102 Articles of association

Transcription

1 Annual Report 2012

2 3 THE SCANA GROUP 4 Objectives and means 5 Group Management and Board of Directors 6 Comments from the CEO 8 Historical highlights 10 Business areas 12 BUSINESS AREA Scana energy 14 Scana Steel Björneborg 15 Scana Steel Booforge 16 Scana Steel Söderfors 17 Scana Machining 18 Scana Subsea 19 Scana Steel AB 20 BUSINESS AREA scana propulsion 22 Scana Propulsion 26 BUSINESS AREA scana offshore 28 Scana Offshore Technology 29 Scana Steel Stavanger 30 Scana Offshore Vestby 31 Scana Offshore Services 33 Scana Skarpenord 35 Scana Korea Hydraulic 36 BUSINESS AREA SCANA other business 38 Leshan Scana Machinery 39 Scana do Brasil Industrias Ltda 40 BUSINESS AREA scana property 42 ENVIRONMENTAL IMPACT 45 ANNUAL ACCOUNTS Directors report 52 Scana group statement of income 53 Scana group balance sheet 54 Scana group cash flow statement 55 Scana group statement of change in shareholders equity 56 Scana group notes 88 Parent company statement of income 89 Parent company balance sheet 90 Parent company cash flow statement 91 Parent company notes 97 Declaration by the Board of Directors and the CEO and group chief executive 98 Auditors report 100 Shares and shareholders Articles of association 104 key figures Cover: Upsetting operation in the Scana Steel Björneborg forge.

3 3 THE SCANA GROUP Scana Industrier ASA is a Nordic industrial group whose main business is to supply products and systems to energy related enterprises. This includes oil and gas, other energy and marine operations related to the offshore market. Scana also provides service and carries out repairs and maintenance for customers in the same markets. Scana s technology, unique materials knowledge and extensive production experiencee form the basis of our competitive power. Our aim is to be the preferred supplier to leading companies within our market segments. The majority of our customers are located in Europe, the Americas and Southeast Asia. Scana Industrier ASA has operative companies in Norway, Sweden, China, USA, Poland, Singapore, Brazil and South Korea. The head office is situated in Stavanger. At the end of 2012, the group had 1765 employees. Scana s technology, unique materials knowledge and extensive production experience form the basis of our competitive power.

4 4 Objectives and means Business concept The objective of the company is to own and manage manufacturing industry, commercial activities and related activities. The objectives of the company also includee investing in other companies that can promote the company s primary activities. Scana shall be a market-driven industrial group with niche products for growing markets. Vision Scana creates progress. Scana shall have a reputation for robust quality, delivery reliability, excellent customer respons and strong competition. The company shall be an attractive workplace were our employees are challenged. Scana s finances shall be sufficient to develop the group industrially and commercially. Direction of development Scanas main markets are energy and offshore Scana moves towards supply of more advanced products and components Scana shall cooperate with core customers for a cost efficient value chain Scana creates progress Scana shall have a presence close to customers in chosen areas Scana moves from merely investment-based customers to more maintenace and service based customers Main aim and strategy The main aim of the group is to increase the shareholders values. On this basis, the following primary strategies have been determined: 1. Inceased focus on the structure and development of the business areas 2. Continued organic growth in all business areas 3. Regain profitability and ensure proper financial management 4. Develop the repair and service concept within Scana Propulsion and for Scana Offshore 5. Strengthen the group s strategic position through cooperation/acquisitions 6. Reduce the group s exposure outside the groups priority area 7. Develop property value In 2013, the board emphasises improved operation and strict financial management

5 5 GROUP MANAGEMENT AND BOARD OF DIRECTORS Scana has a decentralized organisation, and a large part of the group s technical and commercial expertise shall be located in the companies. Scana s group management team and finance and accounts functions are based at the head office in Stavanger, Norway. Group management Rolf Roverud, Group CEO Rolf Roverud (born 1958) took up the appointment as Group Chief Executive in Scana Industrier on January 1, He has previously had a number of leading positions in Saga Petroleum and came from the position as Vice Chief Executive in NSB AS. Roverud is an economics graduate and holds a master s degree in strategy and management. Kjetil Flesjå, Group Director / CFO Kjetil Flesjå (born 1967) has a Master of Science in Finance and came to Scana from Fokus Bank. Flesjå has a thorough expertise in banking and a comprehensive experiencee with corporate finance processes including acquisitions and sales, financial risk analyses, balance and liability strategies, plus and extensive analysis experience. Jan Henry Melhus, Group Director Oil & Gas Jan Henry Melhus (born 1963) is educated as production engineer with additional education within marine technology. He has more than 20 years of experiencee from Scana s areas of commitment. Melhus came to Scana from the position as director for GE Oil & Gas. Ha has previously held leading positions at Vetco Gray, GMC group, NAT and ABB Group. Board of Directors Bjørn Torkildsen, Chairman of the Board Bjørn Torkildsen (born 1962) has extensive experience in Management and Strategy and 25 years experience in the petroleum industry. Mr. Torkildsen worked as Skangass CEO from and Lyse Infra CEO from Torkildsen has an M.Sci from Norwegian University of Science and Technology, with additional education within finance and management. Elisabeth Saupstad Elisabeth Saupstad (born 1968) has extensive experience in hospitality business and held a numerous of management positions within Nordic Choice Hotels and the last years as Director of Operations for Comfort Hotels in Norway. She also worked for Figgjo AS, as director of sales, both national and internationals. Saupstad is now in Add Energy Group, as Managing Director in Add Consulting. Martha Kold Bakkevig Martha Kold Bakkevig (born 1963) has and extensive experience in the topics of leadership, strategy and R&D within technology and business development. She holds a doctorate (dr. scient) from NTNU (1995) and a doctorate (dr. oecon) from Handelshøyskolen BI (2007). Bakkevig is CEO in the well service company DeepWell in Haugesund. John Arild Ertvaag John Arild Ertvaag (born 1955) runs his own investment business through his company Camar AS. The investments are primarily within oil and gas, industry and commerce. He holds a number of board positions in both listed and non-listed companies. After an issue of shares Q1 2012, Camar AS is the largest investor in Scana Industrier ASA. Knut Øgreid Knut Øgreid (born 1950) runs his own investment business through Verket Finans. The investments include among other things real estate, industry, oil and gas and commerce. Øgreid holds a number of board positions in both listed and non-listed companies. After an issue of shares Q1 2012, Verket Finans is the second largest investor in Scana Industrier ASA. Per Ravnestad Per Ravnestad (born 1952) has more than 30 years experience from the oil and gas industry. Up until 2010, Ravnestad was Scana s group director for business development. He came to Scana from the position as Managing Director in IOS Tubular Management. Ravnestad is a major shareholder in Scana.

