Broström is one of the leading logistics companies for the oil and chemical industry, focusing on industrial product and chemical tanker shipping and marine services. Broström is based worldwide, with head offices in Göteborg, Sweden.
Press Release INTERIM REPORT 1 JANUARY - 30 SEPTEMBER 2007 Broström AB (publ) – Reg. no. 556005-1467
•
Weak spot market during the third quarter -
•
Profit after net financial items for Q3 SEK 41 m (163). This includes SEK 12 m (15) of capital gains related to sales of vessels and operations. -
•
Cash flow per share was SEK 10.82 (9.36). Disposable liquidity amounted to SEK 1,156 m (1,110 on 31 December 2006).
Changes in the fleet -
-
•
Net sales were SEK 2,660 m (2,584, of which 96 pertains to sold subsidiaries). Profit after tax was SEK 431 m (465). Earnings per share were SEK 6.55 (7.07). Return on capital employed was 12.1% (13.2).
Cash flow and disposable liquidity for the first nine months -
•
Net sales were SEK 819 m (850). Profit after tax was SEK 45 m (148). Earnings per share were SEK 0.69 (2.26).
Profit after net financial items for the first nine months SEK 460 m (538). This includes SEK 120 m (113) of capital gains related to sales of vessels and operations and dissolution of negative goodwill. -
•
European and Atlantic traffic was adversely affected by a very weak spot market resulting from lower available volumes in the market primarily during the latter part of the third quarter. Asian traffic was also affected by the weaker spot market, however, capacity utilisation of the fleet was high and enabled continued stable and favourable development during the third quarter. Large number of dockings and vessel upgrades carried out during the third quarter.
The BRO GOLIATH (formerly the MARELD) and the BRO GOTHIA (formerly the MARISP), each of 7,100 dwt, were delivered at the end of August and beginning of September, respectively. Broström has a 50% stake in each of these vessels. A call option was declared on the HUNTESTERN (37,000 dwt), with delivery expected in December 2007. The GAN-OCEAN (17,000 dwt) was delivered at the end of July 2007. The vessel is the first in a series of six vessels included in the partnership with Dünya.
Outlook The spot market so far in the fourth quarter of 2007 in Broström’s market segment is at a weak level. Investments and acquisitions carried out in 2006 and 2007 are having an increasingly positive impact on earnings and have also contributed to a further strengthening of Broström's strategic position ahead of 2008 and onwards. The assessment of the trend in the spot market is that it will continue to be characterised by major volatility from period to period. The underlying longer trend for Broström's market segment is judged to be positive.
1
9 months SEK m
Third quarter
Full year
2007
2006
2007
2006
2006
2,660.4
2,583.7
819.2
849,8
3,386.1
Operating profit (EBIT)
617.8
677.0
97.8
213.3
771.7
Profit after net financial items
459.9
537.6
40.7
162.6
579.8
Profit for the period
431.4
465.0
45.0
148.4
503.0
Investments
788.2
1,654.4
132.0
756.2
1,687.5
701.1
610.9
133.2
223.3
1,155.6
1,111.9
Net sales
Cash flow from operating activities Disposable liquidity
853.7 1,109.7
Return on capital employed, %
12.1
13.2
11.3
Equity/assets ratio II, %
31.8
34.7
35.0
Profit before tax per share, SEK *
7.10
8.24
0.64
2.49
8.87
Net profit per share, SEK *
6.55
7.07
0.69
2.26
7.57
Net profit per share after dilution, SEK * Cash flow from operating activities per share, SEK * Average number of shares *
6.55
7.07
0.69
2.29
7.57
10.82 65,797,184
9.36 65,262,024
2.08 65,797,184
3.42 65,294,706
13.05 65,395,814
* The number of shares are recalculated after split
lowed by a period of lower demand for transport capacity, as a result of warm weather and numerous maintenance shutdowns of refineries in the region, among other things. The Southeast Asian market strengthened during the early part of the second quarter and remained at a relatively favourable level throughout the quarter.
ACTIVITIES Market overview First half The mild winter and well-filled stocks of refined oil products contributed to a weaker freight market during the first quarter of the year. Colder temperatures in the US and Europe brought a gradual improvement in the market in February and March. This trend was strengthened by strong demand for shipments of gasoline from Europe to West Africa as a result of production disruptions at refineries in Nigeria.
For small and intermediate tonnage in Europe, the first quarter was more stable. Strong winds and port strikes caused delays during the start of the year. However, in pace with falling temperatures and the formation of ice in the Baltic, demand for tonnage increased, which contributed to improved earnings at the end of the first quarter.
The build-up of stocks in the US that was subsequently needed to meet demand for gasoline ahead of the seasonal rise in gasoline consumption during the summer months led to a sharp rise in import needs and contributed to favourable demand for shipments to the North American market during the second quarter. During the latter part of the second quarter, consumption of gasoline also rose in Europe, which decreased the available volume for export. This has been partly compensated by the export of greater volumes of gasoline from refineries in the Caribbean to the North American market.
