regardless of crew nationality);- the impact of a weak dollar on the euro-denominated share of running
costs.
aframax
29,35132,72729,14226,18024,934
tankers
panamax
18,28418,45218,20518,50021,628
suezmax
27,79930,69827,17334,11034,398
bulk carriers
Time Charter Equivalent (US Dollars/Day)
year
20032004200520062007
panamax
-20,29022,23216,73319,818
aframax
11,7218,7268,5238,683
10,353
tankers
panamax
6,9777,7326,8316,7448,359
bulk carriers
Running Costs (US Dollars/Day)
year
20032004200520062007
panamax
-5,0155,2076,6467,129
45
The consolidated financial position, duly detailed in the “Notes”, is summarized (in '000 euros) in the following table; at the end of 2007 the net financial exposure was €/Mln 107.20 (€/Mln 129.40 at the end of 2006) with a cash availability of €/Mln 43.80.
Nearly all of Premuda S.p.A. loans are currently Euro-denominated, whereas loans related to foreign-flag ships are expressed in US Dollars.
Taking into account the extent of new investments, the amount and structuring of borrowings appear to be adequate to the size and quality of our Fleet and its ability to generate sufficient cash flow.
At the end of 2007, advances already paid to shipyards on account of new-buildings totalled approximately €/Mln 64; commitments for investments in progress were about €/Mln 300.40 spread over five years, of which €/Mln 85.40 relate to minority shareholders). Additional investments committed during the first quarter of 2008 amount to about €/Mln 48.10, spread over the years 2008-2009.Cumulatively, current outstanding investments aimed at Fleet expansion amount to approximately €/Mln 412.50, of which about €/Mln 84 have already been paid to Shipyards (about €/Mln 96.40 related to minority shareholders).
FinancialPosition
at 31.12.2007
163 43,592 43,755
-(28,088)
- (28,088)
15,667
20,346 5,453 25,799
(148,670) (148,670)
(122,871)
(107,204)
at 31.12.2006
51 41,057 41,108
-(23,334)
- (23,334)
17,774
- - -
(147,173) (147,173)
(147,173)
(129,399)
Financial Position
CashOther liquid assetsTotal liquid assets
Short-term bank debtShort-term portion of long-term debtOther short-term debtTotal short-term debt
Short-term net debt
Long-term financial investmentsLoan granted to associated companiesTotal long-term financial assets
Long-term bank debtLong-term debt
Long-term net debt
Total net borrowing
46
Credit risk:The Group is exposed to the credit risk affecting the shipping industry: an activity towards a limited number of clients, usually major companies or shipping operators. This risk is, however, significantly reduced by our standard payment rules (in advance for time charter hire and within completion of discharge for spot voyages) and by the large availability of information on clients' credit standing.Receivables are monitored at all times and, when necessary, impaired, based on historical experience and on newly available information on clients’ standing.At the account-closing date, less than 4.20% of receivables had been due for over one year. Of these, about 14% consisted of demurrage and other charges, usually requiring a longer period for agreement and settlement. The balance sheet data include insurance claims yet to be liquidated (€/Mln 2.50 at the end of 2007). Such amount is the result of management assessment, based on claims submitted to insurers. The final actual refund may vary. Please refer to the Notes for a more detailed analysis.
Liquidity risk:Cash-flow, financial requirements and liquidity are strictly monitored and assessed in order to efficiently manage the Group's financial resources. Short and long-term cash requirements are regularly assessed in order to ensure timely and adequate acquisition of financial resources, as well as proper employment of cash excess. Please refer to the Notes for any information regarding the repayment schedule of long-term loans
Exchange risk: Certain assets and liabilities are exposed to risks arising from exchange rate fluctuations (mainly related to the Euro/Dollar rate). It is a Group's policy to partially cover this risk by derivative hedging instruments as well as by natural hedging. Please refer to the Notes for information on all derivative transactions entered by the Group. At the end of 2007 the main USD - denominated assets and liabilities - are summarized as follows
.
.
:
Riskmanagement
AssetsCash and cash equivalentCommercial creditFinancial creditOther creditTotal
LiabilitiesBank debtsSuppliersFinancial debtsOther debtsTotal
US$/000
22,0709,283
-1,310
32,663
76,9267,301
-956
85,183
47
Other data and information
USD - denominated loans converted into Euro by cross currency swap are not included in the above data. Please refer to the Notes for in-depth analysis of the more significant USD - denominated balance sheet items.
According to the sensitivity index, had 2007 average and year-end EUR/USD exchange rates been the same as in 2006 (1.2556 and 1.3170 respectively), Net Profit and Net Equity would have been higher by Euro/Mln 7.20 and Euro/Mln 0.80 respectively, all other factors unchanged.
The majority of long term bank loans are based on floating interest, therefore, the Group is exposed to interest rate fluctuation risk. It is a Group policy to reduce such a risk through financial derivatives, fixing the interest rates for certain periods. Please refer to the Notes for information on the financial derivatives transactions entered by the Group.
According to the sensitivity index, had average 2007 interest rate been 100bp higher/lower, both Net Profit and Net Equity would have changed by Euro/Mln 1.30, all other factors unchanged and after taking into account all derivative transactions.
The Group operates in a very volatile freight market. Risks related to market rates fluctuations may be reduced by long-term time-charters or by derivative contracts (Forward Freight Agreements, FFA's). Please refer to the Notes for all information on the derivatives transactions entered by the Group.According to the sensitivity index, a 10% variation of 2007 average freight rates would have affected both Net Profit and Net Equity by Euro/Mln 1.50, all other factors unchanged. This variation refers only to the time/vessel portion still uncovered at the beginning of the year (thus, subject to market volatility).As far as the year 2008 is concerned, the freight rates volatility risk affects 1.3 vessels only, considering that all other vessels (owned and chartered-in) are already covered by contracts. Please also note our fleet charter cover over the next three years (as a share of trading vessels, both owned and chartered-in):
Year 2009: 81%;Year 2010: 50%;Year 2011: 23%.
As at 31 December 2007, Premuda S.p.A. and its associated companies employed 307 people, of whom 236 were seafarers. Year-on-year, shore staff increased by 1 and seafarers decreased by 68.
The Group's Consolidated Financial Statements (as well as Premuda S.p.A.’s Financial Statements) as at 31 December 2007 have been audited by Deloitte & Touche S.p.A., who also carried out a limited review of our Semi-annual Report.
Interest rate risk:
Freight rates volatility risk:
48
In March 2008 the controlled company Brig Shipping Lda. acquired the entire ownership of Cordier Navegaçao Lda. - Madeira, which holds shipbuilding contracts for two 34,000 dwt handysize bulk carriers (sister-vessels of other two units already ordered by Brig) due for delivery by Vinashin Shipyard in 2009. This acquisition (for a total investment of about €/Mln 48, of which €/Mln 20 already paid) takes the number of vessels of this type on order by our Group to twelve. With respect to the management of the owned fleet, both tankers and bulkers, no significant events or circumstances occurred after the accounts-closing date.Routine dry-dock and special surveys for 3 units are planned in 2008, with technical off-hire for the entire Fleet amounting to 4.84% of vessel-time (7% in 2007). As to vessels' running costs, we are aiming at keeping them at approximately the same level as last year, in line with the international pattern for our quality standard.
Operating voyage costs will certainly be negatively affected by very high fuel and lubricant prices; it should be noted, however, that these factors only marginally concern our fleet, as fuel for vessels employed on time-charter is paid for by the charterer.
Financial charges (partly fixed at adequate levels already) are not expected to have any negative impact, in view of current prospects on financial markets.
With respect to Fleet commercial risk, it must be noted that approximately 90% of owned vessels and 100% of chartered-in tonnage are currently covered at adequate levels.
Nearly all of income is expressed in USD, therefore, its conversion into Euro - denominated balance sheet data may be negatively influenced by a weak dollar, only partly offset by costs sustained in the same currency (part of crew costs, insurance, spares and stores, lubricant oils and maintenance) and by interest charges on USD - denominated loans.
Broadly speaking, barring unforeseen circumstances, it is reasonable to expect a positive 2008, although with results significantly lower than in previous years. This is due to the fact that, even allowing for an unchanged contribution from the trading fleet, our new-buildings currently under construction will start contributing only from 2009; on the other hand, it would not be reasonable (at the moment) to expect the recent years’ excellent performance in vessels’ disposals to be repeated also in the present year.
Significant events after the balance sheet date and business outlook
49
Dear Shareholders,
We draw your attention to the fact that our 2007 Consolidated Financial Statements have been issued in accordance with the IFRS International Accounting Standards of the International Accounting Standard Board (as already done in 2006).
