Report 2014 ANNUAL REPORT

Transcription

1 Annual Report 2014 ANNUAL REPORT

2 m/v OTELLO. Photo: Stefan F Lindberg. Wallenius Shipping For the past 80 years, Wallenius Shipping has been a frontrunner in the international shipping industry. With a strong focus on innovative technical and environmental solutions, we form one of the world s leading shipping and logistics groups within the car carrier segment. The shipping group consists of two core businesses; Wallenius Lines, the shareholder in several global shipping companies and owner of some 36 RoRo vessels and Wallenius Marine, responsible for ship management, ship design and technical management for the Wallenius fleet. All commercial transportation and logistics services are performed by our various associated companies, well positioned under their own brand names with a broad customer base and comprehensive global coverage. 2 ANNUAL REPORT 2014 ANNUAL REPORT

3 m/v FAUST in Southampton, UK. Photo: Ole Musken. Five year review SEK million (except where otherwise stated) Turnover Change % Operating profit Profit after financial items (before tax) Return on capital employed % Return on equity % Equity ratio % Liquidity ratio Fixed capital expenditure Liquid funds Employees On board ship Shore-based Available tonnage No. of ships Car-carrying capacity (x 1.000) Group tonnage No. of ships Car-carrying capacity (x 1.000) Acquisition value Hull insurance value Year 2013 and 2014 are reported and accounted for according to the new accounting policy K3. Return on capital employed Profit/loss after financial items, plus financial expenses, as a per centage of average capital employed. Return on equity Profit/loss as a per centage of average adjusted equity. Equity/assets ratio Equity as a per centage of total assets. Liquidity ratio Current assets divided by current liabilities. Capital employed Total assets less non-interest-bearing liabilities including deferred tax liability. Total assets has been adjusted for blocked liquid assets and the loan for which the assets were blocked as security, respectively. 4 ANNUAL REPORT 2014

4 Report of the board of directors The Board and the President of Wallenius Lines AB, company registration number , hereby submit their Annual Report for the operations of the Group and Parent Company for the financial year of Figures in parentheses refer to year The Group s Operations Wallenius Lines is the Parent Company in the Wallenius Group. In addition to owning shares in several shipping- and logistics companies, the company owns and charters specially-built vessels for transporting vehicles. Together with international partners, the Wallenius Group forms the world s leading shipping and logistics group within the rolling cargo segment. Through a number of subsidiaries and associated companies, Wallenius Lines offers global ocean transportation and integrated logistics solutions to the world s manufacturers of cars and other kinds of rolling cargo. Together with global partners, Wallenius Lines controls a fleet of some 170 vessels, 36 of which are owned or long-term chartered by Wallenius Lines. All vessels are operated by our associated companies Wallenius Wilhelmsen Logistics (WWL), EUKOR Car Carriers (EUKOR), United European Car Carriers (UECC) and American Shipping & Logistics Group (ASL). Significant events The lower volumes during 2013 continued during Like the financial result, ocean-related revenue was affected by weak demand for High & Heavy equipment, such as mining machinery. Vehicle volumes transported were at the same level as previous year. Our focus on both operational efficiency and cost rationalisation measures combined with enhanced synergies between the operational associated companies remains important. Land based operations continued to report stable results. The vehicle transport industry has been under investigation for anti-trust activities since autumn 2012 by authorities in a number of jurisdictions, including Europe, the US, Canada, Mexico, Brazil, Chile and South Africa. Wallenius Lines associated companies WWL and/or EUKOR are included in these investigations and are cooperating fully with relevant government agencies. In January 2015, Chilean authorities (FNE) filed a suit against six vehicle transport companies, including EUKOR. Change of accounting principles The Annual Report for 2014, with the comparative year of 2013, is the first occasion on which the company is applying the Swedish Accounting Standards Board s General Guidelines BFNAR 2012:1 (K3). The change in accounting principles means that the comparative year 2013 has been recalculated. The true value of interest rate derivatives is stated in the balance sheet and the value change is stated in the income statement, for further information see under note 1 and 18. The Group contribution in the Parent Company is recorded in full in the income statement. The residual value of vessels and vessel depreciation have been recalculated as a consequence of component depreciation. Two long-term chartered vessels have been classified as financial leases, which means that the leased vessels are included in the balance sheet as vessels and outstanding lease expenses are recorded as a liability. Excess depreciation has also been adjusted in the income statement and balance sheet as a consequence of changed