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CEO's Column - NORDEN News Magazine Spring 2014

2014 - an exciting year

2014 will be an exciting year with great challenges and equally great opportunities. NORDEN is ready for both. We have updated our strategy for it to best possibly ensure that NORDEN can manage the challenges and seize the opportunities. The strategy is named Capture value in improving markets, and a central focal point is investments.

In the short term, we have invested in extra ship days by chartering in extra tonnage and keeping the vessels ready to benefit from the increasing rates. In total, NORDEN entered 2014 with more than 28,000 open ship days, and within Dry Cargo, there were even twice as many open days as the year before.

But we have also been busy securing our long-term competitiveness. This has been done through investing in new NORDEN vessels. Previously, we focused on investments in Tankers buying new fuel efficient product tankers while prices were attractive. But since the end of 2012, we have mainly focused on investments in Dry Cargo. And our Projects Department has been busy. In 2013 alone, orders were made for 18.5 vessels, of which 14.5 were dry cargo vessels, and to this can be added an additional 7.5 dry cargo vessels ordered in 2014. With this, our total order book counts 37 vessels representing an investment of more than USD 1 billion.

All the newbuildings are fuel efficient eco vessels, which we will also be satisfied with should the markets develop negatively in the long term. The vessels are both fuel efficient and acquired at a good price. And this is very different from the vessels ordered during the years from 2006-2008. The fuel efficiency of the new vessels will ensure that the single greatest voyage expense, i.e. bunker oil, will be relatively low. And the reduction in fuel consumption is not only a good thing for the bottom line, but also benefits the environment, which you can read more about on pages 14-15.

On pages 10-11, head of Dry Cargo Ejner Bonderup explains how NORDEN has decided to move forward with a low level of coverage based on the more positive market outlook and what this holds in terms of opportunities and risks. As there is naturally an element of risk involved when moving forward with a lower level of coverage. We are exposed to market fluctuations to a greater extent, but the decision has been made based on very thorough analyses and with a continued strong safety net that is our robust financial position.

This is a position which has been strengthened by the improved performance of the Tanker Department. With 18 owned product tankers at sea and further 6 on order, we also had great timing when investing in fuel efficient tonnage within this segment. Now, the product tanker rates are headed in the right direction, and so are the vessel prices. In 2013, the Tanker Department generated the best operating profit in 5 years, and with more ultramodern eco vessels coming in, the Department is well equipped for future challenges, which our head of Tankers, Lars Bagge Christensen, goes into more detail about on pages 4-8.

The vessel prices have also gone up in our main business segment Dry Cargo – see page 13. It is very positive that the market value of NORDEN’s fleet was USD 92 million above carrying amounts at the end of 2013 as this is not only an indication that the vessels are worth more but also that the market shares our belief that we are heading towards better rates and earnings going forward. The year did start off with relatively low rates in dry cargo, but as the quarters progress, the many open ship days may generate great value to us.

I wish you all happy reading of this first issue of NORDEN NEWS in an exciting 2014.

CARSTEN MORTENSEN, President and CEO

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