6 6 COMMENTS FROM THE CEO 2012 did not turn out as expected for Scana. When the European debt crisis replaced the extensive, global financial crisis, we saw at the outset of 2012 signs of growth in the markets that we operate. However, this positive trend failed to continue, and on the contrary we experienced a very demanding conclusion of the year. Even if we have reduced our exposure considerably towards the weak European market, we are still dependent on this market to obtain sufficient tonnage for our steel companies. It was this type of order that failed towards the end of Riskiness in the market growth at the outset of 2013, combined with a desire to lower stock at the turn of the year, reduced the demand for less refined products considerably. Somewhat simplified, we could say that we need the simple products with a fair tonnage to cover our fixed costs and we need more advanced and processed components and products to see a good profit. At the outset of 2012 we asked for the more advanced orders we have, however, received more of these towards the end of 2012, for delivery up to 2014, but the large quantity products disappeared temporarily during this period, as mentioned. This gave us liquidity challenges and a need for capital injection. Scana is fortunate to have shareholders that help contribute to cover our capital requirements. It s sure that the road back to positive results has been longer than we expected. We did not base our prognoses on the fact that the economic slope should be this long-term. A strong Norwegian and Swedish Krone compared to other important currencies, give us extra challenges compared to our competitors and hit us harder when the market prices are already under pressure. Every month we have to compensate for the more than NOK 10 million that the strong Krone affects our operating profit, compared to That is a considerable amount for a company of our size. But we are still convinced that it is feasible to regain profit in Scana even under the current international climate, and we are certain that we are positioned to deliver substantial results when the market returns to normal. Our main focus for 2013 will of course be to regain profit! To succeed, we need to focus clearly on our strengths: our materials knowledge, delivery precision and quality, and a close relationship to our customers. We are small and flexible, with employees that do their best and make a great effort every single day. These are advantages that we will make the most out of! Our companies are currently leaders within their niches and we support world-class customers. This is a good starting point for further work. Still, we cannot take our customer s graces for granted. We must deliver every single time, something we sadly do not always manage. Through self-examination and an open and honest dialogue with our customers, we must rise to meet the challenges and see changes through to regain trust. Scana is a well-respected supplier of high quality steel. During the recent years, we have gradually produced more complete products and systems. We do not compete with other steel works on the delivery of a rod of steel across the globe. Our competitive power lies in the drive to add value for the customer when we turn high quality steel into more complete products in a way that few others manage. Scana is an environmental business and manufactures some of the purest and eco-friendly steel to be obtained, steel that is utilized in our own products and by our customers. Our starting point is scrap metal, which, through our processes is turned into high-quality products. It is our goal to have the smallest possible impact on our environment, irrespective of where in the world we do business. We have a firm basis in our employees competences and attitude. When Scana succeeds with our change process, it is because everybody know that change is necessary, but not least because everyone wishes to keep the business running and the workplaces intact. This team spirit combined with a very low absence due to illness, are strengths to uphold. I wish to thank all our employees for their great efforts and positive attitude through a demanding 2012! What about further development? We are going through demanding changes to strengthen our future competitive position. We are in a process towards delivering more advanced products, components and systems, cooperating closely with our core customers for a cost-efficient value chain. This is an arduous journey, but over time it will secure Scana s foundation and increased competitive power. Throughout the recent year, we have taken over parts of the value chain from several of our key customers, something that has required large production and competence changes in our organization. In the long run this strengthens our