carrying value on vessels. The Group s foreign subsidiaries have been translated at the current method. The change in accounting principles also means that the opening balance for 2013 has been adjusted. See accounting policies for further details. Turnover, Results and financial position Group turnover totalled SEK 1,827 million compared with SEK 1,799 million in The share in profits of associated companies totalled SEK 761 million (845). A large part of the Group s operations is carried out in the associated companies. The associated companies are accounted for in the Group s income statement using the equity method, which stipulates that the Group s revenue does not include the Group s share of the associated companies revenue. If the turnover in the associated companies would be included, total turnover for the Group would be some SEK 20 billion. Operating expenses, including depreciation according to plan, totalled SEK -1,672 million (-1,641). The operating result was SEK 950 million (1,007). Interest expenses amounted to SEK -348 million (-138), of which the positive effects of the market valuation of financial instruments totalled SEK 18 million (172). The result after financial items totalled SEK 611 million (902). Liquid assets, including short-term investments, totalled SEK 424 million (261). The Group s investments in ships and newbuildings totalled SEK 138 million (66). The equity amounted to SEK 8,931 million (6,845), representing an equity ratio of 50 per cent based on book values. Holdings in associated companies Wallenius Wilhelmsen Logistics AS Wallenius Lines and Wilh. Wilhelmsen each own 50 per cent of Wallenius Wilhelmsen Logistics AS. The business is managed from Oslo, Norway. Wallenius Wilhelmsen Logistics AS (WWL) offers advanced logistics solutions for the transport of cars, trucks and heavy machines from factory to dealer or customer. Typical logistics solutions combine ocean and land-based transportation, terminal handling and post-handling and completion of products. WWL operated a fleet of 57 vessels during the year, largely owned by the company s two shareholders. During the year WWL transported some 1.8 million vehicles over sea and some 2.5 million vehicles were transported over land. 13 terminals at various locations around the world handled four million cars and rolling equipment units, and 60 processing centres performed technical services for 6.3 million units. Revenue was at the same level as 2013, but with improved results. EUKOR Car Carriers Inc. Wallenius Lines and Wilh. Wilhelmsen each own 40 per cent of EUKOR Car Carriers Inc. The remaining 20 per cent is owned by Hyundai Motor Company and Kia Motors Corporation. The head office is located in Seoul, Korea. EUKOR Car Carriers Inc. (EUKOR) has maintained its position as the main carrier for the Hyundai/Kia automotive group, the company s largest customers. EUKOR's contract with Hyundai and Kia expires 31 December The aim is to uphold the current share of Hyundai and Kia export volumes. EUKOR has also expanded during the year through increased volumes from other car manufacturers. The company continued to report good results in 2014, due to sound trading volumes and efficient utilisation of the fleet. The company s fleet of some 85 vessels transported around 4.6 million car equivalent units during the year. Three newbuildings, on own account and one vessel on long-term charter were delivered during United European Car Carriers B.V. Wallenius Lines and Nippon Yusen Kaisha (NYK) each own 50 per cent of United European Car Carriers. The head office is located in Oslo, Norway. United European Car Carriers B.V.s (UECC) shortsea traffic and logistics operations cover the whole of Europe. The company s fleet consists of 23 specialized vessels, both UECC-owned and vessels chartered externally as well as from UECC s shareholders. UECC transported some 1.6 million vehicles during 2014, an increase of 3.3 per cent from UECC s results continued to improve during 2014, despite lower volumes to North Africa and significantly decreased volumes to Russia during the fourth quarter. In March 2014, UECC ordered two LNG-fuelled PCTC vessels for delivery during the second half of American Shipping & Logistics Group, Inc Wallenius Lines and Wilh. Wilhelmsen each own 50 per cent of the companies within the ASL Group. 6 ANNUAL REPORT 2014 ANNUAL REPORT

5 The head office is located in New Jersey, USA. American Shipping & Logistics Group, Inc (ASL), New Jersey, USA, owns seven US-flagged vessels and provides global logistics solutions. ASL has a cohesive administrative service function for: American Roll-On Roll-Off Carrier Holdings LLC (ARC), which operates the seven US-flagged vessels that transport commercial cargo and US government preferential cargo. Fidelio Limited Partnership (FLP), which owns seven RoRo vessels under the US-flag. American Auto Logistics Group, Inc (AAL), which provides logistics services on a global basis for private vehicles owned by US government employees. American Logistics Network, LLC (ALN), which develops and provides systems for logistics services, including the storage of private cars. The companies within the ASL Group have for many years provided logistics services on a global basis for private vehicles owned by people employed by American authorities in accordance