The European market remained stable during the second quarter, but with the usual seasonal slowdown towards the end of the period. Third quarter The third quarter was characterised by a steady weakening of the spot market. Apart from the usual seasonal decline, the trend during the period was affected by lower available volumes caused by maintenance shutdowns at a large number of refineries and by a drop in trading activities due to credit concerns and uncertainty about movements in oil prices during the period, among other things. The psychological impact on the spot market was greater than what was justified by the underly-
In Southeast Asia, the year started out with a relatively strong freight market. This was fol-
2
ings/upgrades that were carried out had an adverse impact on third quarter earnings.
ing fundamentals. As a result of this development, stocks of most oil products decreased to levels that were below normal. Underlying consumption of oil products in the world remains strong.
The weakening of the US dollar relative to the Swedish krona has had an adverse impact on Broström's earnings. During the first nine months of the year, the US dollar has in general lost 8% in value against the Swedish krona.
Supply and demand in the oil energy sector are largely in balance over time, which means that small disruptions in the production and distribution chain have a rapid impact on the freight market. As a result, spot market prices for shipments are expected to fluctuate sharply in the coming years. Shipments tend to be increasingly made over longer distances, giving rise to a greater need for vessels. This is having over the longer term a favourable impact on the shipping sector.
The trend for Broström’s Atlantic traffic was also stable during the period as a whole, but here, too, earnings were hurt by the decline in the spot market and by the vessel dockings and extensive upgrades. Broström’s Asian traffic, which is undergoing strong expansion, grew by three vessels in the 47,000 dwt size class during the first half of the year. Traffic during the period as a whole experienced stable, favourable development, and capacity utilisation of the fleet has been good. The expansion of the fleet is contributing strongly to this performance.
The shipyards’ orderbooks remain very wellfilled and newbuilding prices continue to be high. This trend is being strengthened by the prevailing high demand for dry bulk tonnage, which is reducing the shipyards' capacity to build other types of vessels. No weakening of price levels in Broström's segment has been noted.
In May Broström acquired Petroships Group in Singapore. The company currently operates a fleet of nine small and intermediate size product tankers ranging from 5,000 to 16,600 dwt in Southeast Asia. Petroships makes up a strategic complement to Broström’s existing operations in this part of the world and a platform for continued expansion in this segment.
In the vessel segments in which Broström is active, single-hulled vessels still account for a third of the global fleet, which means that the need to scrap vessels will be great for several years to come.
Development for Broström The first quarter started out with a relatively weak freight market in Broström’s segments, but was followed by a gradual improvement later in the quarter and during the second quarter.
Broström’s focus on contracts of affreightment, where such business volume accounts for approximately 50% of total capacity, has enabled the company to maintain a relatively steady and high level of capacity utilisation during the year. The acquisitions made and new partnerships entered into in 2006 and 2007 are now increasingly contributing to higher fleet employment and improved capacity utilisation of Broström’s fleet, which is gradually having a greater impact on Broström’s earnings.
The third quarter was adversely affected by a very weak spot market. As planned during the summer months, and especially during the third quarter, a larger number of dockings took place than during the preceding year. These consisted of ordinary dockings for maintenance as well as for major upgrades of existing vessels to enable even better utilisation of existing capacity. Altogether this entailed 296 days for docking/upgrades during the third quarter, compared with 121 days during the corresponding period a year ago. For the first nine months of 2007, the number of days for docking/upgrading was 590, compared with 250 days during the same period a year ago.
Broström’s commercial fleet currently consists of 87 vessels. After the newbuildings currently on order have been delivered to Broström – within the next two years – the commercial fleet will amount to 105 vessels. Broström intends also in the future to continue taking advantage of consolidation opportunities in the segments in which the company is active. This could take place through additional partnerships and company acquisitions.
During the period, Broström's European traffic as a whole experienced stable, favourable development, however, the decline in the spot market during the third quarter and the dock-
Activity has remained high at most ports at which the Broström Agency Network is repre-
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sented. The earnings trend continues to be favourable. During the third quarter, the holding in Percy Tham i Oxelösund AB (50%) was sold for a gain of SEK 1.5 m, while the holding in Norrköpings Hamn & Stuveri AB (2.8%) was sold for a gain of SEK 10.9 m.
Tonnage tax
Changes in the fleet
In Sweden a study of the introduction of a tonnage tax has been published. The proposal set forth by the study calls for Sweden to also adopt the EU’s maritime policies and thereby achieve competitive neutrality with respect to other maritime nations within the EU.
Starting in 2004, Broström’s entire French operation is affiliated with the tonnage tax system, in accordance with the EU’s shipping policy.
