Wallenius Wilhelmsen to Adjust to the Current Conditions – Heavy Lift News
23 Mar 2020

Wallenius Wilhelmsen to Adjust to the Current Conditions

Given the unpredictable situation for the global economy as the impact of COVID-19 continues to evolve, Wallenius Wilhelmsen is taking decisive steps to prepare for a challenging time ahead. The proposed dividend for 2019 is withdrawn, up to four vessels will be recycled, and preparations are being made to place up to 10 vessels in cold layup.

“The world has changed dramatically over the past weeks, and we are all feeling the effect. The impact these events will have on the world economy and global supply chains remains unpredictable, but it is increasingly clear that current events will have longer term impacts. Our strong focus on synergies and cost efficiency over the past years have put us in a solid liquidity position, but we are taking early precautionary steps now, to preserve cash,” says Craig Jasienski, President & CEO of Wallenius Wilhelmsen.

In connection with the publication of the 4th quarter and annual results for 2019 on 11 February this year, it was announced that the board proposed an ordinary dividend of 7 cents per share to the Annual General Meeting in April 2020. The board also proposed that the Annual General Meeting give the board authority to approve a second dividend payment of up to USD 7 cents per share for a period limited in time up to the annual general meeting in 2021. The board has now decided to withdraw this proposal, which in total would have been equivalent to about USD 60 million.

The current situation indicates an overcapacity in the Wallenius Wilhelmsen fleet of 10-15 vessels net of already planned redelivery of charter vessels. This will be solved through a combination of early recycling and cold lay-ups.

Wallenius Wilhelmsen is working to recycle up to four vessels, all 24 years or older. In a market that already has some overcapacity, we do not expect that these vessels will be needed in the foreseeable future. The move reduces operational cost for the fleet going forward as older vessels generally have higher running costs and are less fuel efficient. The vessels will undergo green recycling in line with the group’s long-standing policy and be reported accordingly to the Ship Recycling Transparency Initiative. The early recycling is expected to lead to a potential impairment of up to USD 40 million.

To further reduce operational costs, preparations are being made to initially place up to 10 vessels in cold lay-up. This puts us in a position to quickly adjust costs as the supply chain and market impacts become clearer going forward. The estimated cost saving for a vessel in cold lay-up is USD 3-4,000 per day depending on length of lay-up.

Flexibility in the fleet has been a core strategic choice since the inception of Wallenius Wilhelmsen, ensuring our ability to adjust the fleet up or down with shifting market demand. Of the 11 vessels available for redelivery at the start of the year, four have been redelivered and another three will be redelivered before end of June. One vessel has been extended and the remaining three are under consideration.

Wallenius Wilhelmsen has two newbuildings under construction that will be further delayed due to the disruption COVID-19 is causing. The vessels will be welcomed as modern and fuel-efficient additions to our fleet once delivered. Both vessels have secured financing which can be drawn at delivery.

Given the situation and to preserve cash until we have more certainty, management has reduced capex spend to a minimum, prioritizing safety and maintenance critical expenditures. This includes deferring some larger expansion projects in our landbased operations as well as the cancellation of four of the remaining scrubber installations.

As the COVID-19 pandemic continues to progress and mitigating actions by authorities evolve quickly, supply chains are being hit hard and vehicle producers are shutting down plants around the world. We continue to actively monitor the situation and its ongoing effects on the global supply chain and will adjust our approach as necessary in line with developments. Our focus continues to be on health and safety, the continuity of our operations and working with our customers for the best possible solutions in difficult times.

Source Wallenius Wilhelmsen

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