7 7 position considerably and is also favourable for our customers. Additionally, we are moving from an investment-based customer group, to more of a serviced-based customer group. Service and maintenance are less vulnerable to economic turnarounds than new sales. In the recent years, Scana Propulsion has had a sharp increase in service and maintenance. This makes it possible to create profit within this business area, even if new sales are low due to a historic slump in the global new build activity. We see the same trend in oil and gas, and in both areas we have a firm basis for growth in the coming years. We will continue to maintain a point of contact close to our customers in selected areas. This must be done without increasing costs disproportionally. Important foundations are Europe/The North Sea, North America / The Gulf of Mexico, Brazil, South East Asia including Singapore, China and South Korea. We have no plans of spreading out more. Still, we are glad to sell to customers operating in other areas, but without a specific presence in that area. An important ongoing change is to turn the group even more towards energy/offshore. Many of our companies are already strong within this segment and are positioned for success. Additionally, the world s need for energy will be on the increase the coming decades. A stronger positioning towards energy related activities, is therefore interesting for us. This change is also a demanding one. It is far more challenging to supply customers in this segment, than in other markets. But in the long-term it is right and that means that we have to make the move. 2013, like 2012, will not be a bed of roses for Scana, but we need to deliver on another level than we did in Our main task is to stabilize those of our companies that have taken the greatest losses, to re-obtain profit for the group as a whole. Exclusively cutting costs cannot ensure this. The most important thing is to win good orders and deliver these on time with expected quality. Additionally we will look into alternative developments for each business area and for the companies within them. This entails cooperation with other companies to create a win-win situation for both parties. At the outset of 2013, this work has already started for Scana Energy and we see that we have a lot to gain for the other business areas or each subisidiary. Through cooperation, we complement each other for new markets, products and competences and create new business opportunities. In addition, we will work to expand our real estate values. This will also happen in cooperation with external partners. Still, small events may have greater effect on our profit than earlier. An event, that during a period of economic growth not had been registered on the profit, will in these situations be noticeable. During 2012 we often experienced that the ball hit the woodwork. For 2013 we need to see more goals and more victories, which is needed to regain profit. Our organization is excitedly working towards that goal! Yours sincerely, Rolf Roverud CEO

8 Historical highlights 1652 Scana s oldest company, Scana Booforge, is established in Karlskoga Permission is granted to build a forge hammer at the Vismes estuary. This forms the basis for Björneborg s growth and development Stavanger Electro-Stålverk is established. Today, Scana Steel Stavanger AS is Norway s only special steel works and is located in Strand municipality Scana establishes a foothold China through the joint venture company Leshan Scana Machinery Company Ltd Scana buys Volda Mekaniske Verksted AS, now Scana Volda AS Scana signs an agreement with Caterpillar, making Scana Volda a preferred supplier of propellers, reduction gears and control systems for Caterpillar s diesel engines Scana acquires the companies Brødrene Johnsen AS and AMT AS, now Scana Offshore Vestby AS. These acquisitions confirm the company s express objectives for growth in oil and gas Scana s turnover reaches almost NOK 2.9 billion after bustling activity in all of the group s business areas. Scana Offshore Services is established after an acquisition of business in Houston. The new company strengthens Scana s position in the USA and Singapore Scana Industrier is founded through a merger between ScanArmatur AS and ScanPaint AS The actuator and valve control system manufacturer Scana Skarpenord AS is taken over by Scana Industrier Scana Industrier acquires Stavanger Staal AS, now Scana Steel Stavanger AS Scana Industrier buys Björneborgs Järnverk AB, now Scana Steel Björneborg AB, one of the oldest ironworks in the world Scana Industrier buys a company steeped in forging traditions: Booforge AB, now Scana Steel Booforge AB. Production was previously run by Alfred Nobel s Bofors Scana Industrier is listed on the Oslo Stock Exchange Scana Steel Stavanger AS secures its own power supply through the licence allocation to Jørpeland Kraft AS, a third of which is owned by Scana The first complete year of operation for Scana Korea Hydraulic Ltd. This company has increased Scana s market share considerably in one of the world s largest shipbuilding nations Scana increases its capital, which gives the company NOK 106 million in new share capital Smedvig sells his share majority in Scana to leading employees in Scana Industrier Scana Korea Hydraulic becomes one of five subcontractors to be given the prestigious Quality Gold Mark by Samsung Heavy Industries, one of the world s largest shipyards Scana establishes the offshore service company Scana Offshore Technology AS in collaboration with International Oilfield Services AS. The new company aims to further develop the group s activities within service and maintenance Scana buys ABB s marine activities in Poland and establishes Scana Zamech Sp. zo. o. The acquisition complements Scana s activities within the business area Marine. Scana s establishment of a business in Brazil will create big opportunities for growth in an exciting market. Scana also establishes Scana Subsea, supplying subsea and riser components to the oil and gas industry Scana buys the property of the liquidated Axels Components in Kristinehamn, Sverige, and establishes Scana Machining AB. Scana sells its shares in Jørpeland Kraft AS. Scana wins, through Scana Offshore Vestby, a contract for NOK 350 million in Brazil. This is the largest contract for Scana in its entire history and represents a breakthrough in an exciting market Scana complete a private placement with a gross value of NOK 150 million against existing stockholders. Existing syndicate loan is refinanced with a multicurrency loan of SEK 348 million and a revolving credit facility of NOK 280 million. Existing loan facility at Leshan Scana Machinery were refinanced with a new loan of USD 8,7 million.