The GAN-VOYAGER, the GAN-VALOUR and the GAN-VICTORY (all 47,000 dwt) were delivered during the first half of the year and are operating in Broström’s Asian traffic. In February the BRO TRANSPORTER (14,400 dwt, built 1989) and the BRO TRADER (14,320 dwt, built 1988) were sold. The sales generated a capital gain of SEK 2.0 m and a liquidity contribution of SEK 86.6 m. Delivery took place at the end of the first quarter.
Until a formal decision has been made on tonnage taxes for the Swedish shipping industry, which would result in competitive neutrality with respect to other EU countries, Broström does not intend to operate its newbuildings on order or acquired vessels under the Swedish flag. These vessels will instead operate mainly under another EU flag.
The BRO DEVELOPER (14,750 dwt) was delivered to Broström in February 2007 from the shipyard in China.
Of the total deferred tax liability on the balance sheet as per 30 September 2007, amounting to SEK 481.2 m, SEK 460.8 m is attributable to the Swedish shipping operations.
Also in February, Broström entered into a longterm partnership with the German shipowner Reederei Claus-Peter Offen, which will result in a doubling of Broström’s commercial fleet in Europe in the 37,000 dwt size segment. The eight new vessels will be delivered in 2008.
SIGNIFICANT RISKS AND UNCERTAINTY FACTORS
In May 2007, Broström and its partner Erik Thun entered into an agreement to acquire the two chemical and oil product tankers MARISP (name changed to BRO GOTHIA) and MARELD (name changed to BRO GOLIATH) (both 7,100 dwt, built in 2003 and 2004, respectively). Both vessels have been commercially operated by Broström for more than two years. Broström and Erik Thun each own 50% of the respective vessels, and delivery took place at the end of August and start of September, respectively.
The risks that affect Broström in its operating environment are economic cycle dependency, freight rates, political factors, oil prices, and risks associated with war and terrorism. Operational risks include vessel operations, risks associated with expansion and investment, and risks related to employees. In the course of its operations the Group is exposed to various financial risks: market risk, credit risk, liquidity risk, currency risk and interest rate risk. The Group’s overall risk management policy focuses on predictability in the financial markets and strives to minimise potentially unfavourable effects on the Group’s financial results.
In May Broström also reached an agreement to acquire Petroships Group, a group of companies in Singapore and Malaysia that operates a fleet of nine small and intermediate-size product tankers in Southeast Asia ranging from 5,000 to 16,600 dwt. Petroships' name has now been changed to Broström Tankers Singapore.
In Broström’s opinion, nothing of material significance has happened which affects the assessment of risks and uncertainty factors reported on in the 2006 Annual Report. Accordingly, for further information, please refer to the “Risk factors and sensitivity analysis” section of the 2006 Annual Report (page 44) and the “Financial risk management” discussion on page 62.
In late July 2007 Broström took delivery of the first vessel, the GAN-OCEAN (17,000 dwt), in a series of six vessels that are being built at a shipyard in Turkey. Broström and its partner Dünya will each own three of the vessels. The GAN-OCEAN is owned by Dünya.
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GROUP FINANCIAL RESULTS
Return on capital employed
Third quarter 2007 Consolidated net sales during the third quarter amounted to SEK 819.2 m (849,8).
10 5 0
2002 2003 2004 2005 2006 Q3 2007
January - September 2007 Consolidated net sales during January - September amounted to SEK 2,660.4 m (2,583.7, of which 95.5 pertains to sold subsidiaries).
Capital employed - average Return on capital employed
The share in associated companies’ profit was SEK 4.6 m (18.0).
MAJOR DEVELOPMENTS AFTER THE PERIOD
Operating profit was SEK 617.8 m (677.0).
In October, two of the operating subsidiaries in the Group have changed names and obtained a Broström identity. The Danish shipbroker Nordtank Shipping A/S that was acquired in 2005 has changed its name to Broström Tankers Denmark A/S. The Petroships Group, acquired earlier this year and based in Singapore, has changed its name to Broström Tankers Singapore Pte Ltd.
The figures for the period include a capital gain of SEK 14.3 m (113.4) on sales of vessels and operations and dissolution of negative goodwill related to the acquisition of Petroships Group in the amount of SEK 106.0 m (0). Net interest expense amounted to SEK -156.1 m (-134.7). Net financial items amounted to SEK -157.9 m (-139.4), which resulted in a profit of SEK 459.9 m (537.6) after net financial items.
OUTLOOK The spot market so far in the fourth quarter of 2007 in Broström’s market segment is at a weak level. Broström believes that the trend in the spot market will continue to be characterised by high volatility from period to period. The underlying longer trend for Broström's market segment is judged to be positive.
The return on capital employed was 12.1% (13.2%). Tax expenses during the period amounted to SEK -28.5 m (-72.6), corresponding to 6.2% (13.5%) of profit before tax. Paid tax amounted to SEK - 3.3 m (-6.0).
Investments and acquisitions carried out in 2006 and 2007, as well as partnerships entered into, are having an increasingly positive impact on earnings and have also contributed to a further strengthening of Broström's strategic position ahead of 2008 and onwards.
