Lauritzen Reefers
President Torben Janholt
In 2005, EBITDA was USD 24.5m compared to USD 31.0m in 2004. The decline in earnings was mainly due to the sale of 50% of LauritzenCool AB to NYK Reefers Ltd.
Ordinary result before tax was USD 36.0m, up from USD 14.2m in 2004, and included gains from the sale of vessels and other assets of USD 20.1m compared to none in 2004. The result is considered satisfactory.
Main events
As of 1 January 2005, 50% of JL’s commercial reefer operating company, LauritzenCool AB, was sold to NYK Reefers Ltd., and the company was renamed NYKLauritzenCool AB. The new joint company subsequently acquired NYK Reefers’ trading activities and its 50% shareholding in LauritzenCool Logistics AB, thus consolidating all the reefer operations of JL and NYK Reefers in NYKLauritzenCool with effect from 1 January 2005.
NYKLauritzenCool is a JL associated company, and JL’s revenues solely derive from earnings from its owned, bareboat chartered and long-term time chartered reefer vessels commercially operated by NYKLauritzenCool. JL’s share of the net result in NYKLauritzenCool is included in JL’s result from associated companies.
With the formation of NYKLauritzenCool, JL agreed with its former partners, Eastwind Maritime and Armada Reefers, to withdraw from the ReeferShip partnership and Arctic Reefers Ltd was sold to Eastwind.
At year-end 2005, JL’s reefer activities comprised Lauritzen Reefers A/S (ship-owning) and the 50% shareholding in NYKLauritzenCool AB (operation).
Lauritzen Reefers
Lauritzen Reefers controls a fleet of 20 owned, bareboat chartered and long-term time chartered reefer vessels, all commercially operated by NYKLauritzenCool AB.
During the year, three medium sized reefer vessels were sold and taken on bareboat charter.
One large reefer vessel was also sold and taken on bareboat charter. At the same time three financially leased sister vessels were subleased. All four vessels remain registered in DIS (Danish International Register of Shipping) with technical management by Lauritzen Fleet Management and commercial operation by NYKLauritzenCool.
NYKLauritzenCool
NYKLauritzenCool is one of the world's largest operators of specialized reefer vessels. NYKLaurtizenCool employs around 70 specialized reefer vessels ranging from 300,000-760,000 ft3and with additional capacity for reefer containers on deck, equivalent to about 20% of the under deck capacity. All vessels are employed in the Leonina system to which JL and NYK Reefers each contribute about 35% of the total fleet capacity.
LauritzenCool Logistics
LauritzenCool Logistics, the specialized reefer logistics service arm of NYKLauritzenCool, further expanded its integrated logistics services during 2005. The company now operates from 25 locations around the world.
Market trends
Spot market rates lived up to expectations during the first half of 2005. During the second half of the year the market softened, although the first half of the year was sufficiently strong to make the average spot rate for the full year higher than in 2004, cf. Figure 10. p. 20.
Despite the softer market during the autumn, contracts for 2006 were fixed with 5-15% increases, confirming the on-going demand for large modern reefer vessels.
Demand for specialized reefer vessels
During the peak season of 2005 demand was higher for specialized reefers than in 2004, as availability of fresh produce for exports was ample.
However, during the summer cold storage facilities in Europe and Russia were unable to unload imported fruits sufficiently rapidly to “pave the seaway” for constant flows of perishables, partly due to oversupply of
European produced fruit. Tropical storms damaged Ca-ribbean and Central American banana production, and hurricane Katrina badly affected poultry exports from the U.S. In addition, certain destinations temporarily banned beef exports from Brazil.
Furthermore, opportunities to carry dry cargo in particular during the off-season were reduced compared to 2004.
Tonnage supply
At year-end 2005, the global fleet of specialized reefer vessels in the segment above 250,000 ft3amounted to about 580 units with total capacity of approximately 250m ft3. No vessels were delivered in 2005 compared to two in 2004.
The stronger market led to a decline in demolition, which dropped to five units with a capacity of 2m ft3compared to 20 units with a capacity of 7.8m ft3in 2004.
During 2005, a few newbuilding orders were placed and the current order book amounts to nine vessels with a capacity of 5.2m ft3.
Events after year-end
Early March, a modern reefer vessel was sold with delivery in June.
Outlook 2006
The reefer market has become increasingly volatile due to the tight supply of modern reefer vessels.
Furthermore, the influx of new container vessels with substantial reefer plug capacity increases competition in the reefer market.
This could lead to increased demolition of specialised reefer vessels in 2006 compared to 2005, bringing a further decline in the global fleet as a result.
The reefer activities are expected to generate a satisfactory result; however gains from sale of vessels are expected to be at a much lower level than in 2005. Result before tax is estimated to be about USD 15-18m.
Figure 10: Spot market freight rates for reefer vessels
Cents/ft3
Source: NYKLauritzenCool base data from Orion, E.Russ and ORSL