9 20139

10 10 BUSINESS AREAs Scana is organized in business areas with a decentralized organization, in which the production units are separate legal entities. SCANA ENERGY Scana Steel Björneborg AB, Sweden Manufacture and sales of forged apecial components. Scana Steel Booforge AB, Sweden Manufacture and sales of arms for forklift trucks. Specialized forging and heat treatment. Scana Steel Söderfors AB, Sweden Manufacture and sales of rolled special profiles and rolled/forged rods and billetts, mainly in special steel. Scana Machining AB, Sweden Machining, assembly and testing of components and products. Scana Subsea AB, Sweden Sales and project management for subsea and riser systems for the oil and gas industry. Scana Steel AB, Sweden Manages Scana s real estate in Karlskoga, Sweden. SCANA PROPULSION Scana Volda AS, Norway Design, engineering, manufacture and sales of girs, propellers and propulsion systems. Scana Mar-El AS, Norway Design, manufacture and sales of electronic remote control systems for propulsion and navigation of vessels. Scana Zamech sp. zo. o, Poland Sales and service related to propulsion systems. Scana Singapore Pte. Ltd. Sales and service related to propulsion systems. Scana Shanghai Trading Co. Ltd. Sales and service office for propulsion systems. Scana Propulsion US Inc. Salg og service knyttet til fremdriftssystemer. SCANA OFFSHORE Scana Offshore Technology AS, Norway Repair, maintenance and recertification of equipment to the oil and gas industry. Scana Steel Stavanger AS, Norway Manufacture and ales of hig-alloy castings and forgings, and wearresistant steel. Scana Offshore Vestby AS, Norway Engineering, design, manufacture and sales of special equipment for the oil and gas industry. Scana Offshore Services Inc, USA Design, engineering, repair and maintenance of drilling equipment. Scana Offshore Services, Singapore Design, engineering and marketing towards the market in South-East Asia. Scana Skarpenord AS, Norway Design, manufacture and sales of hydraulic actuators and valve control systems. Scana Korea Hydraulics Ltd, South Korea Manufacture and sales of hydraulic actuators and valve control systems. Sana owns 49%. Scana Skarpenord Shanghai Service Station, China Service of hydraulic actuators and valve control systems. SCANA OTHER BUSINESS Leshan Scana Machinery Ltd, China Manufacture and sales of castings and steel rolls. Scana owns 80% Scana Do Brasil Industrias Ltda., Brazil Marketing and sales of Scana s products in Brazil. SCANA PROPERTY Established Q to manage and develop the value of Scanas properties

11 11 Business areas

12 12 BUSINESS AREA SCANA ENERGY The companies in Scana Energy represent a several hundred year long tradition in the Swedish steel industry. Among them are Scana Steel Bjorneborg, Scana Steel Booforge, Scana Steel Söderfors, Scana Subsea, Scana Machining and Scana Steel AB. The companies within Scana Energy have an independent and long history and specialize in different production areas. Scana Energy focuses on oil and gas as the most important market area, in addition to other kinds of energy. Also, the companies supply specialized steel and components to marine, automobile, machining and tools industries. Production takes place at Scana s own production facilities, which include melting plants, forges, rolling mills, heat treatment and machining units. The business area is characterized by a high metallurgical expertise. Production is of a high standard and complies with ISO-certified quality assurance systems. Strategic position Scana maintains a high standard with regard to production as well as a broad product range. Getting a foothold in this industry is difficult due to the fact that both production facilities and infrastructure represent major investments, and because it also is extremely challenging to acquire sufficient levels of metallurgical and technical expertise. Scana is one of the few players with integrated production facilities that include both melting/production of steel, heat treatment and preparation of components. Few of Scana s competitors have their own steelworks, and they have to buy billets and semi-finished goods to be able to offer finished steel products. A greater control over the value chain gives Scana a competitive advantage. From , almost NOK 400 million have been invested in Scana Energy. The investments increase our competitive power, coming from increased capacity and delivery precision, and reducing operational risk and production costs. During the recent years, Scana Energy has increased its commitment towards the oil and gas market. Almost half of its profit comes from this interesting, but demanding, market. The companies have also gone further in the value chain the recent years and are taking more responsi bility for complete machining, coating, testing and, to some extent, assembly. These positions differentiate Scana Energy from other corresponding businesses. Products Scana is a leading supplier of specialized steel products and customizes solutions for various uses. Key elements are close collaboration with our customers and high quality results. Scana s technological expertise is pivotal to the production and in the development of new, customized products. Scana s production capacity in terms of steel produced in-house is around 150,000 tonnes of melted material. To Scana, the kinds of advanced components and products we create from high quality steel, are more important than the number of tonnes we manufacture. However, tonnage and good capacity utilization is important for cost recovery and profitability. Scana offers a broad range of products, weighing from 50 kg to 75 tonnes, in lengths up to 24 metres. Scana is a market leader in the upper weight and length range for cylindrical products. Scana has a large capacity within heat treatment. This renders possible specific material qualities and extended tensile strength, an important competitive advantage. Markets and customers The main market for the business area is energy, in which oil and gas are the most dominant. Our specialized products are delivered to world-leading customers. Scana offers optimum design and material alternatives, which, combined with a more refined product, provide a competitive total solution. The global activity within oil and gas is high. Scana Energy delivers components to risers for developing projects offshore, demanding projects with considerable development work. Several of the projects are now nearing completion, and results both from the development work and the market in general give grounds for good profitability for future projects. Scana Energy has built up a record-breaking order reserve for oil and gas projects. The order reserve is to be delivered in 2013 and Scana Energy also delivers shafts of up to 24 meters, which are part of propulsion systems for ships. The number of contracts for ships has been very low the recent years. When the market returns, Scana Energy will be duly positioned, and an increased activity within shipbuilding will have a prominent positive effect on Scana Energy s profitability. Special steel customers are primarily steel companies, major wholesalers and end users such as oil and gas, automotive and machinery industries. Scana has entered into several long-term collaboration agreements with a number of key customers. This provides us with a sound foundation for further development of our business concept. The development moves towards a higher degree of finished products, delivered directly to the customers facilities. High quality and technical expertise, combined with precision deliveries have all contributed to Scana capturing a strong position in the market.

