Directors Report

    The Board of Directors and CEO for Copenhagen Malmö Port AB (CMP) hereby present the annual accounts for the financial year January – December 2013.

    Group relationship, nature and focus of operations

    CMP’s shares and voting share are divided among a total of 21 shareholders (21 last year). Udviklingsselskapet By & Havn I/S, Malmö City Council and Förvaltnings AB Norra Vallgatan together represent just under 92 per cent of the total shares and voting shares.

    Largest shareholders 31 Dec 2013

    Shareholder
    No. of shares % share
    Udviklingsselskapet By & Havn I/S (Danish reg.no. 30 82 37 02) 1,800,000 50.0%
    Malmö City Offices, City of Malmö (reg.no. 212000-1124) 989,100 27.5%
    Förvaltnings AB Norra Vallgatan (reg.no. 556669-0383) 517,500 14.4%
    Other shareholders 293,400 8.1%
    Total 3,600,000 100.0%

    Note. The equity and voting shares are identical.

    CMP’s operations are conducted through a Swedish limited company (Reg. no. 556027-4077), and its branch in Denmark (Reg. no in Denmark is SE 25 99 60 11). Geographically operations are conducted mainly in the ports of Copenhagen and Malmö. The operations are divided into three business areas – Cruise & Ferry, Liquid and Dry Bulk & Property, and Port & Terminal Operations. All business areas operate in both Malmö and Copenhagen.

    Concession agreements with Malmö City Council and Udviklingsselskabet By & Havn I/S respectively, give CMP the right to use permanent facilities in the form of quays, shipping lanes, buildings etc. For this CMP pays annual concession fees. These fees are based partly on older existing facilities and partly – after completion – on previous and current investments in new facilities.

    The current concession agreements with the port owners run up to and including 2035 and are linked to a notice of termination that must be issued no later than December 2015. If the agreement is not terminated, it will be extended automatically for a period of a further five years at a time.

    In 2013 CMP paid SEK 80.9 million in basic rent for land and investments made before the merger in 2001, and SEK 55.4 million in financial rent for investments made after the merger. The agreement with the port owners means that the basic rent is set in line with market conditions. Financial rent is based on the actual amount invested and its economic life and also includes market-related interest set at the time of the investment. For 2013 the average interest was just under 4 per cent.

    Business concept

    CMP’s business concept is to sell port, terminal and transport services. “We create port, terminal and transport solutions across Northern Europe”.

    Our business concept highlights the fact that we are good at creating and delivering solutions – both in our internal development activities and in collaboration with external players. In this creative process, our organisation is responsive, innovative and decisive. In our business concept, we stress that CMP offer solutions rather than services. These solutions are broad and comprehensive, creating added value for customers and business partners. Our solutions can also include new types of collaboration – ideally in alliances and partnerships – in which we challenge ingrained working habits and existing industrial structures.

    We emphasise the fact that CMP’s market covers the whole of Northern Europe. Our efforts to meet out targets for future growth and development are focussed on the countries and markets around the Baltic.

    Turnover and result

    The market remained difficult in 2013. The slow market recovery meant that there were challenges facing both CMP and many of our customers, suppliers and business partners. Despite relatively low demand, our total tonnage increased by 2 % in 2013 to 14.4 million tonnes (14.1). Total turnover amounted to SEK 718.1 million, which is SEK 7.1 million or 1 % lower than the previous year. SEK 4.5 million of the reduction in turnover can be ascribed to negative exchange-rate movements, mainly related to the fact that the Swedish krona strengthened in relation to the Danish krone.

    The operating result for 2013 amounted to SEK 86.9 million (SEK 101.7 million in the previous year). This corresponds to an operating margin of around 12.1 per cent, compared with 14.0 the year before. Around SEK 1.8 million of the SEK 14.8 million reduction in profit can be ascribed to negative exchange rate movements. The remainder is partly due to various price movements, but mainly to the fact that CMP has made big investments in recent years. This in turn caused concession rights (rent for land and buildings) to rise by SEK 15.1 million in 2013. At the same time depreciations increased by SEK 5.9 million for the same reason.

    Net financial income amounted to SEK 1.7 million (2.9) in 2013. Net financial income is mainly attributable to billing for interest on delayed payments and the fact that net cash gave rise to some profit.

    The result for the year after tax amounted to SEK 90.7 Million (82.7).

    Cash-flow, liquidity etc   

    In 2013, CMP’s cash flow from regular activities – before changes to the operating capital – amounted to SEK 98.3 million (123.4). The main difference between 2012 and 2013 is the SEK 28 million which we received in 2012 from the repayment of previously paid tax (tax refund) from the Swedish Tax Agency.

    Partly as a result of the repayment of claims in connection with insurance payments, operating capital was reduced by SEK 14.4 million. This compares with the previous year’s increase of SEK 15.7 million, a total difference of SEK 30.1 million. The difference produces a positive cash flow from regular activities of SEK 112.7 million, compared with the previous year’s outcome of SEK 107.7 million. 

    Investment activities resulted in a cash outflow of SEK -30.6 million (-82.8 in the previous year). As a result, cash flow after investments amounted to SEK 82.1 million (24.9). In 2013 investment was mainly in IT equipment and adaptations for tenants.

    In 2013 dividends amounted to SEK 53.1 million (SEK 129.6 million the year before). Including translation differences etc., cash flow for the year totalled SEK 37.2 million (-113.6). This meant an increase in liquid assets from SEK 88.4 million at the start of the year to SEK 125.6 million at the year end.

    Earnings growth, cash flow etc. together mean that CMP’s year-end financial position was good. The equity/assets ratio, defined as adjusted equity capital divided by total assets, was 75.9 per cent at the year end (74.0 at the same time last year). 

