Despite lower business activity in terms of ship days, revenues in the bulk segment increased by USD 234.5 million to USD 573.6 million in 2004. Strong overall demand had a positive effect on bulk spot rates and JL’s fleet strategy made it possible to take almost full advantage of the development, primarily in the Handysize segment.

Despite strong trading conditions, revenues from reefer activities fell by 6% to USD 439.0 million, mainly due to the partial sale of LauritzenCool Logistics and fewer vessels in the Leonina pool.

Revenues from gas tank activities were USD 92.7 million, up USD 15.6 million as a result of improved trading conditions and a larger fleet.

JL’s product tanker business which became operational in 2004, added USD 1.3 million to group revenues.

Other operating income amounted to USD 14.1 million, compared to last year’s figure of USD 11.4 million, which included gains of USD 3.5 million from land sales.

Costs
Hiring chartered vessels and pool distribution amounted to USD 405.9 million, up USD 40.6 million from the USD 365.2 million reported in 2003, due mainly to increased reefer and bulk time charter costs and bulk pool distribution.

Operating costs of vessels were USD 32.7 million in 2004, slightly up compared with 2003. An increase in JL’s owned bulk fleet was offset by a decrease in the owned reefer fleet and cost savings in the gas carrier fleet.

Other operating costs, including bunkers, port expenditures and other voyage-related costs amounted to USD 376.0 million in 2004 compared to USD 369.9 million in 2003.

Total staff and other administration costs increased by USD 9.2 million to USD 82.3 million, with most of the increase due to higher DKK and SEK exchange rates, increased provisions regarding bonuses, restructuring costs in LauritzenCool and the addition of a new business unit, Lauritzen Tankers.

Depreciation and sale of vessels
Three bulk carriers and two gas carriers were sold in 2004 generating a net profit of USD 22.6 million. In 2003 three reefer vessels were sold and one gas carrier was sold for scrap for a total net profit of USD 4.1 million.

Depreciation amounted to USD 31.5 million, up from USD 25.2 million in 2003, due mostly to an increase in own bulk and gas tank fleets.


Financial items

Earnings by associated companies totalled USD 11.6 million compared to USD 3.3 million in 2003. Results were mainly due to vessels owned in joint ventures, primarily Handyventure (co-owned with Island View Shipping) and Maryse Shipping (co-owned with Exmar).

Net financial costs fell by 69% to USD (2.3) million due to improved cash generation and repayment of loans.

Tax and results
Earnings before tax were USD 240.8 million, up from USD 46.4 million in 2003.

Tax charge amounted to USD (40.1) million compared to tax income of USD 30.5 million in 2003, which was mainly due to revaluation of deferred tax assets taken as income.

Net profit in 2004 was USD 200.6 million, up from the USD 76.2 million reported in 2003.

* Figures for 2001 and earlier have been translated from DKK to USD. Figures for 2000 have not been adjusted in line with current accounting policies.

Balance sheet
Total assets were up USD 109.9 on 2003 at USD 642.7 million.

Goodwill amounted to USD 13.8 million at year-end 2004 compared to USD 14.3 million at year-end 2003. Goodwill relates to the acquisition of Cool Carriers AB on 1 January 2001 and to the acquisition of Quantum Tankers A/S on 6 February 2004.

Vessels, including financially leased vessels, amounted to USD 332.0 million compared to USD 266.0 million in 2003. The increase is relating to investment in the bulk, gas and product tanker fleet.

All vessels are recognised at values below or equal to both utility values and broker valuations. Broker valuations totalled USD 501 million.

Book value of vessels owned in joint ventures amounted to USD 48 million, whereas the broker valuation of these vessels totalled USD 93 million.

Current assets increased by 14% to USD 250.3 million, mainly due to an increase in liquid funds. The increase was partly offset by a decrease in deferred tax assets and a decrease in receivables.

2004 saw an increase in shareholders equity, rising USD 199.3 million to USD 437.7 million. Return on equity was 59% compared to 39% in 2003.

At the end of 2004, total debt amounted to USD 198.1 million, down USD 89.2 million on last year. Long-term debt, including next year’s repayments, fell by USD 95.6 million to USD 101.2. At year-end, loans to value (broker valuations) were 20%.



Cash flow
Liquid funds and securities amounted to USD 160 million compared to USD 91 million at year-end 2003.



Cash flow from operations totalled USD 241 million, up from USD 68 million in 2003.

In 2004, cash flow from investment activities increased to USD (77) million from USD (52) million in 2003, mainly as a result of investment in bulk carriers, gas carriers and a product tanker. This was, however, partly offset by proceeds from the sale of vessels.

Cash flow from financing activities amounted to USD (96) million in 2004, down from USD 7 million in 2003 as a result of loan repayments.

Prospects for 2005
The upswing in the world economy and in the shipping markets during 2004 is expected to continue in 2005, although at a lower pace.

Economic activity grew faster than expected by most observers during 2004. Strong economic growth in North America and Asia had a positive impact on trades.

International shipping has benefited from the vitality of international trade. In addition, infrastructure (rail, ports, etc.) was insufficient to keep pace with the surge in demand leading to congestion in various parts of the world.

Capacity utilization approached 100%, resulting in substantial rate increases. This phenomenon has continued into 2005, and may not disappear in the short term within the segments in which JL operates.

Despite gradual tightening of monetary policies particularly, economic activity ended on a very high note in 2004, and is projected to continue into 2005, although at a slightly lower pace.

A modest decline in the rate of growth in international trade is foreseen for 2005, as the growth of output recedes and high transport costs impact upon trade flows as the year evolves. More tightening of monetary policies is on the cards, which suggests that the rate of growth will tend to decline during the year. It is envisaged that North America and Asia will see their growth rates curbed, with Europe trailing along at fairly modest growth rates.

Commodity prices have increased considerably during the past four to five quarters, and in combination with rising interest rates, this may lead to increased inflation in dollar related economies.

Demand for dollar denominated perishables faces good prospects in Europe and Japan and this should result in increased trading activities in the reefer segment.

High level of capacity utilization at refineries in many areas combined with difficulties in sourcing the right grades of products may develop again in 2005, which will have a beneficial impact on demand for product tankers.

These developments, together with very strong trends in the petrochemical industry, provide a solid foundation for growth for gas carriers in 2005.

2005 looks like being yet another year with good prospects for steel related commodities. In addition, supply driven sectors such as agricultural products also face interesting prospects, which will have a positive impact on demand for dry bulk carriers.

As the influx of new vessels is rising and decisions to scrap continue to be postponed, the rise in merchant fleets is likely to surpass demand growth. This may lead to deterioration in the market balance in the second half of 2005 as a result.

Market scenarios support a positive development in JL’s business areas. Although bulk and product tanker rates are expected to decline, they are still at a far better level than seen from an historical perspective. On the other hand, JL’s reefer and gas activities are expected to obtain higher rates than in 2004, although not to a level sufficient to offset the effect of lower bulk rates.

The sale and purchase activities may affect the earnings. The transactions already carried out in the first part of 2005 have had a very positive effect on the result also compared to 2004.

JL will adopt International Financial Reporting Standards (IFRS) during 2005. Changes in exchange rates and oil prices may affect earnings.

Overall, the result before tax is expected to be very satisfactory, however slightly below earnings in 2004.
 

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