with the Global Privately Owned Vehicle Contract (GPC). During 2014 ASL lost the GPC III contract, resulting in lower volumes, income and profits. A wide-ranging programme of cost reduction and reorganisation was implemented during the second half of At the beginning of 2015 the name was changed from ASL Inc to American Roll-On Roll-Off Carrier Group Inc. Tellus Shipping AS Wallenius Lines and Wilh. Wilhelmsen each own 50 per cent of the company, which has its head office in Oslo, Norway. Tellus Shipping AS charters vessels on mediumand long-term basis on behalf of the other companies within the Group. Group structure Wallenius Lines in Sweden Wallenius Lines own 100 per cent of the Swedish subsidiaries and the head office is located in Stockholm, Sweden. Wallenius Lines and its Swedish subsidiaries own and/or long-term charter a total of 20 vessels, all of which are operated by WWL. The shares in the associated companies are held by Wallenius Lines Sweden. Wallenius Lines Singapore Wallenius Lines owns 100 per cent of the Wallenius companies in Singapore. The companies head office is located in Singapore. Wallenius Lines owns several companies in Singapore, which between them own a fleet of 16 vessels. Eight of these vessels are operated by WWL, four by UECC and four by EUKOR. The fleet In January 2014 Wallenius Lines ordered another two Post Panamax vessels for delivery during Wallenius Lines has a total of four Post Panamax vessels on order. During 2014 one vessel, m/v MADAME BUTTER- FLY built in 1981, was recycled. It was decided at the beginning of 2015 that m/v TRISTAN, built in 1983, would be taken out of service and then recycled. Both vessels were recycled in China at a shipyard certified for green recycling. Financial Risk Management Financial risk management is governed by a policy approved by the Board of Directors. The major significant financial risks with the Group are foreign exchange risk and interest rate risks. Ship Management Wallenius Marine AB, a sister company of Wallenius Lines, is overall responsible for ship management, ship design and newbuilding projects for the Wallenius fleet. For the Swedish-flagged vessels, ship management is handled from Stockholm. For the Singapore-flagged vessels, ship management is handled by the wholly owned subsidiary Wallenius Marine Singapore. Wallenius Marine handles all Wallenius Lines newbuilding projects. They have also been contracted by EUKOR and UECC for project management of their respective newbuilding projects, including UECC s two LNG-fuelled PCTC vessels, to be delivered in Environment Wallenius Lines became the first shipping company in Sweden and one of the first in the world to certify its Environmental Management System according to ISO The company realised at an early stage that the shipping industry needs to make an effort to reduce its environmental impact in five identified areas: carbon dioxide, sulphur dioxides, nitrogen oxides, toxic anti-fouling and ballast water. With a clear vision to operate zero-emission vessels in the future, Wallenius Lines has developed and implemented a number of projects, new technologies and entered into new partnerships. The results of ongoing work are reported on the web site. Future Assessment The cargo market is expected to slowly become stronger, with continued growth in the US and a positive, albeit modest growth forecast for Europe. The Japanese Yen became much weaker during the last year. In due course this may be expected to result in increased export volumes from Japan. The bunker price has halved since last year at the same time, and at present we do not see any signs that the price will increase in the immediate future. All in all, we therefore expect positive effects on profits. The Group s focus on cost-efficiency and on identifying and increasing synergies between the operating companies will continue. We will continue our targeted work to develop the fleet s fuel efficiency combined with environmental consideration. At the beginning of 2015 the Wallenius Group and its associated companies had a total of eleven vessels on order, including long-term chartered vessels. These vessels will be delivered during Appropriation of profits The Board of Directors propose that non-restricted equity, SEK 439,094,847 be carried forward to the new accounts. For further information on the Group s and the Parent Company s results and financial position, please refer to the following income statements with accompanying notes. 8 ANNUAL REPORT 2014 ANNUAL REPORT

6 Income statement (SEK thousands) Note Net sales Share in results of associated companies Other operating income Group Parent Company Operating costs Personnel costs Depreciation according to plan Other operating costs Operating profit Result from other securities and receivables reported as fixed assets Result from participations in group companies Result from participations in associated companies Other interest income and similar profit and loss items Interest costs and similar profit and loss items Profit before tax Appropriations Group contributions, received Group contributions, paid Other appropriations Tax on profit for the year Net profit for the year Profit attributable to owners of the Parent Company 10 ANNUAL REPORT Steel Cutting Ceremony, Hull No. NB Tianjin, China. Photo: Raphael Olivier.