13 13 The image shows a Tension Joint Assembly in project Laggan-Toremore for FMC Kongsberg. This photograph was taken on the final inspection at Scana Offshore Technology, before departure for the North Sea and installation off the Shetland Islands on a depth of 600 meters. End client is Total. Scana Energy

14 14 Managing director: Sören Andersson SCANA STEEL BJÖRNEBORG Scana Steel Björneborg refines steel in an integrated chain that includes steelworks, heat treatment, a forge with a 4,500 tonne press and a well-equipped machining workshop. Scana Steel Björneborg was founded in 1656 and is one of the world s oldest forges. Increased productivity and quality 2012 can be characterized as a year of good progress. Our Lean process implementation has really taken off during the year. We can clearly see that the combination of good order, continuous improvement and daily management have resulted in a better flow of both products and information. Lead time and delivery accuracy is significantly improved throughout One of the technical challenges came from the Oil & Gas industry concerning high demands for products with entirely new quality requirements. After considerable development work, this was resolved in a good way. The costs for quality divergences will also diminish, as a direct result of the aforementioned work, and combined with the programme for cost reduction, this has contributed to increased competitive power. The programme continues through This is a continuation of earlier work to systematically shorten the lead-time. Scana Steel Björneborg want to ensure that the company s workers are highly skilled, which in turn leads to improved quality. The company identifies critical skills using a competence matrix, in addition to certification of specific skills through practical and written tests. to an increasing number of customers ordering finished products, especially in the marine business area, but also in the energy segment. Also for 2013, Scana Steel Björneborg expect a challenging year and will work actively with both existing and new customers to enhance activity. Products Scana Steel Björneborg delivers customer designed products for four market segments: industrial, marine, machine and energy. The company s main products are forged, rotation symmetrical, large and long steel components with a high technical content. Scana Steel Björneborg also supplies raw forged and semi-lathed details. The products are for instance axles, rotors, joints, risers, poles and sheet metal. The products are often key components for our customers, and are delivered with different degrees of completion, depending on customer requirements. The company has an on-going cooperation with material institutes to further increase the quality of products and with suppliers within the group to finish the products to the degree the customers requires. Markets and customers Scana Steel Björneborg exports 70 % of its turnover, directly or through other companies in the group. The largest market is Europe, but export also goes to the USA, Asia and other parts of the world. The entire forging industry has continued, also through 2012, to be faced with a low demand and increased competition due to overcapacity in both Europe and Asia. Scana Steel Björneborg has, adhering to our long-term strategy, continued our work on increasing the refinement of our products. For 2012, this has lead

15 Managing director: Torsten Blomberg Site Manager: Bjørn Konradsen Scana Steel Booforge Scana Steel Booforge is a world leader in the manufacture of large forklift truck arms that can lift in excess of 10 tonnes. Scana s expertise in open die forging renders the company able to manufacture large forks and other forged products according to any specification, with stringent demands for strength. Since 2009, Booforge also manufactures masts and lifting carriages, and thus complete lifting systems for forklift trucks in the heavy segment. 15 Markets and customers The company is mainly aimed at forklift truck and machine manufacturers, as well as other steelworks. The company also has customers in oil and gas. The customers are primarily located in the Nordic region, but the company also acts globally through developed distribution network. The company s largest customers include Cargotec, Konecranes, Svetruck, Sandvik, Alfa Laval and Moorlink. The market for Scana Steel Booforge s core products forks, open die forging and heat treatment has been stable during Products Scana Steel Booforge s main products are: Forged arms for forklift trucks Lifting equipment for forklift trucks Heat treatment of larger goods Open die forged components The strengthening of Scana Steel Booforge as a brand in the forklift truck industry has increased demand and global sales. To further expand our global activities, we established new sales channels and dealer networks during Our special research and development function now gives Booforge the opportunity to perform as an active customer partner in a value chain perspective, to develop supplemental products. With a stronger market focus, our own technological development and increased production efficiency, will Scana Steel Booforge greet the future.

