Now considered a discontinued operation, our PB RoRo business generated a segment net loss of US$12.1 million in 2012 (2011: US$10.6 million loss) and an impairment and exchange loss of US$198.6 million reflecting the severe weakness in the Euro-centric RoRo sector.

 

Our RoRo business was primarily focused on three key objectives in 2012: i) to secure best possible charters and improve utilisation;ii) to implement stringent cost control and rationalise our RoRo operation; and iii) to generate opportunities to exit the sector in an economically rational manner.

CHANGE IN RORO STRATEGY

Our strategic priorities for PB RoRo took a major turn in 2012 after a reassessment of the prospects for our RoRo business in the middle of the year resulted in a significant non-cash impairment charge of US$190.4 million and a decision to exit the sector in the medium term.

RORO MANAGEMENT RATIONALISATION

In view of our downgraded outlook and the resulting changes in the Group’s RoRo strategy, our Meridian RoRo management joint venture was wound down, we brought the commercial and operational management functions in-house and we outsourced technical management to an experienced third-party ship manager.

AGREEMENT REACHED TO EXIT RORO

In September, we agreed to sell all of our six RoRo ships to the Grimaldi Group with forward delivery and with the buyer chartering the vessels on a bareboat basis in the intervening period. Under the sale agreement, the buyer is required to purchase at least one of the vessels by the end of June 2013, followed by at least one vessel in each 6-month period thereafter until the end of 2015.

Our small in-house PB RoRo team worked hard on securing this definite exit from the sector, and will continue overseeing the technical management and commercial employment of our final RoRo vessel prior to its delivery onto Grimaldi’s bareboat charter.

EMPLOYMENT

Our two RoRo ships previously in lay-up in the United Kingdom delivered onto their bareboat charters in October 2012, and the three ships previously trading in the North Sea and Caribbean delivered onto their bareboat charters in February 2013. Our sixth ship has been extended for another year under charter in the Mediterranean after which she is due to enter the buyer’s bareboat chartered fleet in March 2014. Our RoRo fleet recorded 68% utilisation in 2012 with its ships on charter for 1,490 out of a total 2,190 ship revenue days.

FINANCING

We converted our existing EUR 162 million, 12-year RoRo loan facility to a dry bulk loan facility of approximately US$210 million, thus further enhancing our dry bulk vessel buying power.

Continued weakness is expected to persist in the RoRo charter market in 2013. However, with the exception of the time and cost of repositioning two vessels from the Caribbean to the Mediterranean, our RoRo disposal agreement substantially eliminates our exposure in the RoRo charter market in 2013 and beyond.