7 Balance sheet (SEK thousands) Dec. 31 Note Group Parent Company Fixed assets Tangible fixed assets Land and buildings Ships Equipment Newbuildings Financial fixed assets Participations in group companies Receivables from group companies Participations in associated companies Receivables from associated companies Other securities held as fixed assets 17, Deferred tax receivable Other long-term receivables Total fixed assets Current assets Inventories etc Consumables Current receivables Accounts receivable Receivables from group companies Receivables from associated companies Tax receivables Other current receivables Prepaid costs and accrued income Cash and bank deposits Total current assets Total assets Note Group Parent Company Equity and liabilities Equity 23, 24 Restricted equity Share capital Revaluation reserve Statutory reserve Non restricted equity Profit brought forward Net profit/loss for the year Total equity Untaxed reserves Accumulated depreciation in excess of plan Provisions Pension provisions Deferred tax provisions Other provisions Non-current liabilities 27 Liabilities to credit institutions Liabilities to group companies Financial instruments Other liabilities Current liabilities Liabilities to credit institutions Accounts payable Liabilities to group companies Tax liabilities Other current liabilities Accrued costs and deferred income Total equity and liabilities Pledged assets for own liabilities Ship mortgages Endowment insurance Total pledged assets Contingent liabilities Guarantees and contingent liabilities on behalf of subsidiary companies Other guarantees and contingent liabilities Total contingent liabilities ANNUAL REPORT 2014 ANNUAL REPORT

8 Cash flow analysis (SEK thousands) notes to the financial statements Note Group Parent Company Cash flow from operating activities Profit after financial items Adjustments for items not included in the cash flow Tax paid Cash flow from operating activities before changes in working capital Cash flow from changes in working capital Increase(-) / Decrease(+) in inventories Increase(-) / Decrease(+) in current receivables Increase(+) / Decrease(-) in current liabilities Cash flow from operating activities Investment activities Acquisitions of tangible fixed assets Sales of tangible fixed assets Sale of financial fixed assets Acquisitions of financial assets Sales of financial assets Cash flow from investment activities Financing activities Loans raised Amortisation of debt Cash flow from financing activities Cash flow for the year Opening balance liquid funds Exchange rate differences, liquid funds Closing balance liquid funds Note 1 Accounting policies The Parent Company applies the same accounting policies as the Group except in the cases specified below in the section entitled The Parent Company s accounting policies. The Annual Report has been prepared in accordance with the Swedish Annual Accounts Act, and for the first year also in accordance with the Swedish Accounting Standards Board s General Recommendations BFNAR 2012:1 Annual Accounts and Consolidated Accounts (K3). The Annual Report for 2014, with a comparative year of 2013, is the first occasion on which the company is applying the Swedish Accounting Standards Board s General Guidelines BFNAR 2012:1. The change in accounting policy means that the comparative year 2013 has had to be adjusted by recording the group contribution made in full in the income statement. The changed accounting policies have caused the following changes in the opening balance sheet 2013: Interest rate derivatives are recorded in the balance sheet at market value. The value change affects the income statement. Foreign subsidiaries are translated at the current method and the translation difference is recorded via equity. Dry docking expenses are capitalised. Two vessels have been classified as financial leases and inserted into the balance sheet. An outstanding leasing expense for leased vessels is recorded as a liability. Unless otherwise stated below, assets, provisions and liabilities have been valued at their cost of acquisition. Tangible non-current assets Tangible non-current assets are recorded at cost of acquisition minus accumulated depreciation and impairment. The cost of acquisition includes not only the purchase price but also expenses directly attributable to the acquisition. Additional expenses Additional expenses that satisfy the asset criterion are included in the asset s carrying value. Expenses for ongoing maintenance and repairs are recorded as expenses as they arise. For vessels, the difference in the consumption of significant components has been assessed to be key. These assets have therefore been divided into com ponents, which are depreciated separately. Depreciation Depreciation takes place on a straight-line basis over the asset s expected useful life, as this reflects the expected consumption of the asset s future financial benefits. Depreciation is recorded as an expense in the income statement. Consideration has been given to the estimated residual value, confirmed at the point of acquisition at the prevailing price level. Useful life Vessels Dry docking Buildings Equipment 25 years years Highest permitted tax depreciation 3 5 years For vessels, the difference in the consumption of significant components has been assessed to be significant. The main breakdown is vessels and dry docking. Depreciation tangible and intangible non-current assets and shares in Group companies On each balance sheet date an assessment is performed of whether there is any indication that an asset s value is lower than its carrying amount. If 14 ANNUAL REPORT 2014 ANNUAL REPORT