16 16 Managing director: Per Jarbelius SCANA STEEL SÖDERFORS Scana Steel Söderfors is a manufacturer of high quality steel products specializing in high alloy and high purity steels for demanding applications. Hot forming and heat treatment of steel has a long tradition in Söderfors. Since 1676, skilled blacksmiths have made Söderfors renowned for its high quality products. The company has an extensive experience in forging, rolling, heat treatment and machining. Scana Steel Söderfors is located at Söderfors, north of Stockholm, Sweden, and is closely situated to other major steel producers. Since 1995, the company has been a part of the Scana group. Markets and customers Scana Steel Söderfors exports 50 % of its turnover. Europe is the largest market. China, Japan and the US are also important markets. Scana Steel Söderfors works in three different market segments: energy, oil & gas and steel. The customers are world leading system suppliers, component suppliers, steel makers, machine builders and distributors. In 2012, a larger share of the company s orders have included a greater degree of refinement. Products Scana Steel Söderfors supplies niche products. Main products are forged or rolled bars, sections, profiles and open die forged components with a high technical content. Typical open die forged components alongside bars are shafts, rotors, pole plates and connectors. Rolled products are manufactured in high alloy steel, such as round and flat profiles, with bars as the most common product, in different stainless grades with emphasis on various grades of Duplex and Super Duplex. High-alloy tool steel and PM steel in the form of bars, round and flat profiles are also important products. Scana Steel Söderfors continue to grow within the oil and gas business with focus on steel bars in low alloy and high alloy steel. Connectors of different kinds and materials are established products. In the course of the year, the company has invested in additional capacity in processing equipment to meet the increasing demand for highly processed products. The investments are made to improve production efficiency to meet customer demands. Focus on lean production concepts improves customer service levels. The organization continues our competence and skill development process. Increasing the share of processed products and meeting the demands of strategic customers are prominent goals. Furthermore, a new system for process handling of internal logistics has been implemented to create opportunities and develop Scana Steel Söderfors into a just-in-time partner for the customers.

17 Managing director: Torsten Blomberg Scana MachinING Scana Machining sells and performs services in assembly, machining, welding and testing of system deliveries for heavy components in an extensive range of low alloy to advanced stainless steels, as well as aluminium, and special alloys and other high-performance materials. 17 Markets and customers Scana Machining s most prominent markets are within oil and gas, energy and marine, as well as in paper, heavy industry and military defence products. Sales are made through our subsidiaries and larger international groups with affiliated industry in Sweden and Norway. The products the company manufacture are to a large extent exported to end clients. Scana Machining s most important competitive advantages are short, internal decision processes from enquiry to delivery and our employees technical skills, knowledge and commitment to resolve our customers needs. In collaboration with Scana, quality control through the entire value chain is strengthened through future-oriented production facilities. The businesses within oil and gas, marine and military defence products will remain stable and growing markets for the company. The company is actively working to grow into new customer groups with special focus on customers in the Norwegian oil and gas market. Products and services The company supplies subdeliveries within welding, machining, assembly and testing of systems for heavy components of steel, stainless and aluminium. We supply production technical services as well as manufacture of smaller structures. Scana Machining possesses an advanced calibration operation with regard to national and international standards. The company also sells calibration services to several external customers.

18 18 Managing director: Peter Jansson Scana subsea Scana Subsea delivers subsea and riser applications to the oil and gas industry. Having strong materials and production skills, the company takes an overall responsibility for manufacture, assembly and testing of complex products. The company adds value for customers through optimal solutions. The company works with sales, contract management and product development. All manufacture is done by the steel producing companies within the Scana group, completed by high quality workmanship from Scana Machining. In addition, cooperation with partners outside the group is established. The company will utilize Scana s strong market position within steel and forged production of long and heavy components. Markets and customers Scana Subsea exports 100 % of its sales. Customers range from oil companies to system/product suppliers internationally, with USA as the largest market. The North Sea, Brazil and Southeast Asia are also important commitment areas was a good year for Scana Subsea, securing several large contracts for risers in the North Sea and the Gulf of Mexico. Sales have shown a continually positive trend compared to earlier years. An important competitive advantage is Scana s experience in handling long and heavy products. The company also has a strong sales network. Risers will continue to be the company s most important product. For 2013, an increase in demand for risers is expected. But the company works hard to expand the product range. Through Scana Subsea, Scana attains a more efficient project management, taking full responsibility for the entire manufacturing process. This renders increased efficiency and reduced costs for the customers. The effect of these improvements is now seen as a continous increase in orders. The order reserve for Scana Subsea at the beginning of 2013 is over NOK 300 million. This is a record for the company and for Scana s commitment to the subsea segment. Products and services The company s main products are forged, rotation symmetrical, long and thin components with a high technical content for the oil and gas industry, in riser and tendon applications. Material technology and metallurgical skills are also a part of the product portfolio. The company s products are often key components for the customers. Scana Subsea delivers components at dif fe rent completion degrees, depending on the customers re quirements. The company puts emphasis on research and development to further strengthen the quality of its products.

