Part of Stena Line’s management team in the engine room on Superfast VII, one of Stena Line’s vessels on the Irish Sea.

SHIPPING, OFFSHORE DRILLING AND FERRIES

EVERYDAY PERFORMANCE EXCELLENCE AND ASSET-PLAY

Stena has been successful in shipping in past years because we have been able to combine unrelenting focus on quality and operational detail with getting our timing right when it comes to acquiring tonnage. Both these aspects are critical to any shipping venture and are mutually dependent on each other.

It is only by being close to our customers and active in our markets that we can understand where we are in the cycle and when it’s time to act. In addition to the daily operation “asset-play” has historically to a great extent contributed to our financial results. This dual strategy has also been the hallmark of 2013. We have systematically worked with enhancing our operational performance.

Stena Drilling has successfully secured commercial contracts for a majority of the fleet at attractive rates over the coming years, securing our prime source of cash flow. The drilling operation has continued to excel in performance.

Stena Line improved earnings before depreciation by MSEK 300, primarily through cost reductions. Achieving a low cost operation is essential for us to be relevant in our markets and to deliver long-term customer value. Improving the utilization of our fleet is the other pillar on which our future success rests. We have also succeeded in increasing our freight intake, growing volumes during the year by 7% or 15% if we also include recent acquisitions.

Using our core competence of managing larger systems of RoPax vessels in new growth markets has been a key target during the year. Through Stena SeaLine in the Black Sea and Stena Daea Line in Korea we have taken small, but symbolically important steps, to expand our ferry business. These establishments have let us build competence and local knowledge that will enable further growth.

The Stena Weco system has been expanded to operating about 50 product tankers at any given point in time. The operation is gradually developing into a fully integrated global logistics network for petroleum products, light chemicals and vegetable oils. We are combining our global expertise, in offices around the world, with a significant portfolio of longer-term contracts and spot parcels. The system has been preparing itself for the delivery of the ten IMOIIMAX light chemical tankers from mid-2014, which will give Stena Weco the ability to service our customers in a way none of our competitors can.

As a spin-off from the Stena Weco system, we have developed a new feeder company together with one of our largest customers, Golden Agri-Resources, under the name of Golden Stena Weco. This company is developing a sizeable fleet of smaller 15–20,000 ton parcel tankers specifically for the growing inter-Asia trade. It is a good example of how we can develop partnerships with our clients and enhance our global systems.

Another area that should be highlighted is the never ending pursuit of fuel consumption reduction. We have a ­target of annually reducing consumption by 2.5% across the fleet, a number we have been able to beat over a number of years. This result is a tribute to our innovative work as well as the everyday performance of our dedicated staff.

Not only do we save cost, but our fuel reduction initiatives are our primary tangible contribution to minimizing our environmental footprint. A fully laden Suezmax tanker at 14 knots in the Stena fleet of today consumes less than 50% of what it did 15 years ago.

It is not only the everyday discipline of incremental improvement that should be highlighted, but also the asset positions we have taken.

In the summer, we ordered two semi-submersible drilling units of midwater type, one of which has a cancellation option, for operations in the North Sea and Norwegian shelf. This is a significant investment that will ensure that we will have a balanced drilling fleet of semi-submersibles also in the future. This position underscores our belief in our drilling capabilities, our relationship with our customers and the future requirements of global oil and gas exploration.

During the past 18 months, we have acquired nine second hand RoPax vessels at quite favourable prices. These vessels are currently employed in Stena Lines network or chartered out in the market by Stena RoRo. This is yet another example of where we have had the financial strength to make investments counter-cyclically.

However, it is not the hardware that is our prime asset. Having 17,000 employees, mostly seafarers, that every day performs their duties with professionalism, care and loyalty is what Stena is all about. Having a culture whereby we live and breathe safety, quality and performance is the basis for all our operational improvements or asset investments.

Looking into 2014, we will still have a challenging market in many areas. Due to the time lag between when a vessel is ordered and when it is delivered, we have only gradually seen the effects of less new building orders after the financial crisis in 2008. Demand is generally strong, but perpetual over-investment is a challenge for shipping. Shipyard prices for vessels are increasing and I therefore foresee that our “asset play” activity will be limited in the near-term future. This will give us room to continue to focus on optimizing our operations and integrating the significant investments that have been made during the past years. Fully capitalizing on our vast wealth of marine and technical expertise, delivering tangible value to our customers will be the key focus area in 2014.

Carl-Johan Hagman

Next in Annual Review

SUSTAINABILITY

Responsibility and carE in every business