presentation broström preliminary report 2007

Date: 21 february 2008

Preliminary Report 2007

Slide 1

Broström Preliminary Report 2007

Lennart Simonsson, CEO

Anders Dreijer, Deputy MD



Slide 2

Agenda

• Broström in brief

• The Broström fleet

• Strategic transactions 2007

• Preliminary report 2007

• Tanker market up-date

• Market consolidation

• The Broström brand

• Outlook



Slide 3

Broström’s place in the value chain



Slide 4

Broström – a global logistics company

55 vessels in European trade

22 vessels in Asia

9 vessels in the Atlantic

86 vessels

+ 16 vessels to be added within 2 years



Slide 5

Broström’s Fleet of Tanker Vessels

Wholly/Partly owned61%

Commercial Management

29%

Bareboat charter in4%

Time charter in6%

Small Intermediate Handy/MR GRAND5-10 kdwt 10-30 kdwt 30-60 kdwt TOTAL

Active vessels Wholly/Partly owned 14 21 17 52Commercial Management 1 19 5 25Bareboat charter in 3 3Time charter in 2 4 6

TOTAL ACTIVE 15 42 29 86

Vessels on order Wholly/Partly owned 2 3 5Commercial Management 2 9 11

TOTAL ON ORDER 2 5 9 16

GRAND TOTAL 17 47 38 102



Slide 6

Strategic Transactions 2007

• Claus Peter Offen (CPO)

– 8 x 37,000 dwt , to be delivered during 2008

• Acquisition of The Petroships Group, Singapore

– 9 x small and intermediate vessels in Asia

• Acquisition of existing vessels under commercial management

– 2 x 7,100 dwt

– 1 x 37,000 dwt

• First 2 vessels delivered from ship yards in Turkey, in a series of 6 x 17,000 dwt



Slide 7


• Extremely weak spot market during fourth quarter

– European and Atlantic traffic were adversely affected by an extremely weak spot market, mainly during the first part of the quarter, due to lower available volumes in the market.

– Asian traffic was also characterised by a very weak spot market, especially during October and November. For the small size segment, capacity utilisation under contracts remained high, which contributed to stable development during the quarter.



Slide 8

Income Statement 2007

Oct-Dec Full year2007 2006 SEK m 2007 2006

844 802 Net sales 3 504 3 386844 802 Net sales, excl divested companies* 3 504 3 291 +6.5%

46 95 EBIT 664 772-10 42 Profit after financial items 450 580

-5 38 Net profit 427 503

-0.05 0.51 Earnings per share, SEK 6.50 7.57

ROCE 9.8% 11.3%Cash flow/share ** 11.55 13.05

Dividends paid 258 261Repurchases of treasury shares 135 0

Free cash, end of period 993 1 110

*) Broström Resebyrå (Travel Agency)

**) from operating activities before dividends



Slide 9

Bunker Cost



Slide 10

Surplus value of fleet

• Market valuation of

– Existing vessels

– Newbuilding contracts

– Call options of vessels

• Average based on two external brokers

• As per 31 December 2007 the surplus value exceeded book value by approximately SEK 2.7 billion

– SEK 41/share

• Booked values as per 31 December 2007

– Equity incl equalisation reserve SEK 40/share

– Deferred tax SEK 7/share



Slide 11

Tonnage Tax

• Tonnage tax applies for the French operations since 2004 and is in place for the Dutch operations

• One-off effect SEK 181 m in 2004 year accounts when introduced in France.

• Sweden is expected to follow rest of EU

• Proposal submitted

• Awaiting outcome

• Deferred tax as per end of 2007 isSEK 478 m

• Whereof SEK 437 m pertains to the Swedish shipping operation

• Until a formal decision has been made on a Swedish tonnage tax Broström will not operate future newbuildings under the Swedish flag but under other EU flags.