The consolidated results for the 2007 Financial year show a net profit of €/Mln 35.20 after depreciation and amortisation charges of €/Mln 23.80 (in 2006 net profit was €/Mln 28 after cumulative depreciation and amortisation charges of €/Mln 24.10: +37.30%). Net of minority interests, net profit amounts to €/Mln 33.10 (in 2006 €/Mln 24.10: +18.0%). Cashflow, also net of minority interests, amounts to €/Mln 56.90 (in 2006 €/Mln 48.20).The 2007 result - boosted by a €/Mln 28.60 gain from vessels disposal - continues the series of particularly satisfactory results of previous years: this has permitted the substantial improvement of the financial situation and the continuous strengthening of our Group, whose net equity is equal to €/Mln 207.40.
After taking into account the payment - by the Parent Company - of the proposed dividends from the 2007 results and after the extraordinary dividend of €/Mln 8.45 paid in December 2007, the Consolidated Shareholders' Equity will be structured as follows:
We are very pleased to confirm the final considerations already made in our previous management report: the results obtained can certainly be attributed to the remarkable increase of freight rates occurred in recent years and to the capital gains resulting from the timely sale of some units and newbuilding contracts. On the other hand, it must be noted that the Group faced the market in ideal conditions, thank to the significant new investments plans planned in early 1998, against a depressed market at the time, and thank to quite a few of timely tonnage acquisitions and divestitures and a prudent commercial and financial management approach.
As a final note, we would like to thank all of our Group's employees, ashore and at sea, for their valuable cooperation: they deserve our unconditional gratitude and firm confidence in the future.
26 March 2008 The Board of Directors
- Share capital- Legal reserve- Other reserves- Retained earnings Total Group Shareholders' Equity- Minority interestsTotal Consolidated Shareholders' Equity
70,41814,08416,44598,040
198,98770
199,057
(€/000)
51
Consolidated Financial Statements
Premuda GroupConsolidated Balance Sheet (thousands of Euro)
ASSETS
Fixed Assets
Tangible fixed assets
Vessels
Vessels under construction
Real estate
Other fixed assets
Participations
Associated companies
Other companies
Other financial assets
Loans
Other investments
Total Fixed Assets
Current Assets
Inventories
Consumables
Voyages in progress
Receivables
Clients
Prepayments
Other receivables
Financial current assets
Cash and cash equivalent
Total Current Assets
TOTAL ASSETS
52
at 31.12.2007
at 31.12.2006
321,624
273,105
46,863
846
810
57
45
12
25,884
25,800
84
347,565
4,222
2,466
1,756
22,669
13,283
3,457
5,929
282
43,473
70,646
418,211
318,689
293,874
23,402
900
513
6,010
6,006
4
69
-
69
324,768
4,356
2,739
1,617
26,064
11,961
3,886
10,217
181
40,927
71,528
396,296
LIABILITIES AND
SHAREHOLDERS' EQUITY
Shareholder’s Equity
Share capital
Reserves for premium on issued shares
Legal reserve
Other reserves
Retained profit
Profit for the year
Group shareholder’s equity
Minority Interest:
Capital and reserves
Profit for the year
Total shareholder’s equity
Long-Term Liabilities
Bank loans
Provisions
Provisions for staff leaves
Total Long-Term Liabilities
Current Liabilities
Bank loans
Suppliers
Corporate tax
Accruals
Other debts
Total Current Liabilities
Total Liabilities
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY
53
at 31.12.2007
at 31.12.2006
70,418
-
14,084
16,445
60,153
24,108
185,208
2.029
3.885
191,122
147,173
1,113
1,460
149,746
23,334
16,310
691
7,777
7,316
55,428
205,174
396,296
70,418
-
14,084
16,445
73,373
33,118
207,438
66
4
207,508
148,670
614
939
150,223
28,088
16,550
716
7,837
7,289
60,480
210,703
418,211
55
Net revenue
Voyage costs
Time Charter revenues
Charter hire
Running costs
Fleet margin
Profit on vessel sales
Administrative expenses
Other income/(costs)
Depreciation
Operating profit
Financial items
Profit/(loss) from associated companies
Profit before tax
Tax on profit
Net profit
Minority interest
Group's net profit
Group’s net profit
per share (Euro)
Premuda GroupConsolidated Income Statement(thousands of Euro)
year 2007
year 2006
142,427
(9,803)
132,624
(29,470)
(43,533)
59,621
14,601
(15,758)
(16)
(24,136)
34,312
(5,905)
551
28,958
(965)
27,993
3,885
24,108
0.171
133,050
(10,298)
122,752
(25,755)
(36,106)
60,891
28,583
(20,300)
571
(23,809)
45,936
(9,886)
(291)
35,759
(528)
35,231
2,113
33,118
0.235
year 2006
3.206
27.993761
7.484
96524.136
432(14.599)
(551)(95)
44.173
(6.070)(1.594)5.211
230-
41.950
(115.322)356
54.587--
2.353(58.026)
69.796(31.335)12.366(7.007)(8.451)
2.25930.463
14.387
17.593
(2.353)
(7.165)
year 2007
17.593
33.1181.0599.978
(3.054)528
23.809(499)
(29.122)291
(521)
35.587
3.294134
(693)-
(317)38.005
(67.802)(53)
53.13716.258
6.5003.054
11.094
42.500(41.003)(25.815)(10.257)(16.901)
(5.844)6.013
(51.307)
(2.208)
15.385
56
A) NET CASH POSITION AT YEAR START
B) CASH FLOW FROM OPERATING ACTIVITIES Profit for the year Unrealized exchange differences Interest charges (P&L) Interest income (P&L) Tax on profit (P&L) Depreciation Net change in other provisions (Profit) / loss on assets disposal (Profit) / impairment of associated companies Net change in Staff’s leave provision Subtotal: Cash flow from operating activities before working capital changes
Change in receivables Change in inventories Change in suppliers and other current liabilities Net change in deferred taxation Tax on profit (cash) Total cash flow from operating activities
C) CASH-FLOW FROM INVESTING ACTIVITIES Investments in assets: - tangible - financial Sale of tangible fixed assets Asset variation due to change in consolidation area Sale of financial fixed assets Interest income (cash) Total cash-flow from investing activities
D) CASH-FLOW FROM FINANCING ACTIVITIES New loans Repayments of bank loan Net change in financial fixed assets Interest charges (cash) Dividends Change in minority interest Other changes Total cash-flow from financing activities
E) CASH-FLOW OF THE PERIOD (B + C + D)
F) NET CASH POSITION AT THE END OF THE YEAR (A + E)
Premuda GroupCash Flow Statement (thousands of Euro)
57
Statements of Changes in the Consolidated Shareholder’s Equity(thousands of Euro)
LegalReserve
RetainedProfit
Group Interest
Subtotal
MinorityInterest
Total
OtherReserves
ShareCapital
Share PremiumAccount
Profit for the Year
Balance as at 31.12.2005
Allocation of the 2005 result
for the Parent Company
- legal reserve
- dividends
- retained profit
Allocation of the 2005 result
for subsidiaries
Purchase of third-party interest
Capital repayment/dividends
Other
Hedge accounting effect
Consolidated result for the year 2006
Balance as at 31.12.2006
Allocation of the 2006 result
for subsidiaries
- legal reserve
- dividends
- retained profit
Allocation of the 2006 result
for subsidiaries
Capital repayment/dividends
Purchase third-party interest and others
Hedge accounting effect
Consolidated result for the year 2007
Balance as at 31.12.2007
14,084
-
-
-
-
-
-
-
-
-
14,084
-
-
-
-
-
-
-
-
14,084
40,969
-
(2,030)
-
18,955
(2)
-
(46)
2,307
-
60,153
-
(8,451)
17,032
7,076
(8,450)
8
6,005
-
73,373
25,376
-
(6,421)
-
(18,955)
-
-
-
-
24,108
24,108
-
-
(17,032)
(7,076)
-
-
-
33,118
33,118
167,292
-
(8,451)
-
-
(2)
-
(46)
2,307
24,108
185,208
-
(8,451)
-
-
(8,450)
8
6,005
33,118
207,438
9,194
-
-
-
-
(3,883)
(3,282)
-
-
3,885
5,914
-
-
-
-
(3,850)
(1,998)
-
4
70
176,486
-
(8,451)
-
-
(3,885)
(3,282)
(46)
2,307
27,993
191,122
-
(8,451)
-
-
(12,300)
(1,990)
6,005
33,122
207,508
16,445
-
-
-
-
-
-
-
-
-
16,445
-
-
-
-
-
-
-
-
16,445
70,418
-
-
-
-
-
-
-
-
-
70,418
-
-
-
-
-
-
-
-
70,418
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
59
Notes to Consolidated Financial Statements
61
Statement of compliance with IFRS and accounting principles
Consolidation Area
These Consolidated Financial Statements of the Premuda Group have been issued in compliance with the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB). They are reported in ‘000 Euro and compared with the previous year’s financial results. The Year-end Consolidated Financial Statements include Balance Sheet, Income Statement, Cash Flow Statement, Statement of Changes in Shareholders’ Equity and Notes.
