Foremost on my agenda was to fully familiarise myself with my new colleagues and the intricacies of Pacific Basin’s business while taking concrete steps in four priority areas, including:

• restructuring PB RoRo with a view to securing an exit in the medium term;
• conducting a strategic review of our dry bulk business and developing an investment plan that, as a priority, will change our fleet composition towards more owned ships;
• exiting other non-core businesses; and
• assessing the strengths and weaknesses of the Pacific Basin organisation.

I am delighted with the way the team responded to the Board’s call to consolidate the business and distil it down to what we do best. We have already begun to see the fruits of that work, as substantially all our resources are now directed towards our dry bulk and towage businesses.

Pacific Basin is a great company in excellent shape, much as I expected.

Our dry bulk business model and strategy are very focused – that is to say customer focused, cargo focused and segment focused – which I value. I believe in the importance of this and in doing just a few things really well. The Handysize segment continues to demonstrate great resilience in these challenging times and our business model allows us to continue to outperform our market index. All things considered, Pacific Basin’s focus on the Handysize and Handymax dry bulk business is absolutely where we need to be, and is therefore central to our investment plan.

We are now generating good returns from our towage business which we have grown over the past few years and which draws on its strong position in a niche market. The same could not be said of our RoRo business, and the Board’s decision in 2012 to exit the RoRo sector has allowed us to refocus on the few things that we do best.

As such, we are absolutely on the right course strategically.

No, as I have said before, the Board and I share a firm view that we should focus on what we do best, which rules out diversification into areas not linked to our existing core businesses. Instead we will continue to work very hard on strengthening our existing platforms, further building and expanding our customer relationships and cargo cover, mindful that one cannot build large cargo books and generate highly-efficient vessel utilisation without scale.

We sold the vessels because, at the time of my arrival at Pacific Basin, it became apparent to the Board that the prospects for large RoRo vessels had changed significantly and would not improve anytime soon. This resulted in a downgraded outlook for our RoRo business and a decision to exit this sector in an economically rational manner. We did not expect a full exit to be possible in the near term due to the dysfunctional state of the RoRo sale and purchase market. Fortunately, however, we were able to reach a deal with Grimaldi in what turned out to be a few months after I joined. Through that deal, we were able to secure full bareboat employment for the ships and purchase obligations with forward delivery, thus fully addressing our RoRo exit strategy.

We continue to access three external sources of capital – equity, convertible bonds and bank loans including export credits. Utilising the general mandate we received from shareholders in April 2012, we saw an opportunity to renew part of our convertible bond funding on terms that represented an attractive cost of capital. The opportunity made all the more sense as we considered market conditions right for growing our Handysize and Handymax fleets, and we were – and still are – readying ourselves for significant further investment in Handysize and Handymax ships in anticipation of further acquisition opportunities.

As is often the case with share or convertible bond issues, the initial reaction from some shareholders may have been one of concern about the effect of dilution on their holdings in the Company. However, our share price has since gained over 15% in value in the five months since the issue was announced, and investors whom we have since met have expressed their understanding and support for the convertible bond issue which stands to enhance our ability to build shareholder value in the medium and long term.

PB Towage delivered strong results in 2012 and we expect this business to make a valuable contribution to our group performance in 2013 as we consider ourselves well placed to participate in continued growth in Australian offshore energy projects as well as harbour towage activity. Australia is a niche market with significant barriers to entry and our position there is strong. We want PB Towage to grow in line with the increasing activity in this sector, though only through carefully considered investments against specific customer needs and project opportunities.

We expect the dry bulk market weakness of 2012 to continue through 2013 and that it will take some time before a sustained recovery is reflected in market rates. In the context of global uncertainty and fairly weak GDP growth, demand is likely to remain relatively healthy as it was in 2012 when dry bulk demand grew a robust 7%. However, overall net growth in the global dry bulk fleet, while projected to be smaller than last year, will perpetuate the over-supply of recent years and inhibit any meaningful recovery in 2013.

Handysize ships will continue to fare better than larger ships this year, as reduced Handysize newbuilding deliveries will likely be substantially offset by continued high scrapping – significantly higher than we expect for larger ships. It is possible that the Handysize segment will see a net fleet contraction in 2013 and it should also be reasonably well supported by continued healthy growth in Chinese imports of minor bulks, altogether resulting in improved global Handysize fleet utilisation.

The oversupply of large dry bulk ships in recent years has resulted in lower ship values. Looking ahead, Handysize fundamentals are starting to turn and we consider the time now right to be purchasing ships and building the Group for the next shipping cycle. Since September, we have purchased eight bulk carriers and we expect to acquire more in 2013 at attractive prices. We therefore plan to expand our fleet of high-quality owned ships with which we are able to generate earnings that outperform the market due to our scale and cargo combinations.