• USD 66 millStable cash flow
    in volatile markets

  • 42%Book equity including minority
    interest was USD 337 million at year end

Key figures

Amounts in USD million201420132012
Profit and loss
Gross operating revenues (1) 467 478 571
Gain from sale of fixed assets3 3 -
EBITDA (1) 66 60 72
Profit/(loss) before tax (incl. minority interests)1131-10
Profit/(loss) before tax (excl. minority interests)828-17
Profit/(loss) after tax (incl. minority interests)227-5
Profit/(loss) after tax (excl. minority interests)-23-12
Balance sheet
Total assets802 789 617
Total equity (incl. minority interests) 337 337 310
Total equity (excl. minority interests)315 316 296
Interest-bearing debt 324 299 157
Cash and cash equivalents 123 156 128
Net financial assets- (143) (29)
Cash flow from investing activities
Investments in vessels and newbuilding contracts95 147 60
Investments in other assets- 2 3
Sale of assets9 3 -
Equity ratios
Equity ratio (excl. minority interests)39%41 %49 %
Equity ratio (incl. minority interests)42 %43 %50 %
Number of employees onshore (2) 158 146 150
Vessels (3)
Pool vessels 58 51 75
Klaveness Chartering - chartered vessels45 38 26
Cabu carriers (incl. MV Baru)6 7 7
Selfunloader vessels5 5 3
Container vessels8 5 2
Vessels under construction5 7 6
  • (1) Income/loss from physical and financial freight
  • (2) Number of employees at year end for Oslo, Singapore, Shanghai and Rio.
  • (3) Per year-end. Vessels hired in on spot voyages are not included



Torvald Klaveness is a company that has always challenged the status quo. The success and legacy of the company has centered on finding new ways to improve technology and business models in shipping. From enabling the transportation of cement in bulk in the 1960s, to establishing commercial pools in the 1980s, to developing combination carriers and the bulk operator model in modern times, Klaveness has always been an early mover. Our vision of “impacting the nature of shipping” underpins our continued commitment to changing and improving the industry that we are a part of.

Lasse Kristoffersen, CEO, Torvald Klaveness

While innovation for many decades has centered on improving efficiency through standardization, recent years have been impacted by high fuel cost. When vessels were expensive and fuel was cheap it was easier to build ships for one purpose. But when fuel gets expensive and steel becomes cheaper, ballasting to the next cargo becomes relatively expensive. Klaveness’ combination carriers have contributed to lowering fuel costs for customers and have proven very resilient in the current market, which is also a contributing factor to the fact that the company delivered a positive result in a very poor market. The substantial drop in fuel prices at the end of 2014 and in early 2015 does not change our view that the focus on energy efficiency in shipping, both to reduce transportation costs and reduce the environmental footprint, will remain paramount in the years to come.

Klaveness continued to grow in 2014, taking delivery of the final three container new builds from a yard in China. An eight vessel program for Kamsarmax vessels was also secured at the same yard, where Klaveness has sold on contracts for six of the vessels. Together with three new combination carriers ordered at another yard in China, we continued to have a high pace in our investment program and believe that the timing is good for a continued fleet expansion.

What probably pleased me the most in 2014 was the fact that our chartering, trading, and pool business turned a healthy profit despite very difficult markets. This is the result of hard and diligent work from the different teams in ensuring both correct positioning and good execution. The tiny margins available in this business is why the Klaveness value of “craftsmanship” is so important – you really need to know your business in detail to avoid losses and extract value.

In my letter last year I was cautiously optimistic for the shipping markets, but labeled China as “the dark horse”. Unfortunately for the markets, the dark horse turned out to be exactly that and in particular China’s fall in coal imports was a key contributor to the historical low market for dry bulk in 2014. With a China struggling to maintain its growth and import levels, and a substantial order book due for delivery over the next year and two, we are preparing ourselves for weak markets with limited volatility.

We are today witnessing perhaps the worst dry bulk market in history, and it comes after a period of very limited earnings. Liquidity is again a hot topic for many companies. In this world it is satisfying to see that our diverse business model which relies less on underlying markets enables us to navigate these waters safely. Still, we also need to be aware of changing times and look for new business models and new talents.

Over the last few years Klaveness has carried out several internal re-organization and system upgrades, resulting amongst other in the offshoring of daily accounting to our Manila office. At the time of writing we are working to move parts of our ship operations activity to Manila in order to better utilize our seagoing expertise. These changes enable us to improve our scale-ability whilst keeping a competitive cost base, and would not be possible without the combined effort of our many dedicated employees.