9 there is any such indication, the asset s recoverable amount is calculated. The recoverable amount is the higher of the fair value less costs of sale and the value in use. When calculating the value in use, the current value of future cash flows that the asset is expected to generate in current operations is calculated, as well as the value when it is disposed of or retired. The discount rate used is before tax and reflects market assessments of the money s time value and the risks relating to the asset. A previous impairment is only reversed if the reasons that formed the basis of the calculation of the recoverable amount in connection with the previous impairment have changed. Leasing All lease agreements have been classified as either financial or operational lease agreements. A financial lease agreement is a lease agreement according to which the risks and benefits associated with owner ship of an asset are, to all intents and purposes, transferred from the lessor to the lessee. An operational lease agreement is a lease agreement that is not a financial lease agreement. Financial lease agreements Rights and obligations under financial lease agreements are recorded as assets and liabilities in the balance sheet. When first recorded, the asset or liability is valued at the lower of the asset s fair value and the current value of the minimum lease charges. Expenses that are directly attributable to concluding and setting up the lease agreement are added to the amount recorded as an asset. After being recorded for the first time, the minimum lease charges are distributed to interest and repayment of the liability in accordance with the effective interest method. Variable charges are recorded as expenses in the financial year during which they arose. The leased asset is depreciated over the lease period. Operational lease agreements Lease charges under operational lease agreements, including first-time rent but excluding charges for services such as insurance and maintenance, are recorded as an expense on a straight-line basis over the lease period. Foreign currency See under the heading Hedge accounting for items included in a hedging relationship. Items in foreign currency Monetary items in foreign currency are translated at the exchange rate on the balance sheet date. Nonmonetary items are not translated, but are recorded at the exchange rate when the acquisition was made, except for vessels, see under the heading "Hedge accounting". Exchange rate differences that arise when settling or translating monetary items are recorded in the income statement in the financial year during which they arise. Net investments in foreign business An exchange rate difference that relates to a monetary item that constitutes part of a net investment in a foreign business and that has been valued on the basis of the cost of acquisition is recorded in the consolidated accounts as a separate component directly in equity. Translation of foreign businesses Assets and liabilities, including goodwill and other group-related surplus and deficit values, are translated into the recording currency at the exchange rate on the balance sheet date. Income and expenses are translated at the spot rate on each day for business transactions, unless an exchange rate that represents an approximation of the actual exchange rate is used (e.g. average exchange rate). Exchange rate differences that arise in connection with translation are recorded directly to equity. Inventories Inventories are valued at the lower of the cost of acquisition and the net realisable value. The risk of obsolescence has been taken into account. The cost of acquisition is calculated in accordance with the first in first out principle. The cost of acquisition included not only purchasing expenses, but also charges for transporting the goods to their current location and state. Financial assets and liabilities Financial assets and liabilities are accounted for in accordance with chapter 12 (Financial instruments valued according to chapter 4, 14 a 14 e the Annual Accounts Act) in BFNAR 2012:1. Recognition and derecognition in the balance sheet A financial asset or financial liability is recognised in the balance sheet when the company becomes a part of the instrument s contractual terms. A financial asset is derecognised when the contractual right to cash flows from the asset has expired or been settled. The same goes for when the risks and benefits associated with the holding has been transferred to another party substantially and the company does not possess control over the financial asset. A financial liability is derecognised from the balance sheet when the contractual obligation has been fulfilled or expired. On demand purchases and on demand sales of financial assets are accounted for on the trade day. Classification and valuation Financial assets and liabilities have been classified in different valuation categories in accordance with chapter 12 in BFNAR 2012:1. The classification in different valuation categories is the base for how the financial instruments should be valued and how the value changes would be accounted for. (i) Loan receivables and accounts receivables Loan receivables and trade accounts receivables are financial assets that have determined or determinable payments, which are not derivatives. These assets are valued according to amortised cost. The amortised cost is determined based on the effective rate that is calculated at the acquisition date. Accounts receivables are recognised according to the amount expected to be received, i.e. after deductions for doubtful receivables. (ii) Financial liabilities held for trade Financial liabilities in this category are valued according to fair value and value changes are recognised in the income statement. The