Slide 12

Financial Objectives and Performance

• Growth

– Average annual growth in net sales

• 10% per year over a three years period

• actual 2007 vs. 2006: +6.5%

– Average annual growth in commercial activities (measured as net sales including partners)

• 20% per year over a three years period

• actual 2007 vs 2006: +5.8%

• ROCE

– Minimum of the average of past three years’ interest for 10 year US Government Bond plus a risk premium of 5%

• For 2007 the objective was 9.4%

• 2007 actual: 9.8%

• Equity/assets ratio (II)

• Above 30%

• End 2007 actual: 30.9%



Slide 13


• Proposed dividend of SEK 3.00 per share (SEK 4.00)

– Corresponds to a dividend yield of 6.0% based on closing share price 2007

• Policy aiming at distributing 40-50% of profit after tax to shareholders

• Current dividend proposal represents 46% of EPS



Slide 14

Tanker Market



Slide 15

MR product Tanker Earnings

Q 3 Q 4Q 1 Q 2



Slide 16

Global Refinery Margins

• Lack of incentive to produce oil products due to low refinery margins 2nd half of 2007

• Implied low volumes for transportation



Slide 17

TC Market

TC MarketModern 45-47,000 dwt

$10 000

$12 500

$15 000

$17 500

$20 000

$22 500

$25 000

$27 500

$30 000

$32 500

Jan-

04

Apr

-04

Jul-04

Oct

-04

Jan-

05

Apr

-05

Jul-05

Oct

-05

Jan-

06

Apr

-06

Jul-06

Oct

-06

Jan-

07

Apr

-07

Jul-07

Oct

-07

Jan-

08

Hire

per

day

1 year TC

3 year TC



Slide 18

World oil demand

• World oil demand has increased each year the last 20 years with the only exception of 1993



Slide 19

Global Oil Product Demand

• “Weaker OECD growth stands against still-robust projections for GDP growth in China and the Middle East, the key oil demand growth centres.”

IEA February 2008

+1.7%+1.1% +1.2%

+2.3%



Slide 20

US Gasoline Stocks

• “Even a US recession will not necessarily cut gasoline demand”

• “Historically, gasoline demand does not decline until unemployment hits 7%”

(Tesoro, US Refiner)



Slide 21

OECD Commercial Oil Stocks



Slide 22

Rapid Pace of Dieselization Continues in Europe

Source: Cambridge Energy Research Associates

50303-3

European products oil imports

3.63.84.04.24.44.64.85.05.25.45.65.86.06.2

1988

1989

1990

1991

199219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

06

mbd

• Mismatch between refinery output and oil product demand creates need for evening out regional supply imbalances



Slide 23

European Oil Product Imbalances

Neste Oil



Slide 24

World oil consumption and refinery capacity

mbd

Source: IEA/Intertanko

30

40

50

60

70

80

90

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

Oil consumption

Refinery capacity

Sources: BP review until 2004+1.8% increase oil consumption 2005-2009Increase refinery capacity, Petroleum Economist

Oil product supply is tight!



Slide 25

World refinery development

mbd

Source: BP Review/various

0

4

8

12

16

20

24

65 68 71 74 77 80 83 86 89 92 95 98 01 04 07 10

N America

S/C America

Europe

FSU

M. East

Africa

Asia Pacific

Source: BP Amoco.June 2005/Various

Bulk of added refinery capacity is located to Asia and the Middle East

More of refined products will be supplied by regions further away from consumers and be transported over longer distances to get to the end-user



Slide 26

Newbuilding prices

• Contributors to maintained strong vessel values

– Steel prices

– Strong dry bulk tonnage demand

– High ship yard capacity utilisation



Slide 27

Ship Values

Newbuilding Prices & Shipvalues

0

10

20

30

40

50

60

Jan-

02M

ar-0

2M

ay-0

2Ju

l-02

Sep-

02N

ov-0

2Ja

n-03

Mar

-03

May

-03

Jul-03

Sep-

03N

ov-0

3Ja

n-04

Mar

-04

May

-04

Jul-04

Sep-

04N

ov-0

4Ja

n-05

Mar

-05

May

-05

Jul-05

Sep-

05N

ov-0

5Ja

n-06

Mar

-06

May

-06

Jul-06

Sep-

06N

ov-0

6Ja

n-07

Mar

-07

May

-07

Jul-07

Mill

ion

US$

47,000 dwt - NB contract47,000 dwt - NB resale 45,000 dwt - 5yr 45,000 dwt - 10yr 45,000 dwt - 20yr



