Board of Directors

Report 2013

1. Highlights

2013 was a year characterised by growth for Torvald Klaveness. Three container vessels and two specialised selfunloader vessels were delivered from yards, and a further two container vessels, two kamsarmax dry bulk vessels and two specialised cabu vessels were ordered.

Klaveness posted an EBITDA of USD 60 million in 2013 (USD 72 million in 2012). The company had a profit before tax (EBT) of USD 31 million (loss USD 10 million in 2012). Cash flow from operations was USD 26 million. The balance sheet remains solid with a book equity including minority interest of USD 337 million at year end corresponding to an equity ratio of 43%.

The market for Klaveness’ specialised vessels continued to be good in 2013. Several contracts were renewed during the year, securing a continuation of volumes carried in the past. The market for Klaveness’ container vessels was still weak in 2013. Still, all of the container vessels were fully employed through the year and all contracts that expired were renewed. In the first half of 2013, Klaveness swapped one of its new builds for another container vessel at Jiangsu Yangzijiang Shipyard Co., Ltd. in China, and purchased two additional 2,500 TEU container vessels from the same yard. These three vessels will be delivered in the first quarter of 2014.

In the chartering and trading activities the number of vessels under commercial management decreased somewhat during the year. At the same time, improved rates and the market positioning in the dry bulk market contributed to significant growth in the forward values of the portfolio under management.

There have been no major incidents or disruptions to the operations of the Klaveness Ship Holding (KSH) entities in 2013.

Klaveness Container Holding AS and Klaveness Container AS were during the year established as a subsidiary group under KSH and Klaveness Bulk Holding AS and Klaveness Bulk AS were established as another subsidiary group under KSH. Following the restructuring all ship owning activities and vessels of Torvald Klaveness are now gathered under the corporate umbrella of KSH.

2. Newbuilding program

In the first and second quarter of 2013, the selfunloader newbuilding MV Balto and the container vessels MV Balao and MV Ballenita were delivered from the yards. The last selfunloader newbuilding MV Balchen and the third container newbuilding MV Balsa were delivered in the third quarter. Klaveness also entered into an agreement with Jiangsu New Yangzi Shipbuilding Co. Ltd. to swap the fourth container newbuilding for another newbuilding, which resulted in both a price reduction and an earlier delivery of the vessel. All container vessels were delivered directly into short-term employment at market rates which acknowledged the vessels’ improved fuel economy.

Klaveness, through Klaveness Container AS, entered into an agreement with Jiangsu New Yangzi Shipbuilding Co. Ltd. in China to purchase two 2,500 TEU container vessels currently under construction. The vessels are expected to be delivered in the first quarter of 2014. In September, Klaveness entered into a contract with the same yard for an order of two 82,000 DWT Kamsarmax dry bulk vessels including options for more vessels. The vessels are estimated to be delivered in the second half of 2015. Klaveness also entered into cooperation with Tufton Oceanic for a new building program for vessels of this type, and sold several new build contracts to a Tufton Oceanic managed account.

Towards the end of the year, Klaveness negotiated a contract with Zhejiang OuHua Shipbuilding Co. Ltd. in China for an order of two 80,500 DWT combination carriers. The order was finally concluded in January 2014. The vessels are estimated to be delivered in the third and fourth quarter of 2016 and will be part of the cabu fleet of vessels. The contract includes options for further vessels, declarable in 2014.

3. The markets

Global economic activity and world trade picked up in the second half of 2013 and global growth ended at 3.0% compared to 3.1% in 2012. The worldwide volume of exports and imports climbed 4.1% year on year as of October 2013. There have been several signs of recovery, especially for the U.S. economy, but also for the euro area which turned from recession to growth in 2013. Although the euro area still struggles on many fronts, domestic demand appears to be improving and some countries are showing sign of progress. The Chinese economy rebounded strongly in the second half of the year led by acceleration in investments and growth, and ended with a growth of 7.7%, the same as in 2012.

The dry bulk market strengthened considerably in the second half of 2013 with both higher freight rates and improving vessel values. In the first and second quarter of 2013 the Baltic Dry Index (BDI) fell and ended 13% down compared to 2012. In the second half of the year, the index rose significantly resulting in a 71% higher freight market in the second half of 2013 compared to 2012. It was a very volatile year with spot capesize rates ranging from USD 4.200/day to USD 42.200/day. The 2013 average of the 4 T/C Routes for the Baltic Panamax Index and the 6 T/C Routes for Baltic Supramax Index ended at 9.472 and 10.275 $/day, respectively. The newbuilding price index increased by 8% in 2013, still 47% lower than the 2008 peak, and the 5-year old second-hand vessel values rose by 30%.