category includes derivatives with a negative fair value with the exception for derivatives that are an identified and efficient hedge instrument. (iii) Other financial liabilities Loans and other financial liabilities, e.g. accounts payable, are included in this category. The liabilities are valued according to accumulated cost. Hedge accounting Hedge accounting is only applied when there exists a financial relation between the hedging instrument and the secured item that corresponds with the company s goals for risk management. Additionally, it is required that the hedging relationship is expected to be very efficient during the period for which it has been identified and that the hedging relationship and the company s goal for risk management and risk management strategy regarding the hedge is documented when the hedge is started at the latest. (i) Currency hedging of vessels Liabilities in USD have been designated as hedging instruments in fair value hedges of the Group s vessels. Transactions in the ship market are made in USD and the Group s loans in USD have therefore been deemed effective off-setting changes in the fair value of the vessels which are attributable to changes in the USD/SEK exchange rate. The loans which are designated as hedging instruments are translated at the exchange rate at the close of the financial period and the changes in value are recog- 16 ANNUAL REPORT 2014 ANNUAL REPORT

10 nised in the Income Statement. Simultaneously, the vessels carrying value is translated at the exchange rate at the close of the financial period to the extent the carrying values of the vessels are designated as hedged items. The restatement of the vessels meets the Income Statement restatement of the loans. Remuneration to employees after terminated employment Classification Plans for remunerations after terminated employment are classified either as defined contribution plans or defined benefit plans. For defined contribution plans, determined fees are paid to another company, normally an insurance company, and do not have any obligation to the employee when the fee is paid. The size of the employee s remunerations after terminated employment is dependent on the fees that have been paid and the return on capital on those fees. For defined benefit plans, the company has an obligation to provide the remunerations agreed upon to current and earlier employees. The company carries in all material aspects the risk for the remunerations to be higher than expected (actuarial risk) and the risk for the return on the assets to deviate from the expectations (investment risk). Investment risk also exists if the assets are transferred to another company. Defined contribution plans The fees for defined contribution plans are recognised as expenses. Unpaid fees are accounted for as a liability. Defined benefit plans The company has chosen to apply the simplifying rules presented in BFNAR 2012:1. Tax Tax on the profit for the year in the income statement consists of current tax and deferred tax. Current tax is income tax for the current financial year that relates to the taxable profit for the year and the element of income tax for previous financial years that has not yet been recorded. Deferred tax is income tax on taxable profit in respect of future financial years as a consequence of previous transactions or events. A deferred tax liability is recorded for all taxable temporary differences, although not for temporary differences that originate from the first recording of goodwill. A deferred tax asset is recorded for deductible temporary differences and for the possibility in future of using tax loss carryforwards. The valuation is based on how the carrying amount of the corresponding asset or liability is expected to be recovered or settled. The amounts are based on tax rates and tax rules that have been adopted before the balance sheet date and have not been calculated at the current value. In the consolidated balance sheet, untaxed reserves are divided into deferred tax and equity. Provisions A provision is recorded in the balance sheet when the company has a legal or informal obligation as a consequence of an event, and it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be produced. When recorded for the first time, provisions are valued at the best estimate of the amount that will be demanded to settle the obligation on the balance sheet date. Provisions are reassessed on each balance sheet date. Contingent liabilities A contingent liability is recorded as a memorandum item when there is: A possible obligation originating as a consequence of events and the existence of which will only be confirmed by one or more uncertain future events that are not entirely within the company s control, occur or do not occur, or An existing obligation as a consequence of events, but that is not recorded as a liability or a provision because it is unlikely that an outflow of resources will be required in order to settle the obligation or the size of the obligation cannot be calculated with sufficient reliability. Income The inflow of financial benefits that the company has received or will receive on its own account is recorded as income. Income is recorded at the fair value received or due to be received with deductions for any discounts given. The revenue in both the Parent Company and the Group consists predominantly of operational lease income. The revenue varies over time basis the result in the company which operates the vessels. Interest and dividend Income is recorded when the financial benefits associated with the transaction will probably accrue to the company and when the income can be calculated in a reliable way. Interest is recorded as income in accordance