While the past has been characterized by standardization, and the present by fuel optimization, I believe we are turning a new corner in shipping where our industry will be shaped by digitization. I do not have all the answers as to how and when this will change our industry, but I am convinced that this will represent a new opportunity for Klaveness to impact the nature of shipping.


1. Highlights

Despite continued weak shipping markets Torvald Klaveness delivered a positive result and maintained a high solidity and good liquidity in 2014.The total number of vessels under management rose from 131 vessels to 144 vessels during the year. Three new container vessels were delivered from yard and a third combination carrier was added to the newbuilding program.

Klaveness achieved an EBITDA of USD 66 million in 2014 (USD 60 million). The company had a profit before tax (EBT) of USD 11 million (USD 31 million). Cash flow from operations was USD 32 million (USD 25 million). The balance sheet remains solid with a book equity including minority interest of USD 337.1 million at year-end corresponding to an equity ratio of 42 percent.

The market for Klaveness’ specialised vessels remained satisfactory in 2014. In the Cabu segment several contracts were renewed and new contracts were concluded, securing continuation of volumes carried in the past and contributing positively to the Cabu fleet’s performance going forward. The company’s fleet of selfunloading bulk carriers, which continued to be employed in the CSL International pool, performed well. The container market continued to be weak in 2014, but Klaveness’ container vessels were employed throughout the year with consecutive renewals at rates above the general market due to their fuel efficiency.

Despite weak dry bulk markets in 2014, the Chartering and Trading activity increased during the year and generated positive results. The number of vessels under commercial management also increased during the year.

There were some operational issues and vessel incidents in 2014, the most important being that the MV Barry touched ground near Lagos breakwater in October 2014.

Klaveness has been under investigation by Økokrim (the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime) after the company itself notified Økokrim about possible irregularities in commission payments to a broker in the Middle East in 2003/04. In 2014 this matter was brought to a close when Cabu Chartering AS, a subsidiary of Rederiaksjeselskapet Torvald Klaveness accepted a fine from Økokrim.

The Board of Directors of Rederiaksjeselskapet Torvald Klaveness approved the transition from Norwegian Generally Accepted Accounting Principles (NGAAP) to International Financial Reporting Standard (IFRS) as endorsed by the European Union for some of the Klaveness companies. As of December 31, 2014 Klaveness Ship Holding AS, T. Klaveness Shipping AS, Klaveness Selfunloaders AS and Klaveness Bulk AS will report its financial statements in accordance with IFRS.

Klaveness Chartering AS was demerged with effect from January 1, 2015, and now solely consists of dry bulk chartering and trading activities. All management services and employees were transferred to Klaveness AS in the demerger.

2. Newbuilding program

During 2014, Klaveness took delivery of three more 2,500 TEU, fuel efficient, geared container vessels from Yangzijiang Shipbuilding in China, thereby increasing Klaveness’ container fleet to eight vessels. Furthermore, Klaveness declared an option to add a third combination carrier of 80.500 DWT to the two combination carrier newbuildings ordered at Zhejiang OuHua Shipbuilding Co. Ltd. in China in 2013. The three vessels are estimated to be delivered in late 2016 and in early 2017. These three newbuildings will be part of the Cabu fleet when delivered from the shipyard.

The dry bulk investment program that started in 2013 was further expanded in 2014, with the declaration of two more options to build 82,000 dwt vessels at Yangzijiang Shipbuilding. The program now includes eight vessels, whereof two are held by Klaveness, and six were re-sold to other owners. Klaveness acts as project manager and oversees the construction of all eight vessels.

3. The markets

An uneven global recovery continued in 2014. World GDP growth stayed flat in 2014 at 3.3 percent compared to 3.3 percent in 2013. While activity in the United States and the United Kingdom has gathered momentum, the recovery has been weaker in the Euro Area and in Japan. According to the IMF, GDP grew by 2.4 percent in the U.S., 0.8 percent in the Euro Area and 0.1 percent in Japan. The growth in China fell from 7.8 percent in 2013 to 7.4 percent in 2014. Growth in other developing countries in 2014 was generally low due to weak external demand, political uncertainties and supply constraints. World trade grew at 4 percent in 2014, well below the pre-financial crisis average annual growth of about 7 percent.

After peaking in June, oil prices tumbled and ended up declining by more than 50 percent during 2014. Due to weak demand and oversupply, triggered by OPEC’s decision to not support oil prices by production cuts. Bunker prices followed oil prices, and bunkers with delivery in Singapore ended at 299 dollars per metric tonne (616 $/mt) at year-end.

