The shipping activities yielded NOK 7,8 mill during Q1 2011 compared to a loss of NOK 9,3 mill during the same period in 2010. The result before tax was NOK 9,4 mill compared to a loss of NOK 5,3 mill during the same period in 2010. The profit from the securities portfolio contributed with NOK 1,6 mill, compared with NOK 4 mill last year.

Introduction

The result from the shipping activities remains unsatisfactory, but there are positive developments, especially within the ethylene segment. On timecharter basis, freight earnings increased from NOK 25 mill during Q1 2010 to NOK 44 mill the same period this year. A low USD/NOK exchange rate has negative impact on the results.

Compared our expectations at the beginning of the year, the markets are overall slightly better than expected during Q1. The ethylene market continued the positive developments from Q4, while rates in the fully-ref segments have not reached expected levels yet.

Semiref/ethylene

For the ethylene ships in the 12k cbm to 17k cbm segments, freight rates were 140% higher than the same period last year, measured in USD. Compared to 2010 as a whole, Q1 2011 was 93% higher. The positive development is a result of increased volumes under our contracts for ethylene exports from the Arabian Gulf, as well as a generally tighter market driven by increased demand.

The positive development from Q1 has continued in Q2 and we expect a firm market for the balance of Q2. However, the order book being delivered during 2012 to 2014 will increase the supply of tonnage and this results in some concern for the market in the longer term.

LGC/VLGC

For ships in the 60 000 cbm segment, the freight level during Q1 was 96% higher compared to the same period last year, and 39% higher compared to 2010 as a whole; these levels are however not satisfactory. During 2010 the market improved relative to the trough, but the market is still volatile and at a low level. The Clipper Posh (built 1983) was sold for recycling in February.

Freight levels for the company's two 75 000 cbm Panmax VLGC ships are still not satisfactory and freight earnings were marginally lower during Q1 compared to 2010. The company has one 82 000 cbm VLGC ship, which is on time-charter until August 2011.

As earlier reported, the major part of the order book has been delivered in the LGC and VLGC markets and we do not expect at net increase in the world fleet during 2011 and 2012. Any orders for new buildings can only be delivered towards the end of 2013. However, it takes longer time then expected for the increase in demand to digest the supply surplus that was delivered during 2008 to 2010. Export of LPG out of the Arabian Gulf has continued to increase from 2010 levels and this trend is expected to continue in 2011. This development should create an improved balance between supply and demand and thereby support a stronger freight rates.  

General

There have been no incidents with a particular impact on the accounts in the period.

In an improving, but still demanding market, the company maintains its focus on cost control while upholding the attractive, long-term financing of the company's fleet.

The company carried out no ordinary classification docking.

Stavanger, 10th May 2011
The board of Solvang ASA