These Consolidated Financial Statements have been issued in compliance with the accounting principles currently ruling, consistent with those applied in the past.
The Consolidated Financial Statements are expressed in Euro, functional currency consistent with the Group's financial structure.
The Consolidated Companies operate in the shipping industry for liquid and dry bulk transportation, employing owned and chartered vessels, with the exception of the holding company Premuda International S.A.H. and of Premuda (Monaco) S.A.M. (responsible for the operational and business management of the foreign flagged vessels), Australian FPSO Management PTY LTD (in charge of the technical and operational management of the FPSO Four Vanguard), Suezmax Navegaçao Lda. (which provides administration services for other Group companies) and Premuda (Atlantic) Inc. (responsible for the Group fleet employment related to the US market).
Subsidiary companies are those, directly or indirectly, controlled by the Parent Company or where the latter issues financial and operating policies so as to benefit from its activity (actual control).
62
The companies consolidated on a line-by-line basis as at 31 December 2007 are:
Premuda S.p.A.Parent Company Registered office: TriesteShare capital: Euro 70,418,225
Companies directly controlled:
Premuda International S.A.H.Registered office: LuxembourgShare capital: Euro 52,000,000Ownership: 99,90%
Companies indirectly controlled (through Premuda International S.A.H.):
Premuda (Monaco) S.A.M.Registered office: Monte CarloShare capital: Euro 305,000Ownership: 90%
Brig Shipping Lda.Registered office: MadeiraShare capital: Euro 50,005,000Ownership: 100%
Four Vanguard-Serviços e Navegaçao Lda.Registered office: MadeiraShare capital: Euro 27,243,505Ownership: 100%
Panamax Navegaçao Lda.Registered office: MadeiraShare capital: Euro 5,000Ownership: 100%
Suezmax Navegaçao Lda.Registered office: MadeiraShare capital: Euro 5,000Ownership: 100%
Moon Shipping-Serviços e Navegaçao Lda.Registered office: MadeiraShare capital: Euro 16,597,027Ownership: 100%
63
Premuda Bulk Navegaçao Lda.Registered office: MadeiraShare capital: Euro 5,000Ownership: 100%
Premuda (Atlantic) Inc.Registered office: DelawareShare capital: US$ 1,000Ownership: 100%
JEP Navegaçao Lda.Registered office: MadeiraShare capital: Euro 8,505,000Ownership: 100%
Australian FPSO Management Pty LtdRegistered office: AustraliaShare capital: Australian Dollar 100Ownership: 100%
Investments in associates:
Premuda Chartering Navegaçao Lda.Registered office: MadeiraShare capital: Euro 5,000Ownership: 43% (expected 33,33%)
Please refer to the table attached for further information on the Group's structure. We point out, as a significant difference over 2006, the decrease of ownership of Premuda Chartering Navegaçao Lda. from 100% to 43%; the increase from 75% to full ownership of Premuda Bulk Navegaçao Lda.; and the disposal of our 25% stake in Sider Navi S.p.A. (which includes the fully controlled Sider Navegaçao Lda.).
The associated company Premuda Chartering Navegaçao Lda., (presently not trading as it only holds the shipbuilding contracts of three aframax product tanker for delivery 2010) is to be considered jointly controlled by the three shareholders.
64
Consolidation principles
Valuation criteria
The main consolidation principles include the following:
- The book value of the controlled companies has been written off for the relevant Shareholders' Equity against the entry of assets and liabilities on a line-by-line basis, and showing in the retained earnings the difference arising therefrom. Minority interests have been booked separately. Investments in associates have been recognized as explained in the following paragraph on valuation criteria.
- Credit and debit entries as well as costs and revenues among consolidated Companies were written off. In particular, profits and losses generated by transactions among Group Companies not yet realized towards third parties were also written off.
- The Euro conversion of financial statements expressed in foreign currency was carried out at the “current exchange rate". For both Balance Sheet and Profit & Loss Account items the end-of-period exchange rate has been used, since their valuation adopting the average exchange rate for the period had not caused significant changes.Exchange rate differences arising from the conversion of original shareholders’ equities at the current exchange rates, compared to those used in the previous financial statements, were directly entered in the consolidated Shareholders’ Equity under the item “reserves from translation difference”.
For further information, we refer you to the reconciliation account between Shareholders’ Equity and net profit for the year of the Parent Company and those of the consolidated financial statements attached hereto.
The valuation criteria used for the Consolidated Financial Statements are as follows:
- The Fleet is booked at the purchase cost; extraordinary charges, increasing the productivity of the vessels, are capitalised on same. As to vessels directly ordered to shipbuilding yards, their cost value consists of the contract price, agreed extra costs, costs for directly purchased start-up equipments, cost of personnel employed during fitting out, and interest charges on advance instalments paid to the Shipbuilding Yards before delivery of the vessel.
Criteria
Fleet depreciation is based on the cost of each unit less estimated scrap value, divided by the years of residual life, based on the assumption of a trading life of twenty-five years for tankers and of twenty years for bulk carriers.
The cost component of vessels undergoing repairs during routine drydock is amortised over the time until the subsequent drydock (usually 30 months).
- Real estate are stated at purchase cost and amortized on a straight-line basis over 33 years.
- Fixtures, furniture, machinery, office equipment and motor vehicles are stated at purchase cost. Amortization is calculated on a straight-line basis according to the estimated useful life shown below:
fixtures and furnishings machinery and office equipmentmotor vehicles
Assets carrying an artistic, but non-significant, value are stated at purchase cost.
- Associated companies are those subject to a great influence by the Group (but not controlled or jointly controlled). Investments in associates are initially entered in at cost and, subsequently, at Net Equity. The value is increased/decreased to reflect all changes after acquisition. Other investments are stated at cost, reduced in case of losses and where no profits are expected in the near future in amounts that would make it possible to cover such losses; the original value is reinstated in subsequent years only if the reasons for the adjustment to the value of such investments cease to exist.
- Long-term investments include receivables entered at their recoverable value.
- Tax advances are recorded as assets to the extent that they are reasonably expected to be recovered.
- Fixed assets are subject to periodical valuation so as to find out indicators showing a loss of value. If such indicators exist, the recoverable value is determined, equalling the higher between the selling price and the value in use. The latter is determined by discounting expected cash flows at current interest rates. Where the recoverable value was below the entry value, the arising impairment was booked in the Profit & Loss Account. The book value is immediately restored (with effect on Profit & Loss) should the reason for impairment cease to exist.
- 8 years- 5 years- 4 years
65
66
- Bare-Boat and Time-Charter contracts are usually regarded as as operating leases. If their contractual terms define them as financial leases, pursuant to IAS 17, vessels are entered as lease assets. Charter rates referred to operating leases are charged to Profit & Loss throughout the duration of the contract.
- Accruals and prepayments are determined on an accrual basis.
- Owned shares are recorded in the impaired Shareholders’ Equity.
- Inventories are valued using the FIFO method (first in, first out) taking market value into account.Costs for voyages not yet completed at the closing date are booked as “voyages in progress”, net of the whole loss (if negative) and including the pro-rata profit (if positive). Each voyage begins (conventionally) once cargo offloading operations under the preceding voyage is completed; includes the ballast leg to the next loading port and is deemed to be completed at the end of the subsequent cargo offloading.
- Receivables are booked at their recoverable value.
- The provision for staff severance indemnity (TFR) is regarded as a liability arising from defined benefit plan for employees and is booked taking into consideration (amongst other factors) the estimated working life and the wages earned by the employees during a certain working period. The TFR liability is determined by an independent consultant, using actuarial techniques and applying the “Projected Unit Credit Method”. Actuarial gains and losses are charged to Profit and Loss.According to changes in the relevant Italian rules, TFR accrued from 01.01.2007 is considered a Defined Contribution Plan and entered like any other social contribution. Due to this change, the actual evaluation from 01.01.2007 excludes any expected future salary increase. The difference arising is considered a “curtailment” according to paragraph 109 of IAS 19 and charged to Profit and Loss in 2007.
- Other provisions are allocated to cover losses and debts, probably existing, but whose amounts and/or date of occurrence were not ascertainable at the balance sheet date.
- Payables are booked at their par value.
- Income from services is booked once the services are rendered. Income from services in progress is calculated according to the progress report. Income from time-charter is calculated on the accrual basis of the charter period. Income from asset disposal is booked once risks and benefits linked to the asset are transferred to the buyer.
- Maintenance costs comprise all of the expenses incurred during the year for the on-going maintenance of the relevant fleet class. Costs relating to periodical maintenance of vessels are capitalised and depreciated during the period until the next drydock.
- Other costs are determined on an accrual basis.