    In principle, CMP has no interest-bearing liabilities. Adjusted equity capital at the year end was SEK 412.7 million (393.8).      

    Significant events during and after the end of the financial year

    No events of a significant nature have occurred since the end of the financial year. The annual report is subject to approval at the Ordinary General Meeting on 26 May 2014. 

    Future developments

    In 2011 a new RoRo, combi and container terminal was opened at Norra Hamnen in Malmö. This facility has gradually been filled as new customers and businesses have come along and the plan is for this to continue. 

    In 2012 a new area of land and associated quays adjacent to the existing dry bulk terminal at Prøvestenen in Copenhagen was taken into use. In 2014 CMP in Copenhagen will move the cruise activities at Frihavnen to a new cruise terminal at Nordhavn. There are plans to move the present container terminal to new areas at Nordhavn by 2020. 

    We are making extensive investments in both Malmö and Copenhagen. This will be a challenge for CMP in the coming year, but it will also bring significant opportunities for growth and new business. From and including 2011 and for a long time to come, this will result in gradually increasing costs, mainly in the form of concession fees for the investments. A major effort and focussed planning will be required in order to make the best use of resources in what is expected to continue to be a difficult market. However, the savings and restructuring measures that have already been implemented mean that CMP is well equipped to take advantage of the opportunities for growth arising during the coming years.

    Significant risks and uncertainties

    The main risks and uncertainties facing CMP are similar to those faced by comparable businesses in Sweden and other parts of Northern Europe. 

    Our ambition is to minimise and avoid commercial risks as far as possible.

    The company currently has no interest-bearing loans but is mainly exposed to commercial risks through long concession agreements with the port owners. We are seeking to limit this exposure through long leasing agreements with our customers. 

    The main price risks are currency risk, market risk and interest risk. CMP is to a limited extent indirectly exposed to interest risk through annual index adjustments to its concession agreements. In other respects the concession agreements carry fixed interest with very little interest risk. In 2013 the concessions incurred a total cost of SEK 136 million.

    With regard to market risk, i.e. the risk of adjustments to market prices, CMP’s services are mainly linked to agreements that will run for at least one year. For long-term agreements relating to the leasing of quays, warehouses and similar facilities, the agreements are index-linked. These services account for just under 50 per cent of CMP’s total earnings.

    With regard to currency risks, the main risk is that the Danish krone will fall in relation to the Swedish krona. Approximately half of CMP’s sales are in Danish kroner. However, the risk is limited to the profit margin, as most of the costs related to what is invoiced in Danish kroner are in the same currency.

    Other significant risks include bad debt due to insolvency. We continually check the creditworthiness of our customers and try to minimise outstanding receivables by limiting the payment terms etc. We also often require bank guarantees or equivalent security from customers before contracting long leases, in order to further limit the risks of bad debt. Another factor limiting the risks involved in long leases is the fact that quays and buildings often come to be used in ways other than those agreed in the particular contract.

    CMP is subject to the risk of complaints, which can be considered as limited, since CMP offers customers a variety of services.

    The insurance risk is that CMP’s insurance policies may not cover us for some types of damage. The aim of our policy on insurance is to cover as many conceivable risks as possible for a reasonable cost.

    The risk of loss of use exists. CMP tries as far as possible to have alternative equipment to replace cranes and other technical equipment in order to limit the impact of a breakdown or other events that may cause an extended standstill.

    CMP is to some extent exposed to environmentally harmful substances such as oil and other chemicals. The company’s environmental policy, extensive safety procedures and continual monitoring of the facilities means that this risk is judged to be low. The same applies to the risk of things like terrorist attacks, as in accordance with international regulations CMP is required to observe the International Ship and Port Facility Security Code (ISPS).

    Environmental and quality matters 

    CMP is constantly working on environmental matters through its environmental policy and environmental management system.

    We have been applying international standard ISO 14001:2004 to our environmental management system for a number of years. Our current certificate is valid up to and including December 2015.

    Port activities in Sweden require an environmental permit under the environmental legislation. CMP received an environmental permit for its port activities in Malmö in November 2009. 

    Some of the facilities and areas of land where CMP currently operates are polluted as a result of previous activities. Environmental conditions relating to the period before 2001, when CMP began operations, are the responsibility of the port owners. 

    CMP has a certified quality management system in line with ISO 9001:2008. This certificate is also valid up to and including December 2015.

    Investments

    The year’s investments in buildings, machinery and equipment amounted to SEK 27.0 million (SEK 89.5 million).

    Personnel

    The average number of employees in 2013 was 400 (415), a reduction of 3.6 % compared with 2012. Women accounted for 13.0 % of the total workforce. Short-term sick leave was 2.7 % (2.5 %) and long-term sick leave was 0.82 % (1.85 %). 

    Proposal for the appropriation of retained earnings

    The appropriation of the following earnings is to be decided by the annual meeting:

    Retained earnings, SEK
    159,388,000
    Profit for the year, SEK  
     90,656,000
    Total, SEK 
     250,044,000


    The Board of Directors and the CEO propose the following:  

    A dividend of SEK 17.36 per share to be distributed to shareholders
    62,496,000
    To be carried forward, SEK  
    187,548,000
    Total, SEK 
    250,044,000

    No transfer to restricted equity is proposed.

    The Board of Directors and the CEO consider the proposed dividend – which complies with the company’s previously agreed dividend policy of distributing 25 per cent of unrestricted equity – is justifiable, in view of the requirements imposed by the nature, scope and risks of the business on the amount of equity and the company’s need for consolidation, liquidity and general position.

    For information about the company’s results and financial position for 2013 and 2012, please refer to the income statement, balance sheet and supplementary information below.