Annual Report 2012


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OVERVIEWOFFISCAL2011ALTHOUGHRATESFORLARGEVESSELSTEMPORARILYRECOVEREDTOABOVE$30,000FROMSUMMERONWARDASCHINA’SIRONOREIMPORTSBEGANTOSHOWSOLIDGROWTH,FROMTHETURNOFTHEYEARRATESAGAINTURNEDDOWNASARESULTOFSUPPLYPRESSUREFROMNEWBUILDINGSANDLOWERSHIPMENTSOFIRONORECAUSEDBYBADWEATHERINPRODUCINGAREAS.MARKETCONDITIONSFORSMALLANDMEDIUM-SIZEVESSELSWEREWEAKOVERALLDUETOTHECOMPLETIONOFALARGENUMBEROFNEWBUILDINGS,DESPITESTRONGMOVEMENTSOFCOALANDGRAINTHROUGHOUTTHEYEAR.ASARESULT,OVERALLREVENUESFROMTHEDRYBULKBUSINESSINCREASEDYEARONYEAR,BUTPROfiTSDECREASED.FISCAL2012BUSINESSOUTLOOKALTHOUGHTHEMARKETENVIRONMENTISEXPECTEDTOREMAINADVERSEINTHEFIRSTHALFOFfiSCAL2012DUETOCONTINUEDPRESSUREFROMTHEDELIVERYOFNEWBUILDINGS,WEEXPECTTHESECONDHALFTOBEATURNINGPOINTLEADINGTORECOVEROFTHEMARKETTHROUGHGRADUALNARROWINGOFTHEGAPBETWEENSUPPLYANDDEMANDOFVESSELTONNAGE,PARTLYATTRIBUTABLETOCONTINUEDSCRAPPINGACTIVITIES,ANDDESPITECURRENTUNCERTAINTYWITHREGARDTOFUTUREWORLDWIDEECONOMICGROWTH.ALTHOUGHTHESIZEOFTHECOAL&IRONORECARRIERGROUP’SflEETWILLSOONINCREASETO100CAPESIZEVESSELS,THEGROUPWILLESTABLISHASTRUCTURETOENSURECONTINUATIONOFSTABLEEARNINGSBYFOCUSINGONBUSINESSFROMMEDIUM-TERMANDLONG-TERMCONTRACTSWITHDOMESTICANDOVERSEASCUSTOMERS.ATTHESAMETIME,THEGROUPWILLSEEKTOREDUCEENVIRONMENTALIMPACTANDDEVELOPACOST-COMPETITIVEFLEETTHROUGHTHEINTRODUCTIONOFENERGY-SAVINGNEWSHIPTYPES.THEBULKCARRIERGROUPWILLSEEKTOWINORDERSTOCAPITALIZEONTRANSPORTDEMANDINCHINAANDINCREASINGDEMANDINOTHERCOUNTRIESWITHDEVELOPINGECONOMIESANDWORKTOBOOSTPROfiTABILITYBYIMPROVINGSHIPALLOCATIONEFfiCIENCY.WEWILLALSOENGAGEINRISKMANAGEMENTDURINGMARKETDOWNTURNSBYSYSTEMATICALLYUTILIZINGMEDIUM-TERMANDSHORT-TERMCONTRACTSASWELLASFORWARDFREIGHTAGREEMENTS(FFAS).THETHERMALCOAL,WOODCHIPANDPULPGROUPWILLFURTHERSOLIDIFYITSSTABLEEARNINGSSTRUCTUREBYBASINGITSOPERATIONSONLONG-TERMSERVICECONTRACTSWITHELECTRICPOWERCOMPANIESINJAPANWHILEATTHESAMETIMESECURINGCONSECUTIVEVOYAGECONTRACTSFORDEDICATEDSHIPSANDSHIPSONLONG-TERMSERVICECONTRACTSONTHEBASISOFTHESAFEOPERATIONOFWIDE-BEAM,SHALLOW-DRAFTCORONAVESSELS,WHICHHAVEACHIEVEDMARKETPENETRATIONASAHIGH-QUALITYBRAND.FURTHERMORE,THEGROUPWILLUNDERTAKEEXPANSIONOFTHEEARNINGSBASEBYPROMOTINGTHESUPERIORITYOFCORONA-TYPEVESSELSTOOVERSEASCUSTOMERSINTAIWANANDOTHERCOUNTRIES.INTHEWOODCHIPANDPULPTRANSPORTBUSINESS,WHILEMAINTAININGSTABLEEARNINGSBYUTILIZINGDEDICATEDSHIPCONTRACTS,WEWILLSEEKTOATTRACTNEWCUSTOMERSBYACTIVELYENGAGINGINTRANSPORTBETWEENFOREIGNCOUNTRIESOFBIOMASSCHIPSANDSOYBEANCAKES,PRINCIPALLYTHETRANSPORTOFCHIPSBOUNDFORCHINA.CARGOTONNAGECARRIEDBYDRYBULKCARRIERS(IN1,000KILOTONS)BALTICDRYINDEX(FREIGHTRATEINDEXFOROCEAN-GOINGBULKCARRIERS,ASCALCULATEDBYTHEBALTICEXCHANGEINLONDON.)(JANUARY1985=1,000)CHANGEINTHENUMBEROFSHIPSINOPERATION(VESSELS)NUMBEROFSHIPSINOPERATION(ASOFMARCH31,2012)(VESSELS)CAPESIZE88OVER-PANAMAX21PANAMAX48HANDYMAX46SMALLHANDY17CHIPSANDPULP16TOTAL236TOPICSCAPESIZEBULKERTHESTARTOFAJOINTVENTUREFORCAPESIZEBULKEROPERATIONSWITHNOBLECHARTERINGONJUNE5,2012,“K”LINEANDNOBLECHARTERINGSIGNEDANAGREEMENTTOFORMAJOINTVENTURETOENGAGEINOPERATIONOFCAPESIZEBULKERS.THENEWCOMPANY,KNOBLEHONGKONGLTD.,ISBASEDINHONGKONGANDHASBEGUNJOINTOPERATIONOFSEVERALCAPESIZEBULKERSINJULY.THEUNIFICATIONOFTHECAPSIZEBULKERBUSINESSESOF“K”LINEANDNOBLECHARTERINGTHROUGHTHISPROJECTISEXPECTEDTOYIELDMAJORSYNERGIES.21ANNUALREPORT2012


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