- Dividends are entered when they become payable.
- Taxes are entered in compliance with the tax laws in force in the country where the Group operates (in Italy under the so-called “Tonnage Tax”); tax effects on time differences arising between taxable income and profit and loss results are booked under the entries “deferred taxes” and “prepaid taxes”, as per IAS 12 provisions. Tax effects related to items directly entered in net equity (without affecting Profit & Loss) are directly entered in net equity too.
- Exchange rate differences arising from collection of credits and payment of debts denominated in foreign currency are charged to Profit & Loss.Receivables and Payables originally shown in a foreign currency are converted to Euro at the end-of-period exchange rates. Exchange rate differences arising out of the above conversion are charged to Profit & Loss, whereby net profits resulting from such differences, when positive, are not available for distribution. Exchange differences on monetary items qualified as hedging instruments of future cash flow are directly recognised in net equity, provided the hedge proves to be effective. The Group qualified certain long term loans as a natural hedge of the exchange risk on cash flow in USD coming from long term charter contracts of certain vessels.
- Loans are valued at cost, net of acquisition costs, which are charged to Profit & Loss using the amortised cost method.
- Group assets and liabilities are exposed to financial risk related to exchange rate and interest rate fluctuations. The Group's policy tries to minimize such risks by way of hedging with financial instruments, usually resulting from forward purchase/sale of foreign currencies and swap transactions from floating to fixed loan rates. Derivatives are originally entered at cost, and afterwards adjusted to the “fair value”. Changes in the “fair value” of hedging derivatives that prove to be effective pursuant to IAS 39 are directly booked to the Shareholders’ Equity. Their potential ineffective portion, as well as changes in the fair value of other derivatives is charged to Profit & Loss.
- Risks connected with future fluctuations of the “fair value” of commitments related to chartering-in third-party vessels may be covered by “Forward Freight Agreement” (FFA). For such coverage, if effective, the “fair value hedge” is applied, booking in the Balance Sheet the “fair value” valuation of both the hedging instrument and the hedged item, charging to Profit & Loss the relevant effects.
67
68
- Financial items comprise: interest charged on financial debts (booked applying the “effective interest” method), interest income, exchange differences, profit and losses on derivatives (if not registered as hedging instruments).
- The cash-flow statement is produced applying the indirect method. Cash and cash-equivalent reported in the Statement of Cash-flow comprise the relevant values at the reference date.
- The issuance of the Financial Statements and their related Notes in accordance with the International Accounting Standards requires Management to provide estimates and assumptions which may have a certain impact on certain balance sheet items (tangible and intangible assets, provisions for risks, impairments, useful life of assets, employees' benefit, income tax, insurance claims, derivatives instruments etc). As a consequence, actual results may differ from initial estimates.Valuations are reviewed on a periodical basis and their direct effects are immediately charged to Profit & Loss.
- All asset entered in the Balance Sheet have never been revaluated.
- The “stock options” plans are recognized pursuant to IFRS2 provisions. The current plan involves exclusively a cash compensation (and not the physical transfer of shares) and it is therefore accounted in the Balance Sheet as a liability based on the fair value of the relevant shares, and in the Income Statement as personnel cost within the administrative expenses.
- Amounts shown in these Notes are in '000 Euro.
69
New accounting principles and interpretations
st On 1 January 2007, IFRS 7 became effective, completing the criteria to book financial assets and liabilities according to IAS 32 and IAS 39. All information requested by IFRS 7 regarding financial instruments and related risks are included in the Notes.
IFRIC Interpretation 9 – Reassessment of Embedded Derivatives - clarifies that Embedded Derivatives should be separated from the host contract and accounted for as a derivative when the entity first becomes a party to the contract. Subsequent reassessment is prohibited unless there is a significant change in the terms of the contract. The adoption of this interpretation didn't produce any significant accounting effect on our Financial Statements.
In November 2006 the IASB issued IFRS 8 - Operating Segments which, st effective 1 January 2009, will replace IAS 14 - Segment Reporting.
In March 2007 the IASB issued a revised version of IAS 23 - Borrowing Costs, st effective 1 January 2009.
In July 2007 IFRIC released Interpretation 14 of IAS 19 - Defined benefit plans st and minimum coverage criteria, effective 1 January 2008.
In September 2007 the IASB issued a revised version of IAS 1 - Presentation of Financial Statements, applicable for annual periods beginning on or after
st 1 January 2009.
The effects that could arise from the adoption of the above principles and interpretations (not yet fully approved by the relevant E.C. authority) are under evaluation.
In 2006 and 2007 the following interpretations were issued, regarding aspects not existing or not significant for our Group:- IFRIC 7 - Financial Reporting in Hyperinflationary Economies (ruling
st 1 January 2007);st - IFRIC 8 - Scope of IFRS 2 (ruling 1 January 2007);
st - IFRIC 11 - Group and Treasury Share Transactions (ruling 1 January 2007);st - IFRIC 12 - Service Concession Arrangements (ruling 1 January 2008);
st - IFRIC 13 - Customer Loyalty Programmes (ruling 1 January 2009).
271,
434
(77,
071)
194,
363
6,16
8
(2,9
63)
3,20
5
197,
568 -
4,90
7
(570
) -(3
,130
)3,
130
(10,
609)
(2,9
02)
270,
864
(87,
680)
183,
184
7,94
5
(2,7
35)
5,21
0
188,
394
Fram
ura
42,2
37
(22,
239)
19,9
98
1,46
0
(304
)
1,15
6
21,1
54
- - - -
(1,5
69)
(730
)
42,2
37
(23,
808)
18,4
29
1,46
0
(1,0
34)
426
18,8
55
- -
Fou
rIs
lan
d
34,9
68
(10,
137)
24,8
31
24,8
31
-1,
223
(1,5
91)
(391
)
34,9
68
(11,
728)
23,2
40
1,22
3
832
24,0
72
- - - - - - -
(391
)
Fou
r B
ay
45,1
47
(21,
507)
23,6
40 816
(477
)
339
23,9
79
- - - - - -
(1,5
93)
(326
)
45,1
47
(23,
100)
22,0
47 816
(803
)
13
22,0
60
Fou
r M
oo
n
25,1
78
(6,1
01)
19,0
77
- - -
19,0
77
-1,
436 - - - -
(1,5
19)
25,1
78
(7,6
20)
17,5
58
1,38
8
18,9
46(48)
1,43
6
(48)
Fou
r C
oal
18,0
03
(3,4
89)
14,5
14 370
(296
)
74
14,5
88
-72
9 - -
(944
)(7
4)
18,0
03
(4,4
33)
13,5
70 729
729
14,2
99
(370
)37
0 -
(*)
Fou
r E
toile
s
14,1
54
(12,
548)
1,60
6
762
(95)
667
2,27
3 -97
4 -(2
79)
14,1
54
(12,
548)
1,60
6
1,73
6
(374
)
1,36
2
2,96
8- - - -
Fou
r S
pri
ng
s
16,1
30
(3,3
61)
12,7
69
2,38
0
(1,4
49)
931
13,7
00
-1,
274 - -
(1,0
75)
(1,0
16)
16,1
30
(4,4
36)
11,6
94
1,27
4
(85)
1,18
9
12,8
83
(2,3
80)
2,38
0
Fou
r Lo
ch
s
570 -
570
750
(638
)
112
682 - -
(112
) --
(570
) -(7
50)
750 - - - - - -
Fou
r E
uro
5,99
8
(3,7
18)
2,28
0 - -- - -
2,28
0
(5,9
98)
3,71
8 - - - - - - - - - - -
Ant
arct
ica
Atla
ntic
aTa
nker
sS
ubto
tal
46,4
76
(963
)
45,5
13
- - -
45,5
13
- - - - - -
(1,6
28) -
46,4
76
(2,5
91)
43,8
85
- - -
43,8
85
46,5
74
(215
)
46,3
59
- - -
46,3
59
- - - - - -
(1,6
34) -
46,5
74
(1,8
49)
44,7
25
- - -
44,7
25
Ve
sse
ls
Vess
el c
ost
Accu
mu
late
d d
ep
recia
tion
Bala
nce a
t 3
1.1
2.0
6
Dry
do
ck
co
mp
on
en
t
Accu
mu
late
d d
ep
recia
tion
Bala
nce a
t 3
1.1
2.0
6
Net
31
.12
.20
06
Incre
ase
s:
-
Vess
el
-
Dry
do
ck
co
mp
on
en
t
Vess
el s
ale
/en
d o
f
dep
recia
tion
:
-
vess
el c
ost
-
accu
mu
late
d d
ep
recia
tion
-
dry
do
ck
co
mp
on
en
t -
accu
mu
late
d d
ep
recia
tion
Dep
recia
tion
:
-
vess
el
-
dry
do
ck
co
mp
on
en
t
Vess
el c
ost
Accu
mu
late
d d
ep
recia
tion
Bala
nce a
t 3
1.1
2.2
00
7
Dry
do
ck
co
mp
on
en
t
Accu
mu
late
d d
ep
recia
tion
Bala
nce a
t 3
1.1
2.0
7
Net
31
.12
.20
07
at
the e
nd
of th
e y
ear
perm
an
en
tly c
on
vert
ed
in b
ulk
carr
ier.