19 Managing director: Sten Israelsson SCANA STEEL AB Scana Steel AB is a cost-efficient real estate firm, managing Scana s real estate in Karlskoga, north-east of Väneren in Sweden. 19 The company owns 35,000 m 2 floor space in total. This mainly consists of industrial premises, with additional office and service areas. The business is located on the old industrial site of Bofors, and the properties were acquired in 1997, when Scana bought the property of Bofors AB. Following still ongoing structural changes in the defence industry, a need to see new activity in the halls has arisen; to replace the existing tenants lessened need for rented area. At Karlskoga an increasing amount of free halls are accumulating. Scana Steel, however, is still letting a large portion of its halls and has avoided reduced volumes throughout the year. Services Today, five external companies rent areas for a total of 18,500 m 2. The remaining areas are rented and utilized by Scana Steel Booforge and Scana Machining. Scana Machining repossessed premises previously rented by Axcel Components. Logistics and geography From a Swedish perspective, Karlskoga is located almost in the middle of a centre for logistics. With the improved road E18 towards Örebro and Karlskoga, Karlskoga today represents a strong, competitive alternative to other nearby places. Business has been positive in 2012 for Scana Steel AB and its tenants. Especially the logistics companies have seen a positive development and are asking for larger areas.

20 20 Group Director/Managing Director: Kristian Sætre BUSINESS AREA SCANA PROPULSION Scana Propulsion was established to coordinate and increase the marketing efforts for Scana s propulsion technology of propellers, gears, thrusters and remote control. Scana Propulsion is marketed as a complete equipment package in the global ship equipment market. The Scana Propulsion group of companies was from January 1st 2012 structured as group in the group, comprising the companies supplying equipment and services for ship propulsion and maneuvering. The core market of the business area is in the shipping industry, and key customers are shipyards, shipping companies, ship designers and other suppliers of ship equipment. vessels and other special vessels to include offshore and fisheries. Geographically, the main activity is located in Asia, Europe and the U.S., in addition to Brazil s emergence as an interesting market. Within the product area Scana Propulsion, Scana coordinates sales, marketing, purchases, product development and manufacturing of propellers, gears, thrusters and remote control systems. The steel companies have products that are included in the propulsion companies products, giving a substantial control with the value chain and added value within the Scana group. Strategic position The business area is a market leader of complete and technically sophisticated solutions and is represented in the most central markets. The main segment of Scana Propulsion is offshore anchor handling vessels, seismic Scana has recent years enabled a strong growth in the service market. This has partly compensated for lower activity in new sales. Scana s growth within service and repairs is expected to continue in 2013.

21 21 Scana Propulsion

22 22 SCANA VOLDA Managing director: Kristian Sætre The former Volda Mekaniske Verksted, was established in 1913 in Volda, Norway, and hence in 2013 celebrating 100 years anniversary. The company was taken over by the Scana group in Volda Mek. started as an engine factory and later developed into including shipbuilding and production of propellers and gears. At the end of the 1980s, the last hull was delivered. Since 1996, gears and propulsion systems have been the most important products. Scana Volda has been a Consortial Partner to MaK (Caterpillar) since SCANA SINGAPORE Managing director: Lars Alvsvåg Established in The company is responsible for sales and service on Scana s marine products in South- East Asia. Personnel local to the area perform product service and installation, in addition to service on related products for external companies. SCANA MAR-EL Managing director: Bjønn Tveito The company is located in Dalen in Telemark, Norway, and has been a part of Scana since Scana Mar-El is one of Europe s leading manufacturers of maritime control systems for ship propulsion and maneuvering, in addition to control systems for special applications. Since the start in 1974, the company has delivered approx 3,000 control and navigational systems. SCANA SHANGHAI TRADING Managing director: Stig Hjelvik Established in Previously, the company was registered as a representation office for Propulsion. The company is now a self-contained company, responsible for its own revenue and profit. Main business is new sales and service for the Chinese shipbuilding market. SCANA ZAMECH Managing director: Jacek Pabian The history goes back to 1837 when Ferdinand Gotlob Schichau opened the machine workshop Schichau Werke. The workshop manufactured elements for steam engines, equipment for sugar factories, oil mills and lumber mills, as well as hydraulic presses and rollers. In 1855, the world s first seagoing ship with a steel hull and a propeller was launched from Schichau Werke. Scana acquired the company in In the recent years, the most important products have been tunnel thrusters and large propellers. During 2012, all manufacture of new products was moved to Scana Volda. Today, Scana Zamech is a sales and service company. In addition, the company provides certain engineering services for Scana Volda. SCANA PROPULSION US INC. Managing director: Dan Gaiennie Established in A historically large volume of orders and a promising market made it feasible and necessary to establish a sales and service station in the proximity of the Gulf of Mexico. The company is located in Mandeville, close to New Orleans.