The container market for feeder vessels stayed relatively flat in 2013 with only minor improvements in freight rates and vessel values. The average time charter rate for sub-panamax 2.500 TEU standard type was USD 7.592/day in 2013 compared to USD 6.879/day in 2012. A total of 8 sub-panamax container vessels were delivered in 2013 and 20 were scrapped, reducing the fleet from 673 to 661 vessels during the year. 23 vessels were idle at year end.

4. Health, safety and environment

The safety of the seafarers and the maritime operations is priority number one for Torvald Klaveness’ shipping operations. There were 24 minor or medium severe injuries reported in 2013. This corresponds to approximately 1.6 injuries per ship year, up from 1.4 in 2012.

There have been no hijackings of commercial vessels in the Gulf of Aden or the Indian Ocean in 2013. This is mainly caused by the presence of military forces, use of armed guards on board, and owners more actively using best management practices. There is still piracy activity, but in 2013 it was more concentrated in the Gulf of Aden and the western part of the Indian Ocean. Several attempts on hijacking and suspicious approaches have been reported. An increased piracy activity has also been observed in Western Africa, and hijacking of vessels and/or personnel is frequently reported. Use of armed guards in this area is complicated by local rules and regulations. Hence, the vessels are today depending on own countermeasures. Most piracy incidents today are reported around Indonesia, but this is mainly a threat to anchored vessels.

The ISO 9001/14001 and OHSAS 18001 certification process of the technical management company Klaveness Ship Management AS was initiated in 2011. Klaveness Ship Management AS was certified according to all relevant standards in 2013.

Klaveness has established a centre of excellence focusing on improving the fleets’ energy efficiency by continuously monitoring the vessels’ performance and following up energy efficiency activities in the company. In 2013, the fleets’ energy efficiency has on average improved by 4.3% compared to the baseline in 2012. This is a result of several initiatives including voyage planning and execution, technical modifications, and increased awareness in all parts of the organisation. Klaveness is dedicated to maintaining and further improving the fleets’ energy efficiency in 2014. Focus on measures to reduce the vessels energy consumption has also played an important role for Klaveness in the newbuilding projects.

5. Financial results

5.1 Results

Gross revenues from operation of vessels ended at USD 463 million (USD 554 million in 2012). The revenues were somewhat impacted by continued weak dry bulk and container markets. Other revenues were USD 14 million (USD 17 million in 2012).

The company had an operating profit of USD 36 million (operating loss of USD 4 million in 2012). No impairments were carried out (USD 46 million in 2012). However, a reversal of USD 7.5 million was conducted related to a swap of a container newbuilding. Other extraordinary items affecting operating profit where a positive interest rate swap development of USD 3 million, a gain on sale of newbuilding contracts of USD 3 million and restructuring charges of USD 2 million. The net result from financial items was a loss of USD 5 million (loss of USD 6 million in 2012). Profit before tax was USD 31 million (loss of USD 10 million in 2012).

At year-end 2013, the consolidated equity including minority interests was USD 337 million (USD 310 million in 2012), corresponding to a book equity ratio of 43% (50% in 2012). Book equity excluding minority interests was USD 316 million. Interest-bearing debt at year-end was USD 299 million and cash and bank deposits were USD 149 million. During 2013, Klaveness had a positive cash flow from operating activities of USD 26 million (USD 53 million in 2012). New investments in fixed assets amounted to USD 146 million, consisting mainly of yard instalments on vessels under construction.

5.2 Financing and going concern

In the second quarter of 2013, Klaveness issued a NOK 300 million senior unsecured bond. Attractive timing for prudent fleet expansion at historically low prices combined with the strategy to utilise its strong balance sheet were decisive factors. The issuance was well received in the market, resulting in favourable terms. The bond was listed on the Nordic ABM exchange. The bond issue strengthened the company’s liquidity and financial capacity.

During 2013 the company secured bank financing for the two container newbuildings Banak and Bardu. The existing container vessel loans were refinanced in Klaveness Container AS in connection with the restructuring of the group companies. The kamsarmax and cabu newbuildings which were ordered in 2013/14 with delivery in 2015 and 2016 are likely to be financed well before delivery.

The accounts are reported under the assumption of a going concern and the Board considers the financial position of Torvald Klaveness at year-end to be solid.

There have been no major transactions or events subsequent to the closing date that would have a negative impact on the evaluation of the financial position of Torvald Klaveness. A new NOK 400 million bond was issued in the first quarter of 2014, strengthening the liquidity further.

6. Risks and risk management

The company’s business operations are exposed to risks in many areas, and the Board has a high focus on risk analysis and mitigation.