(*)
: O
BO
vess
el i
nclu
ded
in t
an
ker
un
its b
ecau
se o
f its
pre
vaili
ng
use
in t
he p
eri
od
-
Four
Four
Fou
r E
art
h
12.3
56
- - - - - -
(1,2
10)
(808
)
12,3
15
(2,2
47)
10,0
68
1,28
0
(1,0
10)
270
10,3
38
12.3
15
(1.0
37)
11.2
78
1.28
0
(202
)
1.07
8
Tota
lO
vera
ll
42
1,4
78
(13
1,9
61
)
28
9,5
17
7,8
18
(3,4
61
)
4,3
57
29
3,8
74 -
5,6
36
(6,5
68
)3
,71
8(3
,50
0)
3,5
00
(19
,77
1)
(3,7
84
)
41
4,9
10
(14
8,0
14
)
26
6,8
96
9,9
54
(3,7
45
)
6,2
09
27
3,1
05
36,3
16
(8,2
44)
28,0
72
1,65
0
(498
)
1,15
2
29,2
24
-72
9
(5,9
98)
3,71
8(3
70)
370
(2,1
54)
(882
)
30,3
18
(6,6
80)
23,6
38
2,00
9
(1,0
10)
999
24,6
37
Vang
uard
113,
728
(46,
646)
67,0
82
- - -
67,0
82
- - - - - -
(7,0
08) -
113,
728
(53,
654)
60,0
74
- - -
60,0
74
Four
Bul
kers
Sub
tota
l
Balance sheet
Balance sheet
ASSETS
Fixed Assets Tangible fixed assets
VesselsThis item records the book value of owned vessels deducting the relevant accumulated depreciation, as detailed in the previous page. The cost component regarding routine dry docking is stated separately, amortized during the intervening period, until next off hire. This item is also recorded for vessels (other than our own vessels) chartered-in under bare boat; it is not recorded, however, for our own units chartered-out on bare-boat, considering that under this type of contract drydocking is charterer's responsibility.
Vessels under constructionThis item records advance instalments paid to shipyards and other charges sustained for the new vessels under construction, as detailed below. We point out that after the reduction (currently 43%, due to become 33,33%) of our stake in Premuda Chartering Navegaçao Lda., the three aframax product tankers due for delivery in 2010 by the Korean Shipbuilder Samsung are no longer reported. We also remind you that, during the year, we signed and subsequently sold at excellent profit the contracts for four 53,000 dwt bulk carriers.
Breakdown ( /000):€
as at
31.12.06
5,4805,4805,2983,5723,572
-----------
-23,402
increases
---
134134
5,4795,4795,4795,4795,0044,9304,9304,8574,8574,8575,0085,008
61,635
decreases
(5,480)(5,480)(5,298)
- -
(5,479)(5,479)(5,479)(5,479)
-------
- (38,174)
as at
31.12.07
---
3,7063,706
----
5,0044,9304,9304,8574,8574,8575,0085,008
46,863
- aframax product tanker nr.1737- aframax product tanker nr.1738- aframax product tanker nr.1748- handy bulker nr. HR-PR05- handy bulker nr. HR-PR06
- totale
- handymax bulker nr. NTA 06- handymax bulker nr. NTA 08- handymax bulker nr. HL 12- handymax bulker nr. HL 14- handy bulker SPP H 4002- handy bulker SPP H 4007- handy bulker SPP H 4008- handy bulker SPP H 4013- handy bulker SPP H 4014- handy bulker SPP H 4017- handy bulker SPP H 4039- handy bulker SPP H 4047
71
72
Real estate
This item records the cost, less accumulated depreciation, of owned th thbuildings, i.e. the 12 floor and an apartment on the 11 floor of the
building where our Genoa premises are based, as well as archive areas and car parkings. Depreciation is calculated on the basis of a trading life of 33 years.
The office is encumbered by a mortgage registered as security for a medium-term credit line amounting to €/Mln 7.50, not yet drawn as at 31 December 2007.
Detailed as follows /000)Other fixed assets
( :€
fixtures and furnishings (*)
816
(650)166
237(46)(52)23
328
1.001(673)328
office equipment
1.006(810)196
101(83)
--
214
1.107(893)214
motorvehicles
203(52)151
193(72)
(4)-
268
392(124)268
total
2.025
(1.512)513
531(201)
(56)23
810
2.500(1.690)
810
CostAccumulated depreciationBalance as at 31.12.06
IncreasesDepreciation for the year 2007DecreasesRelevant depreciationBalance as at 31.12.07
Summary:CostAccumulated depreciationBalance as at 31.12.07
(*): of which € 43 not depreciable/000
- - -
Residual value as at 31.12.06DepreciationResidual value as at 31.12.07
(€ )/000
900(54)846
73
Partecipations
Associated companiesThese are represented by our stake in Premuda Chartering Navegaçao Lda., recognized under the equity method (after taking into account the planned reduction of our stake to 33,33% before delivery of the vessels). Our 25% share in Sider Navi S.p.A. (€/000 6,006 in the 2006 Financial Statements, inclusive of the fully controlled Sider Navegaçao Lda.) was dismissed in 2007.
Others companiesThese consist in minor stakes, with marginal amounts and unchanged year-on-year.
Other financial assetsThey consist of the interest-bearing loans (€/000 5,453) to the associated company Premuda Chartering Navegaçao Lda. and other marginal amounts pledged as guarantee c/o Telecom Italia, Enel, etc. This item also includes a nominal Euro 20/Mln investment in financial products issued by Commerzbank (with guaranteed principal refund after 5 years) kept as security for a Credit Line of Euro 30 million granted by Commerzbank itself for the same period, fully described later on.
CURRENT ASSETS
Inventories
Spares, stores and consumablesThis item refers to fuel, lubricants and paints on board the vessels and spare parts available on 31 December 2007 in the amount of €/000 2,466 (all accounted for under the FIFO method and taking into account market value) (€/000 2,739 as at 31.12.06).
Voyages in progressThis item accounts for ongoing voyages at the end of the period, in the amount of €/000 1,756 (€/000 1,617 as of 31.12.06).
Trade receivables
ClientsThis item accounts for the net year-end balances of definitely realizable trade receivables, concerning freight, demurrages and others.
74
Accrued income and prepaymentsAccrued income refers, prorata to the financial year, to income not yet booked as at 31.12.07 (mainly interest and other income). Prepayments refer prorata to costs already incurred during the financial year, but related to the following year (mainly insurance, rent fees, membership fees and other charges not connected with shipping activities).
Other receivablesThis item refers to year-end balances for short-term credits: amounts due by insurance companies for damage indemnities, advances to agents, loans to personnel, miscellaneous advances, etc.
Current financial assetsThey represent the “fair value” evaluation of the financial derivatives implemented to protect the Group from risks generated by fluctuations of exchange and interest rates, as summarized in the table attached
Cash and cash equivalentsThis item represents the year-end balances relating to cash at hand and liquidity with banks. A more detailed analysis of the variation occurred during the year can be found in the Cash Flow Statement.
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders’ EquityGroup's objectives for equity management are: a) to generate value for shareholders; b) to protect the Group's continuity and c) to support the Group's development. The Group intends to maintain adequate leverage, allowing a satisfactory return to shareholders as well as easy access to bank finance. Debt/equity ratio and its pattern are constantly monitored, taking into account the available cash flow.
Share capitalShare Capital, fully subscribed and paid-up as at 31.12.07, is unchanged and consists of of 140,761,507 common shares and 74,943 savings shares, all of a par value of 0.50 Euro, and for a total value of €/000 70,418 .
Legal reserveIt amounts to €/000 14,084 (unchanged year-on-year) and presently accounts for one fifth of the Share Capital.
Other reservesThey cumulatively amount to €/000 16,445, also unchanged year-on-year.
Retained profitAmounting to €/000 70,373, with an increase of €/000 13,220 over 2006.
.
75
Profit & Loss for the yearThis item represents the Group profit for the financial year, equal to €/000 33,118 (€/000 24,108 in 2006).
Minority interestsThis is the interest of third-party minority shareholders and amounts to €/000 70.
A more detailed analysis of the changes of the consolidated Shareholders’ Equity can be found in the relevant statement.