Quarterly earnings after net financial items SEK m 1000 800
-0 7
-0 7
3 Q
Q
2
-0 7
-0 6
1 Q
4 Q
Q
3
-0 6
-0 6
-0 6
2 Q
1 Q
4
-0 5
-0 5
200 0
Q
3 Q
The oil energy market today is in balance, and it does not appear that the expansion of refinery capacity, particularly in Asia, will change this relationship in the years ahead. However, as a result of this, it is expected that shipments will take place over ever-greater distances and that regional imbalances will widen. The rapidly growing Chinese economy, US oil needs and Russian exports of oil over the Baltic Sea are also contributing to high demand for transportation of oil and chemical products.
600 400
Quarterly earnings
10 000 8 000 6 000 4 000 2 000 0
15
Operating profit for the Group was SEK 97.8 m (213.3).
300 250 200 150 100 50 0
SEK m
% 20
Moving 12 months
The increasingly stringent requirements being made by authorities and customers with re-
5
is included in Broström’s income statement as from 1 May 2007.
spect to quality, safety and the environment are putting higher demands on the overall organisation that is involved in the logistics chain.
Broström’s acquisition of Petroships Group is expected to add approximately SEK 200 m in annual net sales to Broström from the five acquired wholly owned vessels. Earnings from the partly owned vessels in which Broström’s stake is less than 50% are reported as a share in profit of associated companies. The fair value of tangible fixed assets has been calculated as an average value of external appraisals of the vessels conducted at the time of acquisition. The acquisition has given rise in the accounts to dissolution of negative goodwill in the amount of SEK 106 m, which is reported under other income.
The shipyards’ orderbooks are at historically high levels in Broström’s vessel segments, and a large number of vessels will be delivered in the years immediately ahead. However, Broström continues to hold to the view that this addition of tonnage will be offset to a large degree by the major need for replacement tonnage and the rising demand caused by structural changes in the market. The value of the US dollar relative to the Swedish krona is an uncertainty factor to note. All else equal, a weakening of the US dollar would have a negative impact on Broström’s sales, earnings and shareholders’ equity, while a strengthening would have a positive effect.
On 2 July 2007 Broström sold its 50% stake in the ship agency Percy Tham i Oxelösund AB, to Transatlantic European Services AB. The sale generated a pre-tax gain of SEK 1.5 m. In connection with Broström’s acquisition in August 2006 of two vessels which are now named the BRO EDGAR and the BRO ERIK (both 37,000 dwt and built in 2004 and 2005, respectively), the company also signed an option agreement which gave Broström the right to acquire the HUNTESTERN (37,000 dwt, built in 2004) at a predetermined price. Broström has exercised its option to acquire the vessel, and takeover is expected to take place in December 2007. Owing to the growth in value that has taken place in vessel prices, the option price that Broström will have to pay for the vessel is more than 20% lower than the current market price.
INVESTMENTS AND DIVESTMENTS Total investments within the Group during the period amounted to SEK 788.2 m (1,654.4). Divestments totalled SEK 107.4 m (390.0). Of total investments, SEK 433.6 m (1,650.3) pertained to vessels and newbuilding contracts. At the end of the first quarter the BRO TRANSPORTER (14,400 dwt, built in 1989) and the BRO TRADER (14,320 dwt, built in 1988) were delivered to their buyers. The sales generated a pre-tax gain of SEK 2.0 m and a cash contribution of SEK 86.6 m.
On 10 August 2007, Broström signed an agreement to sell its holding of 2.8% in Norrköpings Hamn & Stuveri AB. The sale generated a pre-tax gain of SEK 10.9 m, which has been taken up as income in the third quarter of 2007.
In May 2007, Broström and its partner Erik Thun entered into an agreement to acquire the two chemical and oil product tankers MARISP (name changed to BRO GOTHIA) and MARELD (name changed to BRO GOLIATH) (both 7,100 dwt, built in 2003 and 2004, respectively). Both vessels have been commercially operated by Broström for more than two years. Broström and Erik Thun will each own 50% of the respective vessels.
Broström is currently involved in investments in five newbuildings. Newbuildings on order Name
In May Broström also reached an agreement to acquire Petroships Group, a group of companies in Singapore and Malaysia that operates a fleet of nine small and intermediate-size product tankers in Southeast Asia ranging from 5,000 to 16,600 dwt. As completed, the acquisition entails that five vessels are wholly owned and three are partly owned. Petroships Group
Delivery
Dwt
Ownership
NB 030
2007
17,000
100%
Partner
NB 053
2007
17,000
100%
NB 064
2008
17,000
100%
NB 386
2009
7,500
50%
Thun
NB 387
2009
7,500
50%
Thun
In addition, a further 13 newbuildings will be added to the fleet under various partnerships.
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Broström’s financial position is strong and enables continued participation in possible structural changes in the industry.
Broström’s updated fleet list can be found at www.brostrom.se.