The dry bulk market weakened considerably during 2014 with both lower freight rates and vessel values. The weak freight markets were mainly driven by low coal imports to China and Indonesian bans on raw minerals exports. On the positive side, Chinese iron ore imports and steel exports rose by 12 and 50 percent respectively. Volatility in the Capesize market continued with the 4 T/C Routes for Baltic Capesize Index rates ranging from USD 3.700/day to USD 35.300/day. The 2014 average of the 4 T/C Routes for the Baltic Panamax Index and the 6 T/C Routes for Baltic Supramax Index ended at 7.718 and 9.818 $/day, respectively. The newbuilding price index increased by 4 percent in 2014, but is still 45 percent lower than the 2008 peak, while the 5-year old second-hand vessel values declined by 15 percent.

The container market for feeder vessels stayed flat at low levels in 2014. A total of 7 sub-panamax container vessels were delivered in 2014 and 25 were scrapped, reducing the fleet from 661 to 645 vessels during the year. Containerized trade volumes grew about 6 percent. The total container vessel capacity increased by close to 5.5 percent. The total number of idle container vessels dropped from 235 to 118 vessels in 2014. The number of idle container vessels in the 2000-5000 TEU dropped significantly, whereas the number of idle vessels in the 500-2000 TEU segment fell slightly. The average time charter rate for sub-panamax 2.500 TEU standard type was USD 7.292/day in 2014 compared to USD 7.592/day in 2013.

4. Health, safety and environment

Throughout 2014 vessels managed by Klaveness Ship Management AS experienced 26 minor, 2 medium and 1 major personnel injury. This number of injuries corresponds to 1.5 injuries per ship year – a reduction from 1.6 in 2013, and slightly above the level in 2012. The major injury occurred onboard MV Balto where an Ordinary Seaman was caught between the winch drum and the base during mooring operations. The Ordinary Seaman was repatriated and later found to be permanently unfit for duty. Preventive measures such as mandatory meetings prior to mooring operations have been implemented in order to mitigate the risk of injuries.

The container vessels Barry, Bardu and Balao have experienced in total six incidents in the port of Lagos, Nigeria throughout the last 14 months. The most serious event occurred when the MV Barry touched ground near Lagos breakwater in October 2014. The investigation of the incident will be concluded within Q1 2015, and preventive measures will be implemented in the safety management system of KSM. All events in large involved the use of local pilots.

In 2014 there were ten vetting inspections of the Cabus; one by CDI and nine by SIRE. All passed.

The KSM fleet has undergone 66 Port State Controls in 2014, whereof one resulted in detention for four hours. The average number of deficiencies per inspection was 1.5. In 2013, the worldwide average of deficiencies per inspection was 2.4.

The piracy activity in the Indian Ocean has been low throughout 2014, and there have been no hijackings of commercial vessels in the Gulf of Aden or the Indian Ocean in the last year. This is mainly due to the presence of military forces, use of armed guards on board, and owners more actively using best management practices. The piracy activity in the Gulf of Guinea remains unchanged, with attacks and kidnappings mostly affecting tanker vessels. All KSM vessels participate in the voluntary reporting regime for Gulf of Guinea (MTISC-GoG) which is endorsed by Marshall Island and NSA.

5. Financial results

5.1 Results

Gross revenues from operation of vessels ended at USD 467 million (USD 463 million). The revenues were somewhat impacted by continued weak dry bulk and container markets. Other revenues were USD 23 million (USD 14 million).

The company had an EBIT of USD 27 million (USD 36 million). The result includes impairment on container vessels of USD 0.3 million, and other write downs of USD 0.3 million. Extraordinary items affecting operating profit where a loss on Baru scrap of USD 3.3 million, gain on sale of kamsarmax newbuildings of USD 3.4 million, provision for loss on dry bulk TC contracts of USD 0.5 million and net pension effects (transfer to new pension scheme) of USD 1.1 million. Also affecting the result was negative development of interest swaps and foreign exchange instruments of USD 2.5 million and increased interest expenses due to new bond loan. The net result from financial items was negative by USD 16 million (-USD 5 million). The profit before tax (EBT) was USD 11 million (USD 31 million).

At year-end 2014, the consolidated equity including minority interests was USD 337 million (USD 337 million), corresponding to a book equity ratio of 42 percent (43 percent. Book equity excluding minority interests was USD 315 million. Interest-bearing debt at year-end was USD 324 million and cash and bank deposits were USD 123 million. During 2014, Klaveness had a positive cash flow from operating activities of USD 32 million (USD 25 million). New investments in fixed assets amounted to USD 21 million, consisting mainly of yard instalments on vessels under construction.