Long Term Liabilities
Bank loansAmounts due to banks are detailed as follows (in '000 Euro):
It must be noted that values expiring “within one year” are entered in the financial statements under "Current liabilities” as "Short-term bank debts”.Please also note that debts accounted for under the amortized cost method cause a lower value of €/000 445 in the amounts effectively due to banks as per amortization plans.
medium/long-term:
BNL m/t. FramuraZero Coupon Bond
Efibanca: m/tt. Four Island and Four Bay
Unicredit
Commerzbankm/v. Four Coalm/t. Four Moonm/t. Four Springs
Banca Intesa - CommerkbankFPSO Four Vanguard
Fortis Bankm/t. Four Antarcticam/t. Four Atlantica
medium/long-term Subtotal
Over-draft and other
Total
Withinone year
1,513-
4,229
9,924
7751,3891,653
5,000
1,8031,802
28,088
-
28,088
More than one up to five years
4,1621,669
20,141
9,924
3,0985,5536,617
20,000
7,2087,208
85,580
-
85,580
More than five years
--
-
-
6,007347
-
22,500
16,66817,568
63,090
-
63,090
Total
5,6751,669
24,370
19,848
9,8807,2898,270
47,500
25,67926,578
176,758
-
176,758
Expiring
76
Details:
Banca Nazionale del LavoroA loan drawn in 2001 and secured by a mortgage on m/t. Framura, for an original amount of US$ 15 Mln and currently Euro-denominated, to be repaid in 40 equal principal instalments, of which the first was repaid on 31.12.01 and the last will be due on 30.09.11. Interest charges are based on the relevant EURIBOR plus margin. To cover 50% of such a loan, a specific derivative transaction on interest rate has been arranged, due to expire 31.12.2008. Taking the above transaction into consideration, the average rate applied for the year 2007 was 5.81%; for next instalment due on 31.03.08 the rate will be 6.08%.
Banca Nazionale del LavoroA 10-year loan in the amount of 12,017,952 Euros, drawn on 06.09.00 and refundable with a single payment on termination date (06.09.10).The loan is secured by a pledge on 10-year Zero Coupon Bond issued by BNL with a corresponding nominal value, and is entered in the Financial Statements net of the present value of the bonds as at year-end. Interest charges are calculated on the 6-month EURIBOR plus margin and are payable twice a year.The average rate applied for the year 2007 was 4.83%; for next instalment due in March 2008 the rate will be 5.48%.
Efibanca(in pool with Banca Carige, Centrobanca and Mediocredito Lombardo)A loan granted in 2000 in the original amount of US$ 48 Mln and currently Euro-denominated, secured by a mortgage registered on the two units Four Island and Four Bay.The loan interest is calculated on EURIBOR for the period plus margin (2007 average rate was 5.05%; 5.64% for the instalment due in January 2008) and is repayable in forty-eight quarterly instalments with increasing principal, of which the first was repaid on 15.01.01 and the last will be due on 15.10.12.
Unicredit Banca d'Impresa (in pool with Banca Generali and Banca Popolare di Vicenza)A 5-year loan of a maximum amount of Euro/Mln 40, agreed on 05.11.04 and to be repaid within 31.12.09.The loan was drawn for an amount of Euro/Mln 30 on 26.11.04 (concurrent with the repayment of a previous bond loan of equal amount) and reduced to Euro/Mln 20 at the end of 2007, whereas the remaining Euro/Mln 10 falls under a revolving credit line until termination. Interest is calculated on 3-month EURIBOR.The average rate applied in 2007 was 5.42%; for the instalment due in March 2008 the rate will be 6.05%. The loan requires our complying with certain financial covenants (with respect
77
to a minimum shareholders' equity, ratio between the shareholders' equity and residual debt, and ratio between the shareholders' equity and the total consolidated indebtedness), all of which are currently easily satisfied. The value of the latter ratio can also have an impact on the applied margin.
CommerzbankA loan granted on 11.07.03 for an original amount of US$15 Mln, to be repaid in forty deferred quarterly instalments with constant principal amount quotas of US$ 220,500, of which the first instalment was repaid on 14.10.03 and the last one will be due on 11.07.13, plus a US$ 6,18 Mln balloon payment due together with the last instalment. The loan, secured by a mortgage on the m/t. Four Coal, was converted into Euro through a special cross currency swap transaction and, therefore, generates interests calculated on the EURIBOR for the period. Starting from the instalment due in July 2007, the floating interest rate has been converted into a fixed one through a specific “interest rate swap” and, subsequently, converted again into floating through an opposite transaction: the applicable “spread” is thereby reduced by 34 bp. Taking into account the above hedging transaction, the average rate applied in 2007 was 4.99%; for the instalment due in January 2007, the rate will be 4.50%.
CommerzbankA loan granted on 13.01.03, secured by a mortgage on m/t. Four Moon for an original amount of US$15 Mln, to be repaid in forty deferred quarterly instalments with constant principal amount quotas, of which the first instalment was repaid on 14.04.03 and the last will be due on 14.01.13. The loan has been converted into Euro through a special cross currency swap transaction and, therefore, generates interests calculated on the EURIBOR for the period. Starting from the instalment paid in January 2006, the floating interest rate has been converted into a fixed one through a specific “interest rate swap” and, subsequently, converted again into floating through an opposite transaction: the applicable “spread” is thereby virtually offset. Taking into account the above hedging transaction, the average rate applied in 2007 was 4.10%; for the instalment due in January 2007 the rate will be 4.71%.
Commerzbank (jointly with Banca Mediocredito)A loan granted on 01.12.03, secured by a mortgage on m/t. Four Springs for an original amount of US$ 18 Mln, to be repaid in thirty-six deferred quarterly instalments with constant principal amount quotas, of which the first instalment was repaid on 01.03.04 and the last will be due on 01.12.12. The loan has been converted into Euro through a special cross currency swap transaction and, therefore, generates an interest calculated on the EURIBOR for the period. Taking into account the above hedging transaction, the average rate applied in 2007 was 5.51%; for the instalment due in March 2008, the rate will be 6.14%.
78
Fortis Bank (jointly with NIBC)Two 10-year loans amounting to US$ 42 Mln each, respectively drawn on 25.05.06 and 09.11.06 concurrently with the deliveries of two new Ice-Class aframax tankers, repayable in monthly instalments plus a US$ 16 Mln “balloon” due together with the last instalments in May/November 2016. The two loans, secured by mortgage arrangements on the vessels Four Antarctica and Four Atlantica and by the assignment of the two respective bare-boat contracts, generate interests calculated on LIBOR for the period (respectively 6.09% and 6.02% as average rates for 2007; 5.77% and 5.65% for the instalments due in January 2008). These loans require our complying with certain financial covenants (with respect to a minimum shareholders' equity, ratio between the shareholders' equity and residual debt, and a minimum amount of available liquidity), all of which are currently easily satisfied. Should such covenants not be fully complied with, the applicable margin will increase and the loan-to-value ratio will be restricted.We point out that these USD-denominated loans are a partial hedge of the exchange rate risk related to the inflow generated in the same currency by the bare boat contracts for the two vessels (“hedge accounting”). As a consequence, the changes in their counter-value at the end of the year due to Eur/Usd exchange rate fluctuations are directly booked as Shareholder's Equity. This amount for the year 2007 is €/000 6,005; the cumulative amount as of the end of 2007 is equal to €/000 8,312.
Intesa San Paolo - CommerzbankA 10-year loan amounting to Eur/Mln 40, drawn on 02.05.07, repayable in 40 quarterly equal instalments, the first of which was duly reimbursed on 02.08.07 and the last will be due on 02.05.17. The loan, secured by mortgage arrangements on the FPSO Four Vanguard and by the assignment of the employment contract, generates interests calculated on the EURIBOR for the period (4.72% for the first instalment), with applicable margin depending on the loan to value ratio (that, in any case, is to be lower than 0.80).This loan requires our complying with certain financial covenants (with respect to a minimum shareholders' equity, a minimum amount of available liquidity, a minimum EBITDA to financial charge ratio, a maximum debt to material assets ratio, all of them on consolidated basis). Should such covenants not be fully complied with, the applicable margin will increase and the loan-to-value ratio will be restricted to 0.65.
We point out that, as at the end of 2007, the following unused credit lines were available:
Banca Popolare di Novara (pool with Banco Popolare di Verona e Novara)a credit line for US$ 60 Mln, available to Premuda and/or controlled companies (in this case fully guaranteed by Premuda) to buy new or secondhand vessels.
79
The line can be drawn within the end of September 2010, with repayment date subject to the age of the acquired vessel, but not later than September 2018. Interest charges are based on the relevant LIBOR. A commitment fee is due on the available and unused portion.
MPS Capital ServicesA credit line for Eur/Mln 7.50 (or USD-equivalent) signed on 27.11.07, available until 27.11.14, to be drawn in one or more tranches, secured by mortgage on the company's office premises. Interest charges are based on the relevant EURIBOR. A commitment fee is due on the available and unused portion.