CASH FLOW Cash flow from operating activities amounted to SEK 701.1 m (610.9), or SEK 10.82 (9.36) per share.
Equity/assets ratio II SEK m
% 40 36 32 28 24 20
FINANCIAL POSITION AND LIQUIDITY
10 000 8 000 6 000 4 000 2002 2003 2004 2005 2006
The Group’s disposable liquidity on the balance sheet date amounted to SEK 1,155.6 m (1,109.7 on 31 December 2006). This amount includes unutilised overdraft facilities totalling SEK 52.4 m (52.2).
Balance sheet total
Q3 2007
Equity assets ratio II
A dividend of SEK 258.3 m was paid to the shareholders in May.
PLEDGED ASSETS AND CONTINGENT LIABILITIES
Net debt increased during the period from SEK 3,015.0 m to SEK 3,362.7 m, mainly due to investments in vessels and businesses.
Pledged assets have increased since the start of the year by SEK 4.5 m and amount to SEK 5,786.7 m (5,782.2 on 31 December 2006). Contingent liabilities have decreased by SEK 9.9 m since the start of the year and amount to SEK 73.2 m (83.1 on 31 December 2006).
Shareholders’ equity on the balance sheet date amounted to SEK 2,529.1 m (2,606.4 on 31 December 2006), and the equity/assets ratio I was 30.0% (32.8%). The equity/assets ratio II was 31.8% (35.0%), which is above Broström’s target of 30%.
WARRANT PROGRAMMES As per 30 September 2007 Broström has two share warrant programmes in effect that were introduced in 2005 and 2007. The programmes were offered to all permanent employees of the Group as well as to employees of partly owned companies in which Broström’s ownership is 50% or more.
As per 30 September 2007, Broström has repurchased 1,673,000 Class B treasury shares at an average price of SEK 69.96. At Broström’s Annual General Meeting on 3 May 2007, the Board’s proposed amendment to the Articles of Association, which would allow a stock split, was approved. The split was effected by VPC on 4 June 2007, whereby each existing share was split into two new shares. Comparison values for previous years regarding the number of shares have been recalculated in accordance with IFRS.
The number of warrants in the warrant programmes has been recalculated in accordance with the rules that apply for a stock split. On 4 June 2007 Broström carried out a 2:1 split, which is why the number of warrants has doubled compared with the previously reported number of shares, and the price per share has been halved.
It should be noted that in connection with the adoption of IFRS, the company has decided not to restate the book value of its vessels to market values. Fleet valuations have continued to increase adding to the overvalue of approximately SEK 2.5 billion as per 31 December 2006.
The warrant programme from 2005 consists of two warrant series with exercise dates in September 2007 and September 2008, respectively. Each employee was entitled to 2,500 warrants. If the programme was not fully subscribed, an additional maximum of 197,500 warrants could be subscribed. The price of each warrant was SEK 3.13 in series 2005:1 and SEK 4.25 in series 2005:2. Each warrant entitles its bearer to subscribe for one share at the exercise price of SEK 78.60. The warrants
During the first quarter, Broström launched and placed a three-year bond worth SEK 500 m. The bond has been issued with a fixed rate of interest with a coupon set to 5.25% p.a. The amount was paid out on 3 April.
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that were not granted in 2005 were offered to future new employees. One such offer was made in autumn 2006. The price was SEK 5.35 for each warrant in series 2005:1 and SEK 8.40 for each warrant in series 2005:2. At the exercise date in September 2007 Broström's share price was below the exercise price of SEK 78.60, and thus the warrants in series 2005:1 expired without value. As per 30 September 2007 397,800 warrants had been subscribed. A total of 2,200 warrants are unsubscribed.
9 months SEK m
Third quarter
Full year
2007
2006
2007
2006
2006
26.3
24.2
8.6
7.9
31.9
Income statements Net sales Operating profit/loss (EBIT)
-26.8
-6.9
-6.8
-8.3
-18.7
Net financial items
16.8
60.8
7.9
12.6
253.0
Profit after net financial items *
-10.0
53.9
1.1
4.3
234.3
-
-
-
-
3.4
-10.0
53.9
1.1
4.3
237.7
12.3
11.1
4.4
2.8
12.8
2.3
65.0
5.5
7.1
250.5
33.8
73.7
16.7
14.4
268.3
Appropriations Profit before tax Tax
Subscribed warrants in the warrant programme entail an increase in the total number of shares and votes by 0.6% and 0.4%, respectively.
Profit for the period * Of which, dividends from subsidiaries and associated companies
There was no dilutive effect in terms of value on the balance sheet date. The warrant programme from 2007 consists of two warrant series with exercise dates in September 2009 and September 2010, respectively. Each employee was entitled to 2,500 warrants. If the programme was not fully subscribed, an additional maximum of 197,500 warrants could be subscribed. The price of each warrant was SEK 3.80 in series 2007:1 and SEK 5.10 in series 2007:2. Each warrant entitles its bearer to subscribe for one share at the exercise price of SEK 98.10. As per 30 September 2007 419,400 warrants had been subscribed. A total of 1,580,600 warrants are unsubscribed.