5.2 Financing and going concern

Klaveness Ship Holding AS made a new senior unsecured bond issue of NOK 400 million (KSH02) in the first half of 2014. This bond issue was also listed on the Nordic ABM exchange. In connection with the placement of the new bond issue, Klaveness repurchased bonds with a total nominal value of NOK 100 million in the first bond issue (KSH01).

One Cabu refinancing was completed in the fourth quarter, and bank financing for all selfunloaders was secured in February 2015. Financing for the newbuildings is expected to be finalized in March 2015. The new bond issue and bank financing for the newbuildings has strengthened the company`s liquidity further.

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

There have been no major transactions or events subsequent to the closing date that would have a negative impact on the evaluation of the financial position of Torvald Klaveness.

6. Risk and risk management

The company’s business is exposed to risks in many areas. The Board places high attention on risk analysis and mitigating actions.

Market risks in the shipping markets relate primarily to changes in the freight rates, vessel values and counterparty risk. These risks are monitored and managed according to procedures and mandates decided by the Board. Torvald Klaveness hedges most of the oil price risk. The 50 percent drop in oil price in the latter half of 2014 had a temporary negative liquidity impact associated with cleared oil hedges. The effect was partially offset with lower working capital needs. To reduce currency and interest rate risk, the company has sold currency forward with maturity in 2015 and 2016, and entered into interest rate swaps converting floating interest payments to fixed rate. Ending 2014, the fixed debt interest portion of total debt is 72 percent.

Operational risks in the shipping and trading activities are managed through quality assurance and control processes and training of seafarers and land based employees. All employees attend an in-house training program to ensure companywide compliance with business ethics guidelines. Quarterly risk reviews ensure that risk-mitigating actions are executed and that new risks are identified, analyzed and managed. The organization is continuously working to learn from incidents and accidents by developing procedures and training accordingly.

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

At the end of 2014, the company has five new-buildings on order, whereof four have steel cutting in 2015. Risk of delays and failure of the yards to deliver exists. Klaveness has dedicated on-site personnel who supervise the building processes. Tier one Chinese banks provide refund guarantees.

There were no major unforeseen events of a financial nature during 2014. The liquidity risk of the company is acceptable, as financing is in place for the newbuildings and there is a relatively stable cash flow from the specialised vessels. Current cash and projected operating cash flow are considered sufficient to cover the company’s current liabilities.

7. Business areas

7.1 Dry bulk

Torvald Klaveness is a major player in the dry bulk market through AS Klaveness Chartering’s chartering & trading activities and the Baumarine and Bulkhandling pool operations. The portfolio of AS Klaveness Chartering consists of contracts of affreightments, short and long time charters and freight derivative contracts. Despite a negative market development in 2014, the level of activity in chartering and trading was higher than in previous years and the results better. A continued stronger presence in core trades, higher trading and operational efficiency as well as a very successful turn-around of the portfolio in the second quarter were the main reasons for the positive result.

Klaveness operates two tonnage ‘spot’ pools in the dry bulk market. ‘Baumarine’ for panamax and post-panamax vessels and ‘Bulkhandling’ for Ultra, Supra- and Handymax vessels. With a market under pressure and falling ship values, there have been changes in the pool tonnage portfolio as ships have been sold, redelivered or fixed on timecharter. Baumarine has however increased the number of ships from 29 to 38 during the year, while the number of vessels in the Bulkhandling pool was maintained at 23 ships. Baumarine showed a good performance and ended at a daily result of gross USD 8.600 which is approximately USD 700 above the BPI index. Bulkhandling ended the year with an average daily result of gross USD 8.700 which is approximately USD 900/day below the relevant index. Results for both Baumarine and Bulkhandling reflect the negative effect of decreasing bunker values.

The business area Ship Owning & Projects, covered in section 7.3, manages the company’s ship investments other than the combination carriers.

7.2 Combination carriers

The Cabu vessels are combination vessels that transport both dry cargo and caustic soda in the Far East, the Middle East and Australia. During 2014 one Cabu vessel was positioned from Australia to Brazil to service import of caustic soda and export of dry cargo from Brazil. The Cabu pool consists of six Cabu vessels. One older LR tanker, which was a part of the Cabu pool, was recycled in 2014. One external investor holds 50 percent in two vessels and 19 percent in one vessel. The pool result for 2014 remained stable at a satisfactory level. The vessels are largely employed on long and medium term contracts of affreightment with customers in the Australian and Brazilian alumina industry and this accounted in 2014 for about (65%) of the available vessel days, while dry bulk cargoes, which are mainly north-bound from Australia to the Far East or Middle East and from Brazil to US Gulf accounted for about (35%) of the available vessel days in 2014.