Market risks in the shipping markets relate primarily to changes in the daily rates and vessel values in relevant shipping markets as well as counterparty risk. These risks are managed and monitored according to mandates given by the Board. The company has a portfolio of currency futures maturing in 2014 and have entered into forward starting interest rate swaps, converting floating interest payments to fixed rate, as a risk mitigating activity. At year-end 2013, the fixed debt portion of total debt was close to 70%.

Operational risks in the shipping and trading activities are managed through quality assurance procedures and systematic training of seafarers and land based employees. To ensure compliance with ethical guidelines, all employees have been through a tailor-made in-house dilemma training program. Quarterly company-wide risk reviews ensure attention to risk management. The learning from the Bareli accident in 2012 led to the implementation of measures to strengthen the in-house induction program for newly recruited seafarers and to establish clearer guidelines for passage planning and through this further develop the strong safety culture.

Vessels operated by Torvald Klaveness sail in waters that are exposed to piracy attacks. All vessels sailing through exposed areas take necessary steps to mitigate the threat of such attacks.

At year end Klaveness had seven vessels under construction and is therefore exposed to the risk of delay or failure of the yards to complete the vessels. The newbuilding program reduces to four vessels following the delivery of three container vessels in the first quarter of 2014, and is split between two yards. These yards have been chosen for their track record and financial standing and the planning process is well underway. Klaveness will have dedicated personnel on site supervising all building processes, and tier one Chinese banks have provided refund guarantees.

There were no major unforeseen events of a financial nature during 2013. With a large part of the financing in place and a steady cash flow from the specialised vessels the liquidity risk of the company is deemed acceptable and current cash and projected operating cash flow is considered sufficient to cover the company’s current liabilities.

Investigations are still ongoing by Norwegian authorities for possible irregular commission payments to a broker in the late 1990’s and early 2000’s related to renewals of a freight contract entered into in 1995. There is still no conclusion in this matter. At the same time Klaveness and the customer in question have agreed to settle their disputes and entered into a new long term commercial freight agreement. 

7. Business areas

7.1 Dry bulk

Torvald Klaveness is involved in the dry bulk market through its chartering and trading activities and the pool operations. The portfolio consists of contracts of affreightment, time charters and freight derivative contracts. Results from the chartering and trading activities were somewhat below expectations but still satisfactory taking into account the high degree of volatility in the markets. Increased volatility combined with improved positioning enabled the company to grow the trading forward values substantially during the year.

The company operates two spot pools, Baumarine for panamax and post-panamax vessels and Bulkhandling for supra- and handymax vessels. The number of vessels in the pools decreased during the year as a consequence of ships being sold, redelivered and some owners taking fixed income coverage.  At year-end, Baumarine operated 29 vessels and Bulkhandling 22 vessels – a net reduction of 24 vessels from the beginning of the year. However, this was to a large extent compensated by an increase in the number of ships chartered in by Klaveness Chartering. Corrective measures were taken during the year to improve earnings and realise the value creation in the pool services, visibly leading to an improved performance in the second half of the year. The Baumarine panamax pool delivered USD 200/day above the comparable 4 TC Baltic index while the Bulkhandling Supramax pool delivered slightly below the relevant benchmark.

7.2 Combination carriers

The cabu vessels are combination vessels that transport both dry cargo and caustic soda in the Far East, the Middle East and Australia. The cabu pool consists of six cabu vessels and one LR tanker. One external investor holds 50% in two vessels and 19% in one vessel.  The pool result for 2013 remained stable at a satisfactory level. The vessels are largely employed on long term contracts of affreightment with customers in the Australian alumina industry and this accounted for about 63% of the available vessel days, while spot or market based cargoes, which are mainly north-bound from Australia to the Far East or Middle East accounted for 37% of the available vessel days in 2013.

Towards the end of the year Klaveness negotiated a contract with Zhejiang OuHua Shipbuilding Co. Ltd. in China for an order of two 80,500 DWT combination carriers, which was finally concluded at the beginning of 2014. The vessels are estimated to be delivered in the third and fourth quarter of 2016 and will be part of the cabu fleet of vessels. The contract includes options for further vessels, declarable in 2014.

Several contracts were renewed in 2013, securing continued good working relationships with key customers and contributing positively to the cabu fleet’s performance going forward

Klaveness reached a global settlement with Alba (Aluminium Bahrain) where both parties waived their financial claims towards each other in January 2014. The parties re-established their business relations by entering into a new long-term freight contract.

7.3 Shipowning & projects

The business area Ship Owning & Projects manages the company’s ship investments other than the combination carriers, in addition to facilitating new projects.