Balance sheets
Subscribed warrants in the warrant programme entail a 2.9% increase in the number of shares and 1.9% increase in the number of votes. There was no dilutive effect in terms of value on the balance sheet date.
STAFF Through the acquisition of Petroships Group in May 2007, the number of Broström employees increased by 399, of whom 47 are in the shore-based operations and 352 are onboard employees. In total, the Broström Group has approximately 1,400 employees.
Non-current assets
2,316.2
1,981.9
-
-
1,981.2
Current assets
1,706.5
1,856.4
-
-
2,027.3
Total assets
4,022.7
3,838.3
-
-
4,008.5
Shareholders’ equity
1,405.1
1,586.5
-
-
Untaxed reserves
-
3.4
-
-
-
Non-current liabilities
1,428.1
1,011.5
-
-
993.9
Current liabilities
1,189.5
1,236.9
-
-
1,238.1
Total liabilities and shareholders’ equity
4,022.7
3,838.3
-
-
4,008.5
1,776.5
Investments
327.4
1.2
0,8
0.4
2.0
Divestments
0.1
16.9
-
-
16.9
Disposable liquidity
875.3
998.9
-
-
1,013.1
Of which, unutilised overdraft facilities
52.4
52.4
-
-
52.2
ACCOUNTING PRINCIPLES This interim report has been prepared in accordance with the Swedish Annual Accounts Act and IAS 34 Interim Financial Reporting. Since 1 January 2005 the Broström Group has applied International Financial Reporting Standards (IFRS) as adopted by the EU, along with the additional rules stipulated by recommendation RR 31 of the Swedish Financial Accounting Standards Council. The Group has applied the same accounting principles and calculation methods in the interim report as in its most recent annual report.
PARENT COMPANY The activities of the parent company, Broström AB, consist mainly of Group management and administration of joint activities for the Group. The assets consist mainly of shares in subsidiaries and short-term financial investments.
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The Group has also analysed the IFRSs and interpretations which went into effect in 2007. Only IFRS 7 Financial Instruments: Disclosures, is judged to affect the Group. This new standard pertains to the scope and content of the presentation of financial instruments and risks in the annual accounts and is not expected, upon adoption, to result in any material impact on the Group’s earnings or financial position.
ANNUAL GENERAL MEETING 2008 The Annual General Meeting of Broström AB (publ) will be held at 5 p.m. on Tuesday, 29 April 2008, at Lorensbergsteatern, Göteborg. Broström does not have a nominating committee, since an agreement exists between the company’s A-shareholders. One of the aims of this agreement is to establish consensus on nomination matters, which are drafted by the A-shareholders, who jointly submit their recommendations to the AGM for a decision. This procedure was established by an earlier AGM. The nomination work also includes drawing up recommendations for an AGM chairman, the chairman of the Board of Directors, directors’ fees and, where applicable, election of auditors and auditors’ fees.
As from 2007 Broström provides no breakdown by segments, since the companies that essentially made up the Marine & Logistics Services segment were sold in 2005 and 2006. A breakdown by segment is therefore no longer relevant. At Broström’s Annual General Meeting on 3 May 2007, the Board’s proposed amendment to the Articles of Association, which would allow a stock split, was approved. The split was effected by VPC on 4 June 2007, whereby each existing share was split into two new shares. Comparison values for previous years regarding the number of shares have been recalculated in accordance with IFRS.
The A-shareholders strive for the greatest possible openness in the nomination process and welcome proposals and views from other shareholders. Shareholders who wish to nominate a director to the board, or who for other reason want to contact a representative of the A-shareholders, are instructed to contact the Chairman of the Board.
FUTURE REPORTS Broström will release a financial report on the following dates in 2008. 21 February 2008
Preliminary report 2008
29 April 2008
Interim report three months 2008 and Annual General Meeting
27 August 2008
Interim report six months 2008
6 November 2008
Interim report nine months 2008
Göteborg, 6 November 2007 BROSTRÖM AB (publ) On behalf of the Board
Lennart Simonsson Managing Director Broström AB 403 30 Göteborg Sweden Tel +46 31 61 61 00 Reg. no. 556005-1467 More information about Broström and press releases can be found at www.brostrom.se.