The three Cabu vessels ordered at Zhejiang OuHua Shipbuilding Co. Ltd. estimated to be delivered in late 2016 and early 2017 will be part of the Cabu fleet when delivered from the shipyard.

Several contracts of affreightment were renewed in 2014 and new contracts concluded, securing continued good working relationships with key customers and contributing positively to the Cabu fleet’s performance going forward.

7.3 Ship owning & projects

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

During 2014, Klaveness took delivery of three new 2,500 TEU, fuel efficient, geared container vessels from Yangzijiang Shipbuilding in China, completing the series of six. The container fleet now counts a total of eight vessels, ranging in size from 1,700 TEU to 3,100 TEU. The vessels were chartered out to liner companies for periods of less than 12 months, and all vessels have been employed throughout the year. While the new vessels have been earning rates above the general market due to their fuel efficiency, rates have in general been near operating cost in the segment. The two 10-year old vessels “Baro” and “Barry” both went through drydocking in 2014.

The company’s fleet of selfunloading bulk carriers has been stable at five vessels through the year. The vessels have all been employed in the CSL International Pool. The pool has a diversified contract portfolio and the vessels are mainly employed in North America and the Caribbean. Results weakened towards the end of the year, due to a combination of counterparty issues, weather related delays and negative effects from falling bunker prices. The vessels “Baldock” and “Barkald” were docked in 2014.

The dry bulk investment program that started in 2013 was further expanded in 2014, with the declaration of two more options to build 82,000 dwt vessels at Yangzijiang Shipbuilding. The program now includes eight vessels, whereof two are held by Klaveness, and six were re-sold to other owners. Klaveness acts as project manager and oversees the construction of all eight vessels.

One of the bulk carrier newbuildings re-sold in 2014 was chartered in for four years from the buyer, growing the “dry bulk investment” portfolio to two owned and two chartered vessels.

8. Organisation

At year-end, Klaveness had 158 employees located in Oslo, Singapore, Shanghai, Manila and Rio de Janeiro. All employees were employed in regional Klaveness offices. In Oslo 31 percent were female, while at the offices in Asia 49 percent were female. Absence due to sick leave was satisfactory, averaging 1.4 percent in 2014 compared to 1.7 percent in 2013. Working conditions for employees are considered to be good.

806 seafarers are hired through manning offices in Manila and Constanta. In addition, some South African crew have been engaged. The retention rate for 2014 was 96 percent, indicating that Torvald Klaveness is able to attract and retain qualified seafarers. Torvald Klaveness endeavours to offer all employees, regardless of gender, religion, beliefs or nationality, equal and attractive career opportunities.

The Board of Directors expresses its appreciation of the work done by all the employees during 2014.

9. Outlook

World GDP is expected by the IMF to grow by 3.5 percent in 2015, supported by gradual recovery in high-income countries and low oil prices. High-income countries are likely to see growth of 2.4 percent in 2015, up from 1.8 percent in 2014, on the back of gradually recovering labor markets, ebbing fiscal consolidation, and low financing costs. Economic growth in emerging countries is expected to decelerate from 4.4 percent in 2014 to 4.3 percent in 2015, due to weaker growth in China and Russia, and low commodity prices.

Deliveries of new dry bulk vessels slowed in 2014 to its lowest level since 2009. In 2015 it is expected that deliveries will increase, based on growth for Capesize and Supra/Ultramax-vessels, while Panamaxes will continue to decrease. Expectations to the freight market have fallen through 2014, and are currently at very low levels. At year-end 2014, the forward spot earnings for a Panamax in 2015 was 7.600 $/day. At the same time, fuel prices have fallen substantially, decreasing the cost of transportation, but also increasing the likelihood of increased average vessel speeds that could affect supply negatively.

Scrapping in the container vessel market continued in 2014 with more than 400,000 TEU being taken out, close to the record scrapping level of 2013. The orderbook for the sub-panamax segment is still limited with a continued scrapping potential going into 2015. The recovery in rates for container feeder tonnage depends on the continued consolidation amongst the liner operators and to what extend further segment cascading will take place. The expected supply and demand situation appears more favorable going into 2015, compared to the situation in the beginning of 2014, and demand and supply are both expected to grow by 6.5 percent.

Klaveness expects increased volumes in contracts of affreightment and vessels under management in 2015.

10. The parent company

The result for the parent company, Rederiaksjeselskapet Torvald Klaveness, was a profit after tax of USD 19 million for 2014 (USD 4 million in 2013). The proposed transfer of the profit for the parent company is shown below:

Dividend                                         USD 2 million
Transfer to other equity              USD 17 million