23 23 Scana Propulsion is represented through offices, strategic partners and agents throughout Norway, Poland, Iceland, the Netherlands, Turkey, United Arabic Emirates (UAE), Singapore, India, China, Korea, USA, Brazil and Chile. By structuring our organization in this manner, Scana Propulsion can nurture closer relationships with customers regarding both sales and service preparedness for the marine fleet. Scana Propulsion Service is a special profit centre in the group and performs the service and after market activities within the business area. Scana Propulsion Service has service personnel located in Norway, Poland, Singapore, China, USA and Brazil in addition to service agreements with independent companies in selected markets. The companies constituting Scana Propulsion have gained a good international reputation and typically export 80 % of their products, in total. Markets and customers Scana Propulsion s core segment is offshore, merchant vessels, speedboats, passenger ships and fishery. Geographically, the main activity is located in Asia, Europe and the US. European ship owners and design companies are very important for the markets where Scana Propulsion operates. In Brazil, there is a bustling activity in the offshore and merchant segment as a result of Petrobras extensive development program. This is an important market for Scana Propulsion. Scana Propulsion s hallmark is technologically advanced solutions and a strong market position for ships for demanding operations, like anchor handling vessels and other special vessels. Scana Propulsion promotes complete equipment packages in the global ship equipment market, but the products are also sold as independent units. Gear from Scana Volda is an example of a strong brand in the market, and similarly, control systems from Scana Mar-El. In co-operation with engine manufacturers, Scana offers complete propulsion packages for ships, consisting of engine, gears, propellers, shafts, tunnel thrusters and propulsion control. Caterpillar is a consortial partner and holds an important role in this segment. Close co-operation with ship designers and leading electronic suppliers has created a clear focus on developing products that are a part of eco-friendly hybrid and diesel-electric propulsion systems. Among our partners, there is a great interest in developing propulsion solutions in co-operation with Scana. A continued commitment to complete packages within hybrid and diesel-electric solutions is expected to

24 24 yield increased results. Scana Propulsion s product line is included with several design companies, and they are marketing these products in different ship designs for their clients. Scana Propulsion Service has a strong commitment to selling service to the global market. This commitment has yielded positive results. Synergies between the propulsion companies and a continued international commitment are expected to increase turnover and profit for the service organization. Sales and marketing of service is aimed mainly at Scana s own products related to commissioning, maintenance, retrofit and breakdown. Diagnostic services and other consultancy services are also provided was in general a challenging year in the business, mostly due to excess contracting in 2007 and 2008 and the resulting excess tonnage. The financial crisis with consequential limitations on investment desire and finances in shipping, amplified an already slow contracting. Scana Propulsion is also affected by this situation. Nevertheless, due to a large share of contracts going to the offshore fleet, there has been a satisfactory order intake. In 2012, the company signed strategically important contracts within the offshore business in Singapore, USA and Norway The weak market is expected to last also through Nevertheless, the demand for vessels within offshore and windmills is expected to increase. These markets are important for Scana Propulsion. Lower activity at the shipyards has resulted in shorter delivery times on the Propulsion products, from typically 2-3 years in heated periods to less than one year. An effect of this situation is that new contracts currently has a faster effect on results. Products The product line of Scana Propulsion: Controllable pitch propellers from mm. hub diameter (8 m. max outer diameter) Fixed propellers in diesel-electric propulsion systems with gears

25 Reduction gears up to 20,000 kw engine output Tunnel thrusters up to 3,000 mm diameter and 3,000 kw Contra rotating propellers (CRP) in combination with dieselelectric powering. Max power acc. specs. Permanent magnet electrical motors directly connected to controllable pitch propellers. Max power acc. specs. Maritime control systems for ship propulsion and manoeuvring Rudder control, control machines, thrusters controls Joystick systems Agency agreements for positioning sensors, joysticks and instrumentation Service and customer support: - Planned repairs and maintenance at dry docks - Service according to customer wishes and demands - Rebuilding and modernization for increased safety and better operations economy, plus eco-friendly solutions - Spare parts - Training, consultation and surveillance Product development In the market for high-technological solutions, development is of paramount importance especially development governed by specifications from the customer. Consequently, Scana Propulsion has continuous product development and upgrade as an integral part of the group s work. Deliveries are adapted to each ship and are detailed in collaboration with ship owners and ship designers. The development team of Scana Propulsion develops, projects, manufactures and sells propulsion solutions for all ship types, in a scale of up to 20,000 kw engine output. The business area also has a department for development and manufacture of remote control systems. Scana Mar-El s agency department sells very high quality components. These are utilized offshore, in telecommunication, energy, sea and land based defense installations and in other industry. This department represents large international players in advanced, high-tech components, and technological companies in Norway are in the customer portfolio. Scana Propulsion has a strong market focus and frequently commercializes new products. Products adapted for hybrid and diesel-electric solutions have a clear focus was the year of break-through for contra rotating propellers (CRP) in combination with permanent magnet electric motors. The project was carried out in cooperation with Salt Ship Design and Inpower. The product has generated massive attraction world-wide. The product is, in addition to other applications, suitable for pure platform supply vessels (PSV s), a market segment to which Scana Propulsion with its former product portfolio had limited access. Scana Propulsion has through the years been developing a new generation tunnel thrusters, having optimized strength and reduced noise. This thruster was completed in 2011 and was introduced internationally in Important new orders of 2012 The order intake in 2012 was mainly for the offshore segment, service vessels for windmills, fishing and other special vessels. Following important orders may be mentioned: STX for the ship owner Iceman. A sophisticated and large double propulsion system for an AHTS, intended for use in arctic areas. BAE systems for Gulfmark Offshore. Delivery of two ships, with option for more. Kleven shipyard for Ugland Offshore. A contra rotating propulsion system with permanent magnet motors, resulting out of a co-operation with Salt Ship Design. Several important orders with Servogear for remote control systems for windmill service ships. The fishing vessel market has been active recent years, and Scana Propulsion signed several nice orders for this segment. 25