Banca Nazionale del Lavoro (pooled with eight other banks)A credit line for Eur/Mln 26 signed on 20.12.07, available until 19 06.09, to be drawn in one or more tranches. Interest charges are based on the relevant EURIBOR. The credit line is unsecured.
CommerzbankA credit line for Eur/Mln 30 signed on 31.07.07, available until 31.07.12, secured by pledge on financial products issued by Commerzbank itself, amounting to Eur/Mln 20, to be drawn in one or more tranches. Interest charges are based on the relevant EURIBOR. A commitment fee is due on the available and unused portion.
Banca CarigeA credit line for an original amount of USD 28 Mln, currently reduced to USD 21 Mln, to be further reduced by USD 7 Mln by the end of each year (expiring 31.12.2010). The credit line may also be drawn in Euro and interest charges are based on the relevant LIBOR/EURIBOR. The line is secured by a guarantee of Premuda S.p.A. and a pledge on 1,800,000 shares of Premuda International S.A.H. A commitment fee is due on the available and unused portion.
UnicreditTwo loans of max USD 22 Mln each (or Eur-equivalent) to finance two new 34,000 dwt handy bulk carrier ordered to Vietnamese shipyards. The loans may also be drawn during the pre-delivery phase. Interest charges are based on the relevant LIBOR/EURIBOR. A commitment fee is due on the available and unused portion.
It should be noted that there is an ongoing interest rate risk related to the above mentioned transactions, covered by financial derivative transactions for a total amount of Eur/Mln 20.10, as per the attached table.
80
Provisions for risks and chargesThe item registered, equivalent to €/000 614 on 31.12.07, as opposed to a corresponding value of €/000 1,113 on 31.12.06, represents the overall allocations for litigations, third party claims and other liabilities.
Provisions for staff severance indemnityThis item refers to sums accrued for employees severance indemnities, determined on an actual basis, as previously stated under the Valuation Criteria.
Current Liabilities
Short-term bank debtsThis item refers to overdraft facilities and the short-term quota of medium/long-term loans, as stated in the description of the bank loan detail table previously shown.
SuppliersThis item indicates current sums due to various suppliers. The amount of this exposure reflects the business volume. Balances for the end of the period are stated.
Tax liabilitiesThis item amounts to €/000 716 (€/000 691 as at 31.12.06) and refers to liabilities towards Tax Authorities at the end of the year related to corporate tax on income, personal income tax on employees' wages and salaries (Irpef), withholding tax for professionals, all due within the following period.
Accrued liabilities and deferred incomeAccrued liabilities relate to costs accrued in 2007, the majority of which is represented by interest charges on loans, by the fourteenth-month pay for personnel and its related social charges, and by insurance coverage costs. Deferred incomes nearly totally consist of charter hires which have been invoiced in advance.
Other payablesCumulatively these amount to €/000 7,289 (€/000 7,316 as at end 2006) and mainly consist in miscellaneous payables due to charterers, wages due to workforce, social security, other debts.
81
Commitments and risksAs at 31st of December 2007, the Group's purchase commitments totalled €/000 172,989, relating to the outstanding instalments due to the Vinashin vietnamese Shipyard and the SPP Korean Shipyard for the ten handy bulk carriers ordered. We also point out the purchase commitments of the associated company Premuda Chartering Navegaçao Lda. for €/000 127,470 (our share €/000 42,490) relating to the outstanding instalments due to the Samsung Korean shipbuilding yard for three new aframax product tanker units.The Group holds purchase options on the vessels Four Smile and Four Schooner, to be declared at the end of present charters (June 2009) at the price of USD 50 million and USD 32 million respectively.Purchase options for the three new bulk carriers Four Shinano, Four Mogami and Four Kitakami (chartered-in starting as from the respective delivery by Shipyard) are also available, starting from the end of the fifth contractual year (from the end of third contractual year for Four Kitakami). Option prices, de-escalating throughout the charter periods, are JYN-denominated.The Group granted purchase options on the vessels Framura and Four Islands to the present charterers. Such options may be exercised in June 2011 at the price of USD 30 Mln and USD 35 Mln respectively.The Group granted to the charterers of the vessels Four Atlantica and Four Antarctica options to extend from 8.5 to 10 the respective bare-boat contracts; if such extension is exercised, purchase options at the end of year 10 at the price of USD 36 Mln per vessel shall also become effective.
Herebelow the minimum commitments (Euro/000) resulting from long-term charters:
More than1 up to 5 years
116,72945,26352,834
More than
5 years
13,04925,10922,506
Total
232,10881,408
101,358
Time charter out (income)Bare boatTime charter in (costs)
out (income)
within 1 year
102,33011,03626,018
Committed amounts
82
Income statement
Before explaining in detail the Income statement items, it must be noted that comparisons with the corresponding period of the year before are not quite homogeneous due to changes occurred in the Fleet composition and vessels’ employment (spot or time charter).
Net revenuesNet revenues account for income received from charters, demurrages and ancillary services of vessels used, net of brokerage fees.
They are detailed as follows ( /000):
Voyage costsVoyage costs are charges directly incurred for individual voyages, i.e., amongst others, fuel costs, port disbursements, canal transit tolls, extraordinary insurance (related to contingent risk factor). It must be noted that, under a time charter, these costs are borne by the charterer.
Breakdown ( /000):
Charter hiresThis item refers to hire fees paid by Premuda to third parties on account of vessel charters, detailed as follows ( /000):
Bare-boat hire fees payable refer to the vessels Four Glens and Four Lochs, owned by the holding company Navigazione Italiana S.p.A., before they were both acquired (declaring a purchase option) by Premuda S.p.A. in December 2006.
€
€
€
IncomeStatement
year 2006
143,0844,278
115,942
1,376(2,033)
142,427
variat.
(9,405)6,938
(20,209)
(46)74
(9,377)
%
- 6.6162.2- 17.4
- 3.3- 3.6- 6.6
Gross charters of which bare boat
DemurragesFeesNet revenues
of which time charter
year 2007
133,67911,21695,733
1,330(1,959)
133,050
year 2006
7,7002,079
249,803
variat.
(238)716
17495
%
- 3.134.470.85.0
FuelPort costsOthersTotal
year 2007
7,4622,795
4110,298
year 2006
2,01627,45429,470
variat.
(2,016)(1,699)(3,715)
%
- 100.0- 6.2
- 12.6
Bare BoatTime chartertotale
year 2007
-25,75525,755
83
Running costsThis item refers to charges incurred for operating the fleet, such as crew, maintenance, certifications, insurance, lubricants and other costs. It must be noted that, under bare-boat charters, these costs are borne by the charterer.
Breakdown ( /000):
Profit on vessel’s disposalThis is the net profit booked through the disposal of the vessels Four Lochs, Four Euro and the contract for four 53,000 dwt handymax newbuildings. The amount reported for the previous year referred to similar profit booked through the sale of the vessels Sider Capri, Sider Ponza, Four Glens, Four Iron and Four Sterling.
Administrative expensesThese are costs incurred by the Group's shore facilities, including administrative personnel remuneration and social security costs, as well as overheads, company officers' remuneration and expenses, other operating charges and other costs not directly attributable to the vessels.
Other income/costsThese are residual amounts of marginal value.
€ year 2006
16,05514,447
6,5531,4465,032
43,533
variat.
(2,782)(3,736)(1,609)
(115)815
(7,427)
%
- 14.5- 25.9- 24.6
- 8.042.6
- 17.1
CrewMaintenanceInsuranceLubricantsOtherTotal
year 2007
16,39310,711
4,9441,3312,727
36,106
year 2006
5,6331,513
261671
8,078
3,183
4,47126
15,758
variat.
2,124427
654
2,611
983
958(10)
4,542
%
37.728.2
2.38.0
32.3
30.9
21.4- 38.528.8
RemunerationSocial security costsEmployee severance indemnityOther chargesSubtotal: Head office personnel
OverheadsSundry company expensesOther charges/(income)Total
year 2007
7,7571,940
267725
10,689
4,166
5,42916
20,300
84
DepreciationDepreciation rates applied and criteria used to determine the depreciation concerning the year can be found under the corresponding Balance Sheet items as well as in the “valuation criteria” section.
Financial itemsThese are detailed as follows ( /000):
Financial revenues are substantially unchanged. On the other hand, financial charges have increased due to the additional indebtedness resulting from new investments and the general increase in interest rates. The exchange differences stay mainly because of the impact of the declining dollar on the receivables denominated in such a currency.
Profit/loss from associated companiesThese indicate the impact of the net equity valuation of the affiliate companies Premuda Chartering Lda.