During 2013, two new selfunloaders were delivered to Klaveness from Chengxi Shipyard in China, increasing the fleet to five vessels. The selfunloader vessels are employed in the CSL International Pool. The pool has a diversified contract portfolio and the vessels are mainly employed in North America and the Caribbean. Results were in line with expectations for the year, albeit somewhat lower than the 2012 results.

In September 2013, it was decided to seek a stock exchange listing of a potential newbuilding program under the name Klaveness Bulk ASA. This effort was however terminated as a result of changed market conditions. Instead, Klaveness entered into cooperation with the hedge fund Tufton Oceanic for parts of its dry bulk investments.

Klaveness also took delivery of three new 2,500 TEU container vessels from Yangzijiang Shipyard in China. Another three are due for delivery from the same yard in the first quarter of 2014. Adding the two existing vessels brings the container fleet to 8 vessels, ranging in size from 1,700 TEU to 3,100 TEU. The vessels were chartered out to liner companies for periods of less than 12 months, and all delivered vessels have been fully employed throughout the year. While the new vessels have been earning rates above the general market due to their fuel efficiency, rates have in general been quite weak.

In June 2013, Klaveness sold its interest in the German cement shipping company Baltrader.

8. Organisation

At year end, Klaveness had 86 employees in Oslo, 26 employees in Singapore and 4 employees in Shanghai. Klaveness Maritime Agency, the manning office in Manila, had 30 employees. In Oslo 31% were female, while at the offices in Asia 47% were female. Absence due to sick leave was satisfactory, averaging 1.7% in 2013 compared to 1.8 % in 2012. Working conditions for employees are considered to be good.

In 2013 it was decided to transfer accounting services to the Manila office, leading to a downsizing in the Oslo office and an increase in staff in Manila. The transfer has led to both cost savings and a more scalable set-up.

800 seafarers are hired through manning offices in Manila and Constanta. In addition, some South African crew has been engaged. The retention rate for 2013 was 96%, indicating that Torvald Klaveness is able to attract and retain qualified seafarers. Torvald Klaveness endeavours to offer all employees, regardless of gender, religion, beliefs or nationality, equal and attractive career opportunities in the Company.

The Board of Directors expresses its appreciation of the work done by all the employees during 2013.

9. Outlook

Global activity and world trade picked up in the second half of 2013 and activity is expected to improve further in 2014. According to the IMF, global growth is expected to be slightly higher in 2014, at around 3.7%, compared to 3.1% in 2013. The U.S. economy was performing well in the second half of 2013 driven by improved consumer spending, business investments and net exports. The growth in the U.S. is by IMF expected to be 2.8% in 2014 compared to 1.9% in 2013. The activity in the euro area also improved in 2013 and turned from recession to recovery. A modest pickup is generally expected in 2014 mainly driven by exports but high public and private debt will reduce growth in domestic demand. Growth in the euro area is by IMF expected to strengthen to 1% in 2014 compared to -0.4% in 2013. In China IMF expects growth to moderate slightly to around 7.5% in 2014.

Deliveries of new dry bulk vessels slowed in 2013 and will slow further in 2014. The fleet utilisation should improve further in 2014 as large capacity expansions in iron ore and coal supply coupled with improved macro conditions should increase sea freight demand more than supply.  However, the potential for speed increases in the fleet will make effective supply growth elastic to demand if earnings improve to a level where eco speed is no longer beneficial. Improvement in earnings will likely decelerate once this threshold is passed and the growth in earnings is not likely to accelerate before most of the global fleet is running at full speed.

In the container market the number of newbuildings in the sub-panamax segments for delivery 2014 and 2015 is very limited and with continued high scrapping in this segment and no possibility to order for such early delivery the fleet is expected to shrink in the coming years. Global demand growth is likely to slightly outpace global container supply in 2014. However, the post-panamax and panamax segment is still weighed down by structural oversupply, and therefore the speed and the degree of cascading will stand out as important factors for any possible recovery in freight rates on the individual container tonnage segments going forward.

Klaveness expects increased volumes in contracts of affreightment and vessels under management in 2014. In addition three vessels under construction will be delivered in 2014 and will result in higher activity related to operation of owned vessels.

10. The parent company

The result for the parent company, Rederiaksjeselskapet Torvald Klaveness, was a profit after tax of USD 4 million for 2013. The proposed transfer of the profit for the parent company is shown below:

Dividend USD 3 million
Transfer to other equity USD 1 million



Oslo, March 21, 2014





Trond Harald Klaveness





Christian Andersen

Board member




Baard Haugen

Board member




Christian Rynning-Tønnesen

Board member


Lasse Kristoffersen

Chief Executive Officer