with the effective interest method. A dividend is recorded when an authorised body has made a decision that a dividend is to be paid. Consolidated financial statements Subsidiaries A subsidiary is a company in which the Parent Company possesses, either directly or indirectly, more than 50% of the votes or in some other way has a controlling influence. A controlling influence means a right to define a company s financial and operational strategies with the aim of achieving financial benefits. The recording of business acquisitions is based on the unit view. This means that the acquisition analysis is produced as of the date on which the acquiring party achieves a controlling influence. As of this date, the acquiring party and the acquired unit are viewed as one accounting unit. Application of the unit view also means that all assets (including goodwill) and liabilities, as well as income and expenses, are included in full, even for part-owned subsidiaries. The cost of acquisition of subsidiaries is calculated as the sum of the fair value on the acquisition date for assets paid plus debts arising and taken over, as well as any own equity instruments issued, expenses that are directly attributable to the business acquisition and any purchase price. The acquisition analysis confirms the fair value, with some exceptions, on the acquisition date of acquired, identifiable assets and liabilities taken over, as well as minority interests. Minority interests are valued at fair value on the acquisition date. As of the acquisition date, the acquired company s income and expenses, identifiable assets and liabilities, and any goodwill or negative goodwill generated are included in the consolidated financial statements. Associated companies Shareholding in associated companies, in which the company has at least 20 per cent and no more than 50 per cent of the votes or in some other way has a significant influence over operational and financial control, is recorded in accordance with the equity method. The equity method means that the value of shares in associated companies recorded in the Group corresponds to the Group s share in the associated companies equity, any residual value from Group surplus or deficit values, including goodwill and negative goodwill, minus any internal profits. In the consolidated income statement, the Share in associated companies profit/loss is recorded as the Group s share in the associated companies profit/ loss after tax, adjusted for any depreciation or dissolution of acquired surplus/deficit values, including depreciation of goodwill/dissolution of negative goodwill. Dividends received from associated companies are deducted from the carrying amount. Profit shares accrued after acquisitions of associated companies that have not yet been realised through dividends are set aside in the equity fund. Elimination of transactions between Group Companies, associated companies and jointly controlled companies Internal Group receivables and liabilities, income and expenses and unrealised profits or losses arising from transactions between Group Companies are eliminated in full. Unrealised profits resulting 18 ANNUAL REPORT 2014 ANNUAL REPORT

11 from transactions with associated companies are eliminated to the extent that they correspond to the Group s shareholding in the company. Unrealised losses are eliminated in the same way as unrealised profits, but only to the extent that there is no indication of any need for impairment. Accounting policies in the parent company The accounting policies in the Parent Company correspond with the accounting policies described above for consolidated accounting, with the exception of the following cases. Leasing Financial lease agreements are recorded as operational lease agreements in the Parent Company. Foreign currency A foreign currency exchange gain/loss relating to a monetary item that forms part of the Parent Company s net investment in a foreign operation and which is valued on the basis of the acquisition cost is recognised in the Income Statement if the gain/loss occurred in the Parent Company. Financial assets and liabilities Financial assets and liabilities are recognised in accordance with Chapter 11 (Financial instruments valued based on acquisition cost) in BFNAR 2012:1. Valuation of financial assets At the initial recognition, financial assets are measured at the acquisition cost, including any transaction costs that are directly attributable to the acquisition of the asset. Subsequent to the initial recognition, current financial assets are valued at the lower of the acquisition cost or the net realisable value at the close of the reporting period. Trade accounts receivable and other receivables that are current assets are valued individually at the amount expected to be received. Financial fixed assets are valued after initial recognition at acquisition cost less any impairment losses and increased by any revaluation. Interest-bearing financial assets are measured at amortised cost using the effective interest method. Valuation of financial liabilities Financial liabilities are valued at amortised acquisition cost. Expenses that are directly attributable to the raising of loans modify the loan s acquisition cost and are amortised using the effective interest method. Short-term liabilities are recognised at cost. Derivative instruments with a negative value and for which hedge accounting is not applied are recognised as financial liabilities and are valued at the amount which is more favourable for the company if the obligation would be unwound or transferred at the close of the reporting period. Changes in value are recognised in the Income Statement Ownership interests in subsidiaries, participations