Tax on profitThis item accounts for taxes relating to the period, detailed as follows ( /000):
Deferred taxes mainly related to the spreading of the taxation of capital gains realized during previous periods. Prepaid taxes were mainly related to non-deductible provisions and directors' fees not paid during the period. Because of the introduction of a new taxation method under the so-called “Tonnage Tax” regime for the Parent Company, the amount of prepaid/deferred taxes to be entered in the financial statements is very low.
€
€
year 2006
824523
1,006709
3,062
(39)(7,445)
(519)(516)
(8,519)
(448)(5,905)
variat.
1,31229
(640)(635)
66
4(2,498)
(140)116
(2,518)
(1,530) (3,982)
%
159.25.5
- 63.6- 89.6
2.2
- 10.333.627.0
- 22.529.6
342.367.4
Interest income: Banks Securities Affiliates Other income Income subtotal
Interest charges: Short-term to banks Loans Fees and expenses Other charges Charge subtotal Exchange differences Total
year 2007
2,136552366
743,128
(35)(9,943)
(659)(400)
(11,037)
(1,977)(9,886)
year 2006
791(105)279965
variat.
(263)105
(279)(437)
%
50.4- 100.0- 100.0- 45.3
CurrentDeferredPrepaidTotal
year 2007
528--
528
85
Net profitThis is the consolidated profit (loss) for the period, gross and net of minority interests.
Premuda Group mainly operates with owned or chartered vessels in 3 business sectors:
- Oil and derivative products (tanker sector);- Transport of bulk dry loads (bulk sector);- Oil off-shore (FPSO) sector.
The following table contains the Profit & Loss Statement for the year 2007, divided by business sector.
The subdivision of the Fleet and of the Net Financial Indebtedness by business sector is also reported.
No geographical subdivision has been detailed, taking into consideration that our vessels operate in global markets and the operation of individual units is not limited to certain areas, with the exception of the FPSO Four Vanguard, which is permanently deployed in Australia under a long-term contract.
Segment information
Net revenuesVoyage costsTime-Charter revenues
Charter hireRunning costsFleet margin
Profit on vessels disposalAdministrative expensesOther income/(costs) DepreciationOperating profit
Financial itemsProfit/loss from associated companiesProfit before tax
Tax on profitNet profit
Minority interestGroup’s net profit
bulk
15,000-
15,000
(3,830)(3,990)7,180
25,089--
(3,036)29,233
FPSO
34,109(232)
33,877
-(15,622)18,255
-(5,313)
-(7,008)5,934
individed
---
---
-(14,987)
571(255)
(14,671)
Total
133,050(10,298)122,752
(25,755)(36,106)60,891
28,583(20,300)
571(23,809)45,936
(9,886)
(291)35,759
(528)35,231
2,11333,118
tanker
83,941(10,066)73,875
(21,925)(16,494)35,456
3,494--
(13,510)25,440
Segmentinformation
bulk
24,637(9,880)
individed
-48,036
Total
273,105(107,204)
FleetNet Financial Indebteness
tanker
188,394(97,860)
FPSO
60,074(47,500)
86
Consolidated Cash Flow Statement
Financialposition
C
Financial Position
onsolidated Cash Flow Statement
The Cash-Flow Statement has been drawn up following the indirect method.
The operating activity generated a liquidity of €/Mln 38.00, inclusive of a €/Mln 2.50 reduction in working capital.
The investment activity generated cash resources of €/Mln 11.10 due to the difference between new investments and disposals (after considering the change in the consolidation area).
The financial activity drew cash resources in the amount of €/Mln 51.30, mainly due to the repayment dynamic of all medium/long-term loans, the distribution of dividends and the changes in minority interests, net of newly-contracted loans.
The financial position, already detailed and illustrated in its components, is summarized (in Euro/000) in the following table; as at end 2007 cumulative net borrowing amounted to €/Mln 107.20 (€/Mln 129.40 at the end of 2006) with liquid assets amounting to €/Mln 43.80.
at 31.12.2007
163 43,592 43,755
-(28,088)
- (28,088)
15,667
20,346 5,453 25,799
(148,670)(148,670)
(122,871)
(107,204)
at 31.12.2006
51 41,057 41,108
-(23,334)
- (23,334)
17,774
- - -
(147,173)(147,173)
(147,173)
(129,399)
Financial Position
CashOther liquid assetsTotal liquid assets
Short-term bank debtShort-term portion of long-term debtOther short-term debtTotal short-term debt
Short-term net debt
Long-term financial investmentsLoan granted to associated companiesTotal long-term financial assets
Long-term bank debtLong-term debt
Long-term net debt
Total net borrowing
87
Annex 1:Reconciliation between Net Equity and Net Profit for Premuda Spa and Net Equity and Net Profit on consolidated basis (Euro/000)
amounts as at 31 December 2007as per Premuda Spa Balance Sheet
Adjustments for consolidation purposes:
- Equity and Profit of controlled and associated companies exceeding the book value of the related participations
- effect generated by the cancellation of inter-company transactions (net of tax)
Group's interest
Minority interests
Total consolidated
Net Equity
118,833
94,887
(6,282)
207,438
70
207,508
NetProfit
3,004
29,413
701
33,118
4
33,122
88
Annex 2:Transactions with related parties (Euro/000)
Above amounts derive from the following transactions, all of which concern normal business activity, arranged at ordinary market terms and conditions, i.e. conditions that would apply between unrelated parties:
- insurance cover issued by Assicurazioni Generali S.p.A.; - sale of a participation (in Sider Navi S.p.A.) to Navigazione Italiana S.p.A.; - providing administrative services, granting loans and issuing guarantees to associated companies. The summarized financial statements highlighting transactions with related parties are reported in the following pages.
Commercial activity with related parties(parts of the Shareholders’ agreement governing Premuda SpA)
Assicurazioni Generali SpANavigazione Italiana SpA
Financial activity with associated parties
Sider Navi SpA Sider Navegaçao Lda
Commercial activity with associated parties
Sider Navegaçao Lda
Income
-395
54
13
Cost
1,940-
--
-
Liabilities
489-
--
-
Receivables
--
--
5
89
Summary Consolidated Balance Sheet as at 31 december 2007 with separate evidence of transactions involving related parties (Euro/000)
at 31.12.2007
321,624
273,105
46,863
57
25,884
347,565
27,173
43,473
70,646
418,211
-
-
-
-
-
-
5
-
5
5
of which withrelated parties
at 31.12.2007
of which withrelated parties
-
-
-
-
-
-
-
-
489
489
489
489
70,418
103,902
33,118
207,438
70
148,670
1,553
150,223
28,088
32,392
60,480
210,703
418,211
ASSETS
Fixed Assets
Tangible fixed assets
of which: Fleet
of which: Fleet under construction
Participations
Other fixed assets
Total fixed assets
Current Assets
Inventories, credits and other current assets
Cash and cash equivalents
Total current assets
TOTAL ASSETS
LIABILITIES AND
SHAREHOLDERS’ EQUITY
Shareholders’ equity
Share capital
Reserved and retained profit
Profit of the year
Group Shareholders’ equity
Minority interests
Long-term liabilities
Bank loan
Provisions and other long-term liabilities
Total long-term liabilities
Current liabilities
Short-term bank debt
Other current liabilities
Total current liabilities
Total liabilities
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY
90
Summary Consolidated Income Statement as at 31 december 2007 with separate evidence of transactions involving related parties (Euro/000)
Charter hire and running costs
Fleet margin
Profit on vessel sale
Administrative expenses and other income/costs
Depreciation
Operating profit
Financial items
Profit. / loss from associated companies
Profit before tax
Tax on profit
Minority interest
Group’s net profit
Net revenues
Voyage costs
Time-charter revenues
of which withrelated parties
-
-
-
(1,940)
(1,940)
-
408
-
(1,532)
9
-
(1,523)
-
-
(1,523)
year 2007
133,050
(10,298)
122,752
(61,861)
60,891
28,583
(19,729)
(23,809)
45,936
(9,886)
(291)
35,759
(528)
2,113
33,118
91
Annex 3:Derivatives instruments (Euro/000)
Interest Rate Swap
Interest Rate Swap in/out
Interest Rate Swap in/out
Expiring date
Fair
Value
Notionalamount
at 31.12.07
Type
31.12.2008
14.01.2013
14.01.2013
- 27
+ 133
+ 176
+ 282
2,840
9,937
7,328
20,105
All above derivative transactions have been arranged for hedging purposes and booked at their fair value at the end of the year. The changes in their fair value are, however, charged to Profit & Loss due to non-compliance with certain formal requirements, precondition to apply the hedge accounting system according to IAS 39.
The table does not include three cross-currency swap transactions covering as many long-term loans, because these are recognized attheir historical exchange rates. In any case, a separate representation of such transactions would not have any effect on either profit & loss or net equity.
Premuda Annual Report 2007design & layout: Aldo Scorzoni photos: pages 4, 8, 10 Premuda’s archive