CEO COMMENTS

2015 was a good year, but it looks like tough times ahead

People are worried. The less well paid half of the western population has not received a salary increase for more or less twenty years. Digitalisation is transforming the way we communicate and how we act. Robots that communicate with each other are taking over in industrial production and also replacing many workers in service industries. Growth is not sufficiently high to overcome unemployment, particularly for immigrants who need jobs. The manufacturing industry is suffering from a reduced need for raw materials. Against this background, Stena is proud of 2015 – a year in which we have achieved our second-best results ever.

A stable conglomerate with growing volumes and revenues

In our ferry operations, volumes for freight and passengers have grown by six and three percent, respectively. World consumption of oil is increasing by two million barrels per day, giving a boost to the tanker markets. Unsatisfied demand for new housing is developing in most European countries, particularly in Sweden, where immigration is creating rapid population growth. Our diversified portfolio of companies in Stena Adactum showed an improved performance. Our exposure to oil drilling and LNG tankers created significant losses, which were absorbed by other parts of our businesses.

Supporting each other is a fundamental concept of a conglomerate. Our business concept is not to maximise profits every year, but to create value that ­enables our company to live a long life for the benefit of ourselves and future generations. Stena AB has never made a loss during its 77-year history.

“Every year, every morning is the start of something new.”

Fresh start for each generation

Despite this, our employees must feel that they are the first generation. every year, every morning is the start of something new.

  • It starts here, it starts with you – that should be the agreement! But are our employees really aware of their responsibility and do they have the power to take on this responsibility?
  • What promises are to be fulfilled?
  • If we are not our customers’ first choice – then we are no choice!
  • Service is expected – loyalty is earned.

We continue to believe in relationships and earn repetitive business even though some negotiations are extremely tough. Everything starts with questions and finding the right solutions. Audits, inspections and observations ensure that things are measured and get done.

Caring is our best characteristic

In our Ferry and Drilling operations, we have new management teams who care. For each business customer, we collect customer satisfaction reports. For our passengers, we conduct ongoing customer satisfaction surveys, with an emphasis on the share of very ­satisfied customers. Fortunately, our customers’ satisfaction, measured by the index and percentage of repeat customers, is increasing. Stena Property has been named best property owner in Sweden this year thanks to our continuous commitment to relationship manage­ment. Stena Drilling’s quality of performance and their good relationships give me optimism about the future employment of our drilling units, albeit at lower rates for the period after 2016.

From a Group perspective, we also show care by means of continuous investments and good liquidity in order to absorb future shocks. Capital is the result of previous work. Not having respect for capital is the same as not respecting people’s previous efforts, which in turn means not respecting people at all.

Caring is an important expression for us. Care in the form of attention to detail and good business is clear to see. In more general terms, we talk about and measure customer care, financial care and care for employees, partners and society now and in the long term.

Being effective and skilful in terms of costs and resource utilisation in every­thing we do is an important mindset. Our continuous savings efforts have resulted in 15% lower costs during 2015. The extensive focus on activities aimed at reducing energy consumption and environmental impacts has resulted in a reduction of 3.8% per nautical mile in fuel consumption for Stena Line in the last twelve months. Converting the main engines on our ferry Stena Germanica to run on methanol instead of marine diesel oil has meant that sulphur emissions can be eliminated completely, while NOX can be reduced by 60% and particle emissions by 90%. With future bio-methanol and renewable methanol, the CO2 impact on the environment may disappear entirely.

Innovation is another mindset. During the last year, we have focused our innovation on the opportunities that digitalisation can offer us. With 22 ferry lines in Northern Europe, we have an advantage in digital marketing and are in continuous contact with passengers and freight customers. Marketing through algorithms is in an early but important stage for us. Our different business areas do not appear to have suffered any harm from the consequences of ­digitalisation. Travel is increasing, e-commerce is ­creating more packages for transport, while our new expanded IT systems are enabling energy efficiency and improved safety systems for vessels, drilling units and properties, including improved reporting for business management. So, digitalisation has been good for us so far, but we need to accelerate our understanding of its consequences and our ability to adapt to them.

The world’s consumers are spending more and more time online. Stena Line has been developing its presence in digital channels for years. As a result, sales have increased and the check-in process has become much easier for travellers.

At least one percent of our profit is added directly or indirectly to non­deductible charity measures or ­cultural development. Sponsorship is roughly in line with our non-deductible expenditure. With a focus on our customers, reinvestment of 89% of our profit plus depreciation and the aim that every­thing we do must be for the benefit of society at large, we believe that our contribution to society is positive.

With our long-term goals, new management in many areas, and fifteen thousand employees, it is important to safeguard the continuous development of our people. Stena has always invested about SEK 150 million annually in training. This year we have expanded our ambition to include internal leadership programmes for existing and future high potentials.

And not only our people, but also our physical assets need nurturing. So far, no Stena vessel has been sold by us for scrapping. Maintenance of our vessels will keep them employed until technical development creates economically ­necessary substitutes. It is my hope that we shall still be able to sell our older vessels above book value in the future.

Care and co-responsibility

As everything is about caring, I feel that we are ready to change and embrace a new commitment. This involves moving from:
– “Take care” to
– “I care – We care”

With these words I would like to thank everyone who works for or supports Stena as an employee, customer or partner. Despite tough times ahead, we believe in both what we do and what we achieve. And most of us appear to love what we do.


Gothenburg, 28 February 2016

Dan Sten Olsson
CEO Stena AB

Highlights 2015

Stable growth

  • Revenues1) SEK 36.4 billion +8%
  • EBITDA1) SEK 12.4 billion
    – ”all time high” +26%
  • Profit before tax
    SEK 4.5 (2.8) billion

Strong liquidity and credit profile

  • Available cash, unused credit facilities and financial assets, SEK 25.9 billion2)
  • Cash conversion cycle 5 (19) days
  • Operating free cash flow including investments SEK 3.9 (1.5) billion

Strategic expansion

  • Total investments in 2015 SEK 5,7 billion.
    Mainly SPS3) and BOP4) for Offshore
    Drilling, and new construction for Stena Property
  • Newbuilding projects:
    – 9 IMOIIMAX vessels
    – One drilling unit

 

Strong balance sheet2)

  • Book value of vessel and rig fleet,
    SEK 46 billion
  • Market value of property portfolio,
    SEK 31 billion with loan to value 52% (43)
  • Net debt excl. property loans, SEK 33 (39) billion
  • Net debt to EBITDA excl. property loans,
    3.2x (5.0)
  • Equity incl. deferred tax SEK 48 (43) billion

1) Including net income from the sale of assets and changes in the value of investment properties
2) As of 31 December 2015
3) Special Periodic Service
4) Blowout preventer

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