in associated companies and jointly controlled entities Shares and other ownership interests in subsidiaries, participations in associated companies and jointly controlled entities are carried at acquisition cost less accumulated impairment losses. In addition to the purchase price, acquisition cost includes expenses directly attributable to the acquisition. Salaries and other compensation to employees In the Parent Company, the defined benefit plans are reported according to the simplification rules in BFNAR 2012:1. Taxes Deferred tax attributable to untaxed reserves is not reported separately in the Parent Company. Group contributions and other shareholders contributions Group contributions received/ provided are reported as a balance-sheet allocation in the Income Statement. The received/provided group contribution has affected the company s current tax. Note 2 Net sales by business Group Parent Company Net sales by business segments Sea transport Note 3 Other operating income Group Parent Company Capital gains Other Note 4 Average number of employees 2014 Men 2013 Men Parent company, Sweden 5 80% 4 70% Subsidiaries Singapore 8 0% 8 0% Distribution by gender Women Parent company Board of Directors 25% 40% Management 0% 0% Group Board of Directors 33% 40% Management 33% 33% Wages, salaries and other remunerations Social security costs Wages, salaries and other remunerations Social security costs Wages, salaries, other remunerations and social security costs Parent company Of which pension costs 1) Subsidiary companies Of which pension costs - - Group total Of which pension costs ) Of the Parent Company s pension costs SEK thousand (854) relate to the category Board and President. The company s outstanding pension commitments to these amounted tot SEK thousand (11 780). Board of directors and CEO Board of directors and CEO Wages, salaries, other remunerations by member of the board, etc. and other employees Other employees Other employees Parent company Of which bonuses Subsidiary companies Of which bonuses Group total Of which bonuses Severance pay The parent company has reached an agreement with the president and a few members of Group Management concerning severance pay. In the event of notice being given by the company the President and others will receive a compensation comprising one years' salary. 20 ANNUAL REPORT 2014 ANNUAL REPORT

12 Fees and expense allowances for auditors Group Parent Company Audit assignments to KPMG Other assignments to KPMG Audit services refer to the legally required examination of the annual report and the book-keeping, the Board of the Director's and the Managing Director's management and other audit and examinations agreed-upon or determined by contract. This includes other work assignments which rest upon the Company's auditor to conduct, and advising or other support justified by observations in the course of examination or execution of such other work assignments. Operating lease Group Parent Company Lease contracts where the Company is the lessee Future minimum lease payments regarding non-cancellable operating lease contracts Within one year Between one and five years Later than five years The financial year's recognised lease expenses Lease contracts refer to lease of property within the Group. The contract is for three years with a notice of termination of 9 months. Note 5 Result from other securities and receivables reported as fixed assets Group Parent Company Other interest income Foreign exchange differences Capital gains/losses Other Note 6 Other interest income and similar profit and loss items Group Parent Company Interest income, group companies Other interest income Foreign exchange differences, realized Foreign exchange differences, unrealized Note 7 Interest costs and similar profit and loss items Group Parent Company Interest costs, group companies Other interest costs Revaluations derivatives Foreign exchange differences, realized Foreign exchange differences, unrealized Other financial expenses Note 8 Tax on profit for the year Group Parent Company Current tax Deferred tax Reconciliation of effective tax rate Group Percent Amount Percent Amount Profit/loss before tax Tax according to current tax rate for the parent company 22,0% ,0% Effect due to other tax rates for foreign subsidiaries -2,0% ,6% Non-deductible expenses 0,8% ,6% Non-taxable income -34,8% ,5% Reported effective tax 14,0% ,5% Parent Company Percent Amount Percent Amount Profit/loss before tax Tax according to current tax rate for the parent company 22,0% ,0% Non-deductible expenses -1,6% ,1% Non-taxable income 30,1% ,3% Reported effective tax 50,6% ,2% Note 9 Land and buildings Group Parent Company Accumulated acquisition value Opening balance Translation differences during the year Accumulated depreciation according to plan Opening balance Depreciation during the year Translation differences during the year Closing residual value Land (included in land and buildings) Group Parent Company Accumulated acquisition value Closing residual value Note 10 Ships Group Parent Company Accumulated acquisition value Opening balance Investments Sales and retirements Reclassifications Translation differences during the year Currency hedging of ships Accumulated depreciation according to plan Opening balance Reclassifications Sales and retirements Depreciation during the year Translation differences during the year Closing residual value Leasing Group Ships held under financial lease contracts are included with carrying amount of Under other current and non-current liabilities the present values of future payments regarding financial lease obligations that are entered as liabilities are recorded. 22 ANNUAL REPORT 2014 ANNUAL REPORT