In 2015, the Company carried out a strategy process that resulted in the strategy “Focus and Simplicity”. The overall business model with activities within both Dry Cargo and Tankers was confirmed. A key part of the new strategy is the focus of resources and investments in business areas where NORDEN – with a talented and global organisation close to its customers – can create the most value for its shareholders. As a consequence, the Company will focus its ownership on 4 vessel types in the future – 2 in dry cargo and 2 in the product tanker segment.
Value creation in NORDEN continues to be based on both parts of the business model “Exploiting the cycle” and “Value creation throughout the cycle”, but the choice of segments is driven by a wish to maximise the opportunities to create value beyond what is driven by the long-term market conditions.
The strategy process has uncovered that within Dry Cargo, NORDEN has the best performance compared to the market in the vessel types Supramax and Panamax. Going forward, NORDEN will focus its investments on these vessel types, where NORDEN has the greatest opportunities to utilise its organisation and competencies. Within Supramax and Panamax, and based on an extensive network of local offices on 5 continents, thorough market knowledge and a good reputation, NORDEN will be best able to develop its already strong position.
The aim is to make NORDEN Global Industry Leader within Supramax and Panamax. By concentrating efforts and investments, the Company will gain better access to cargoes and, thereby, to business opportunities. At the same time, NORDEN is improving its market insight and, in this way, improving the Company’s basis for decision-making. By operating a larger fleet consisting of these 2 vessel types, NORDEN will be able to meet the customers’ need for flexibility and reliability to an even greater extent, and moreover NORDEN’s customers are typically not asking for NORDEN to be operating all vessel types.
To supplement the Supramax and Panamax business areas, NORDEN will maintain its operation of Handysize vessels, where a considerable overlap and synergies with Supramax are present in terms of expertise and customers. No further investments will be made in Capesize, Post-Panamax and Handysize. However, the timing for phasing out these vessel types from the core fleet has not yet been pinned down: The chartered vessels will be redelivered when their contracts expire, and owned vessels will be sold when it makes commercial and financial sense. Over time, profits from sales will be reinvested in Panamax and Supramax.
In Tankers, the vessel types Handysize and MR will continue to be in focus, and also here the ambition is to be the customers’ first choice. The operation of NORDEN’s product tankers continues to be managed by Norient Product Pool, which NORDEN owns 50% of. During its 10 years of existence, Norient Product Pool has grown to become one of the largest product tanker pools in the world. With an extensive fleet, a strong brand and a global network of offices staffed by talented employees, it has managed to consistently generate earnings that lie significantly above market average. Investments will be focused on Handysize and MR tonnage, and the small position that the Company holds within the vessel type LR1 will not be extended.
A considerable part of the opportunities for value creation in the shipping industry lies in adjusting the exposure to the overall market developments (“Exploiting the cycle”), and NORDEN will continue its activities within purchase and sale of vessels as well as long-term charter procurement. In 2015, management of these business functions for both dry cargo and product tankers has been combined in the function “Asset Management”. The establishment of this new unit ensures a better foundation for consistent investment assessments as well as optimisation of the invested capital between the 2 segments Dry Cargo and Tankers. At the same time, the unit brings together the expertise and the relations with external partners, ensuring faster and more efficient identification and execution of opportunities.
As a part of the strategy, costs remain in sharp focus. During the autumn of 2014, the Company initiated a cost-saving programme that will reduce the vessels’ annual operating expenses and voyage costs by USD 20 million over a 3-year period. See also ”Cost focus and technical operation”.
More details on NORDEN’s strategy in the Annual Report 2015 pages 6 to 7