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REVIEW REPORT We have conducted a limited review of the attached interim financial statements for Broström AB (publ) for the period 1 January 2007 - 30 September 2007. The preparation and presentation of these financial statements in accordance with IAS 34 and the Swedish Annual Accounts Act are the responsibility of the company’s management. Our responsibility is to report our conclusions concerning these interim financial statements on the basis of our limited review. We have conducted our limited review in accordance with the Standard for Limited Review (SÖG) 2410 “Limited review of interim financial information” conducted by the company’s appointed auditor, issued by FAR. A limited review consists of making inquiries, primarily of individuals having responsibility for financial and accounting matters, as well as performing analytical procedures and taking other limited review procedures. A limited review has a different focus and is significantly smaller in scope than an audit according to Auditing Standards in Sweden, RS, and generally accepted auditing practice. The review procedures undertaken during a limited review do not enable us to obtain a level of assurance at which we would be aware of all important circumstances which would have been identified had an audit been conducted. Therefore, a conclusion reported on the basis of a limited review does not reach the level of certainty of a conclusion reported on the basis of an audit. Based on our limited review, no conditions have come to our attention which would give us reason to believe that the attached interim financial statements are not, in all material respects, prepared in accordance with IAS 34 and the Swedish Annual Accounts Act. Göteborg, 6 November 2007
Bror Frid Authorised Public Accountant
Birgitta Granquist Authorised Public Accountant
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INCOME STATEMENTS 9 months Group, SEK m Net sales
Third quarter
Full year
2007
2006
2007
2006
2006
2,660.4
2,583.7
819.2
849.8
3,386.1
0.5
9.5
-
2.1
10.5
130.9
118.8
11.6
13.3
122.8
4.6
18.0
2.2
15.4
15.0
- 1,486.6
- 1,422.1
- 493.7
- 452.2
- 1,908.0
Personnel costs
- 413.2
- 378.0
- 143.6
- 126.9
- 514.2
Depreciation
-278.8
- 252.9
- 97.9
- 88.2
- 340.5
617.8
677.0
97.8
213.3
771.7
Capitalised work for own account Other income 1) Share in associated companies’ profit after tax External expenses
Operating profit (EBIT)
34.5
18.9
-1.1
18.1
16.8
Financial expenses
-192.4
- 158.3
- 56.0
- 68.8
- 208.7
Net financial items
- 157.9
- 139.4
- 57.1
- 50.7
- 191.9
Profit after net financial items
459.9
537.6
40.7
162.6
579.8
Tax on profit for the period
- 28.5
- 72.6
4.3
- 14.2
- 76.8
Profit for the period
431.4
465.0
45.0
148.4
503.0
424.4
461.0
43.9
147.7
495.1
7.0
4.0
1.1
0.7
7.9
Financial income
Profit for the period attributable to Equity holders of the parent Minority interest Earnings per share, SEK 2)
6.55
7.07
0.69
2.26
7.57
Earnings per share after dilution, SEK 2)
6.55
7.07
0.69
2.29
7.57
Average exchange rate SEK/USD
6.87
7.47
6.75
7.24
7.38
Average exchange rate SEK/EUR
9.24
9.29
9.27
9.23
9.25
1)
2)
Dissolution of negative goodwill amounts to 106.0. The remaining part is mainly related to sales of vessels and operations. The number of shares are recalculated after split
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BALANCE SHEETS Group, SEK m
30 September 2007
31 December 2006
120.1
124.0
ASSETS Non-current assets Goodwill Other intangible assets
2.3
2.5
6,273.5
5,907.4
Financial assets, interest-bearing
26.4
28.4
Financial assets, non-interest-bearing
74.2
49.1
6,496.5
6,111.4
Tangible assets
Total non-current assets Current assets Inventories
74.5
63.6
Current receivables
531.5
492.4
Short-term investments
229.3
226.0
Cash and cash equivalents
1,103.1
1,057.4
Total current assets
1,938.4
1 839.4
Total assets
8,434.9
7 950.8
SHAREHOLDERS’ EQUITY AND LIABILITIES Shareholders’ equity 1)
2,529.1
2,606.4
Equalisation reserve
121.4
149.7
Deferred tax
481.2
481.0
Non-current liabilities
Other non-current liabilities, non-interest-bearing Non-current liabilities, interest-bearing
2)
Total non-current liabilities
29.7
29.1
4,328.4
3,969.6
4,960.7
4,629.4
Current liabilities Current liabilities, interest-bearing
2)
366.8
328.8
Current liabilities, non-interest-bearing
578.3
386.2
Total current liabilities
945.1
715.0
Total liabilities and shareholders’ equity
8,434.9
7,950.8
Pledged assets
5,786.7
5,782.2
Contingent liabilities
73.2
83.1
Closing date exchange rate SEK/USD
6.50
6.87
Closing date exchange rate SEK/EUR
9.21
9.05
1)
Of which, minority interest
37.0
32.7
2)
Of which, financial leasing
578.1
633.0
CHANGES IN SHAREHOLDERS’ EQUITY Group, SEK m According to balance sheet, most recent year-end closing Exchange rate differences Derivative instruments, cash flow hedges after tax Profit for the period Repurchases of treasury shares Dividend to shareholders and minority holders New issue, warrant premiums Amount at the end of the period
9 months 2007 2,606.4 - 131.8 431.4 - 117.2 - 261.6 1.9 2,529.1
2006 2,709.5 - 193.6 - 4.6 465.0 - 269.3 16.1 2,723.1
Full year 2006 2,709.5 - 349.0 - 4.5 503.0 - 269.1 16.5 2,606.4
The exchange rate difference for the period is mainly due to changes in the USD relative to the Swedish krona. USD is the functional currency for the main subsidiaries in the Group.