Slide 28

World Fleet < 60 kdwt

109-2644

91

0

50

100

150

200

250

Wor

ld Flee

t Dec

200

7

Order

book

Dec

200

7

Single

Hull

Wor

ld Flee

t 201

0+

kdw

tWorld Tanker Fleet DevelopmentAll Broström segments < 60 kdwt

+7 %

annual avg

Annual average assuming orderbook to be delivered over three years

Source: Clarksons Reasearch

•Small -10%

•Intermediate +4%

•Handy/MR +8%



Slide 29

Ice Trading Conditions

11 Feb 2008 Normal

An exceptional mild winter in the Baltic



Slide 30

Market Consolidation



Slide 31

Small & Intermediate (number of vessels)

0

10

20

30

40

50

60

70

No

of

ves

sels

, in

cl N

B

Small (5-10 kdwt) Intermediate (10-30 kdwt)



Slide 32

Medium Range (MR) & Handy (number of vessels)

0

10

20

30

40

50

60

70

80

90

100

No

of

vess

els

MR&Handy (30-60 kdwt) existing MR&Handy (30-60 kdwt) on order



Slide 33

Consolidation Through Tanker Pools

Shipowner/Pool memberMarida Pool 10-30 kdwt

Swift Tankers 10-30 kdwt

Handytankers 30-60 kdwt

Norient Product Pool 30-60 kdwt

High Pool Tankers

30-60 kdwt

Glenda International Management 30-60 kdwt

Clean Products International 30-60 kdwt

D'Amico (Italy) X X XDS Norden (Denmark) XGlencore XHarren & Partner XInterorient Navigation (Cyprus) XMaersk/AP Möller X X XMitsubishi Corp (Japan) XMotia (Italy) XNissho Shipping (Japan) XOSG XSeaarland (Netherlands) XTeekay XUltragas/SONAP (Chile) X

TOTAL NO OF VESSELS 16 19 85+1 45+39 8+4 11 6



Slide 34

Broström’s track record in market consolidation

• Broström has contributed to considerable market consolidation through company acquisitions and partnerships:

– United Tankers/Erik Thun (1990)

– Rederi AB Donsötank (1992)

– Van Ommeren Tankers (1998)

– Rigel Schiffahrts (2000)

– Dünya Shipping (2005)

– Nordtank Shipping (2005)

– Furetank Rederi (2005)

– Claus-Petter Offen (2007)

• An expansion into Small and Intermediate (5-20 kdwt) tonnage in Asia has been part of Broström’s strategic planning and resulted May 2007 in the acquisition of The Petroships Group, re-named to Broström Tankers Singapore

• At year-end 2007 Broström operated a fleet of 22 vessels in Asia, compared with 9 vessels at year-end 2006

• Opportunities for further consolidation are being continuously evaluated



Slide 35

Petroships/Broström – a perfect match

SMALL 13 vessels = 17 vessels5,000 - 10,000 dwt incl 2 NB incl 2 NB

INTERMEDIATE 42 = 47 vessels10,000-30,000 dwt incl 5 NB incl 5 NB

HANDY/MR 9 vessels 15 vessels 14 vessels = 38 vessels30,000-60,000 dwt incl 8 NB incl 1 NB incl 9 NB

ATLANTIC EUROPE ASIA PACIFIC

= 9 vessels = 70 vessels = 23 vesselsincl 15 NB incl 1 NB

PETROSHIPS

4 vessels

5 vessels

A total of 102 vessels incl 16 newbuildings



Slide 36

The Broström Brand

• Broström’s increasing focus on large, global customers asks for a global brand that is built on trust and credibility

• Branding is a crucial success factor in our industry

• The Broström brand embraces everything the customer experiences and expects from doing business with us



Slide 37

Broström has launched a Functional Organisation

• A functional organisation helps Broström to communicate one clear message to our customers and partners – wherever they meet us

• Also, potential employees all over the world will perceive a clear picture of what the Broström brand stands for



Slide 38

Outlook

• The start of 2008 has been characterised by a volatile spot market, and the view is that it will continue to be highly volatile from time to time.

• As a result of investments and acquisitions carried out during the years, Broström has further strengthened its position going into 2008 and forward.

• The underlying long-term trend for Broström’s market segment is judged to be positive, even though major fluctuations may occur from time to time.



Slide 39

Thank You!

Going for Excellence. Together.

presentation broström preliminary report 2007

Business

petroships group

middle east

brostrm

consolidation

small

vessels

quarter

asia