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CASH FLOW STATEMENTS Group, SEK m
9 months 2007
2006
Full year 2006
OPERATING ACTIVITIES Operating profit
617.8
677.0
771.7
78.0
12.1
94.3
- 128.0
- 95.2
- 106.2
- 3.3
- 6.0
- 4.4
Change in working capital
136.6
23.0
98.3
Cash flow from operating activities
701.1
610.9
853.7
- 426.3
- 1,747.5
- 1,983.3
107.4
373.2
373.8
- 339.5
-
- 0.1
-
15.2
15.2
1.7
2.6
- 0.4
Cash flow from investing activities
- 656.7
- 1,356.5
- 1,594.8
FINANCING ACTIVITIES Dividend to shareholders
- 258.3
- 261.0
- 261.0
- 3.3
- 8.3
- 8.1
- 117.2
-
-
Adjustments for items not included in cash flow, etc. Financial items Paid tax
INVESTING ACTIVITIES Investments in non-current assets Sale of non-current assets Investment in subsidiaries/associated companies Sale of subsidiaries Change in other financial non-current assets
Dividend to minority holders Repurchases of treasury shares New share issue, warrant premiums
1.9
16.1
16.5
665.9
1,163.6
1,276.5
- 240.5
- 274.1
- 331.2
Cash flow from financing activities
48.5
636.3
692.7
Cash flow for the period
92.9
- 109.3
- 48.4
1 283.4
1,480.5
1,480.5
92.9
- 109.3
- 48,4
- 43.9
- 76.9
- 148.7
1,332.4
1,294.3
1,283.4
New loans Repayment of loans
Cash and cash equivalents and short-term investments Opening balance Cash flow for the period Exchange rate differences Cash and cash equivalents and short-term investments, closing balance
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SHARE DATA 9 months 2007
Per-share data (recalculated after split)
2006
Full year 2006
Full year 2005
Earnings, SEK
6.55
7.07
7.57
9.45
Earnings after dilution, SEK
6.55
7.07
7.57
9.38
Shareholders’ equity, SEK
38.46
41.28
39.36
41.35
Shareholders’ equity after dilution, SEK
38.46
41.27
39.36
41.07
Cash flow from operating activities, SEK
10.82
13.05
9.58
Cash flow for the period, SEK
1.43 69.50
9.36 - 1.68
- 0.74
6.38
75.25
75.00
80.00
65,245,684
Share price on balance sheet date Number of shares (recalculated after split) Number of shares, closing date
65,797,184
65,797,184
65,797,184
of which, number of treasury shares
1,673,000
-
-
-
Average number of shares outstanding
65,797,184
65,262,024
65,395,814
64,693,840
of which, average number of treasury shares Number of outstanding warrants Number of dilution shares
1 007 533
-
-
-
2,400,000
800,000
800,000
1,351,500
-
12,812
2,264
437,542
Number of shares after dilution at end of period
65,797,184
65,809,996
65,799,448
65,683,226
Average number of shares after dilution
65,797,184
65,274,836
65,398,078
65,131,382
KEY RATIOS Full year
Full year
2007
9 months 2006
2006
2005
Return on capital employed, %
12.1
13.2
11.3
15.9
Return on shareholders’ equity, %
21.8
22.9
18.6
27.1
1.3
1.2
1.2
1.0
Debt/equity ratio, multiple Interest cover ratio, multiple Equity/assets ratio I, %
3.4
4.4
3.8
5.7
30.0
32.4
32.8
34.2
Equity/assets ratio II, %
31.8
34.7
35.0
37.2
Share of risk-bearing capital, %
37.5
40.6
41.1
43.2
LARGEST SHAREHOLDERS Owner (direct ownership)
Number of
Number of
30 September 2007 (recalculated after split)
A-shares
B-shares
capital
Arvid Svensson Invest AB
2,075,968
7,877,182
15.1
27.5
The Dreijer families
1,469,908
3,115,210
7.0
17.1
Odin Fonder, Oslo
Percentage of votes
5,866,000
8.9
5.6
The Björnram families
343,680
463,157
1.2
3.8
Lennart Simonsson
192,084
410,540
0.9
2.2
Kenneth Nilsson
169,816
534,144
1.1
2.1
Broström AB
1,673,000
2.5
1.6
Case
1,644,300
2.5
1.6
Handelsbanken Fonder
1,369,203
2.1
1.3
Michael Hjortböl Other** Total
4,251,456
970,560
1.5
0.9
37,622,432
57.2
36.3
61,545,728
100.0
100.0
** Including non-Swedish nominee shareholders where individual holdings are not officially registered. For definitions, please see 2006 Annual Report.
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