The National Shipping Company of Saudi Arabia
Annual Report 2010
Accuracy in performance!
The National Shipping Company of Saudi Arabia Annual Report 2010
Proactive!...
The National Shipping Company of Saudi Arabia Annual Report 2010
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REPORT OF THE BOARD OF DIRECTORS
Contents
Members of the Board of Directors
8
Chairman’s Message Management Report
10 13 14 14 15 16 17 24 25 26 26 27 28 29 29 30 30 30 32 33 34 35 37 38 41 42 43 45 80
Company’s Letter
Introduction
Strategy and Future Objectives & Projects Financial Statements and Operational Results
Affiliates and Segments Ship Management of Vessels
Planning and Business Development Communication and Public Relations
Information Technology Internal Audit and Control
Human Resources
Marketing & Customers Services
Quality Assurance
Environmental & Safety Social Responsibility
Risk Management
Financing and Investment
Regulatory Payments Dividend Distribution
Shareholders’ Information & Rights
Disclosure & Governance
Board of Directors Board Committees
Executive Management
Conclusion
Financial Report
Office and Branch Addresses
The National Shipping Company of Saudi Arabia Annual Report 2010
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Inspired by nature!
The National Shipping Company of Saudi Arabia Annual Report 2010
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REPORT OF THE BOARD OF DIRECTORS
- Members of the Board of Directors -Chairman’s Message
The National Shipping Company of Saudi Arabia Annual Report 2010
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Members of the Board of Directors
2008 - 2010
Abdullah Sulaiman Al-Rubaian Board Chairman
Mohammed Abdulaziz AlSarhan Board Vice-chairman
Esam Hamad Al-Mubarak
Saleh Abdullah AlDebasi
Abdulkarim Ibrahim Al-Nafie
Farraj Mansour Abothenain
Nasser Mohammed Al-Kahtani
Sami Abdullah Al-Saeed
Bander Barjas Al-Abdul Kareem
The National Shipping Company of Saudi Arabia Annual Report 2010
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REPORT OF THE BOARD OF DIRECTORS
Members of the Board of Directors
2011 - 2013
Abdullah Sulaiman Al-Rubaian Board Chairman
Mohammed Abdulaziz AlSarhan Board Vice-chairman
Esam Hamad Al-Mubarak
Saleh Abdullah AlDebasi
Abdulkarim Ibrahim Al-Nafie
Farraj Mansour Abothenain
Nasser Mohammed Al-Kahtani
Ghassan Abdulrahman Al-Shibl
Abdullah Ali Al-Ajaji
The National Shipping Company of Saudi Arabia Annual Report 2010
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Chairman’s Message
Dear Shareholders On behalf of my Board Members for the session colleagues (2008-2010), and I, I am delighted to submit the annual report and the results of the fiscal year 2010, together with programs and projects executed and the consolidated financial statements for the year ended 31/12/2010. Also submitted, NSCSA’s financial position, where the net profit achieved in the year 2010 was approxi- mately SAR (415) million despite of global financial difficulties. The company under the guidance of previous term Board of Directors com- pleted many important programs and projects that are in the interest of the company and helped to develop and grow. The most important accomplish- ments during the past three years are but not limited to the following: • NSCSA adopted and implemented a strategic plan including the review of its strategy, current activities, and opportunities in the shipping markets due to the global changes in the transportation sector in general as well as the shipping industry in particular. • Adoption of the Corporate Governance Regulation that aims to assist the Board of Directors and Executive Management and improve the efficient operation of the Board and its committees in order to ensure compliance with the best governance practices that ensure the rights of shareholders and stakeholders’ rights. • Established a joint venture company for transporting Dry Bulk cargo between The National Shipping Company of Saudi Arabia (NSCSA) and the Arabian Agricultural Services Company (ARASCO) having (60%) & (40%) own- ership respectively. • Established a joint venture company between the National Chemical Car- riers (NCC) and the Norwegian company (Odfjell) in Dubai to commercially operate the fleet of both companies with tanker size of (40,000) dwt. The fleet operates in a pool employed in chemical trades, vegetable oil and refined petroleum products around the world focusing on the Arabian Gulf as the most important area in the production and export of petrochemicals. • Cancellation of (7) new building chemical tankers’ contracts signed between the National Chemicals Carriers company and (SLS) Shipbuilding Ltd. in the year 2006. It was mutually agreed due to the delay by the shipbuilding com- pany in delivering the tankers within the agreed time. Accordingly, the National Chemicals Carriers recovered the amount of SAR 701.6 million, including all the installments paid by the company to (SLS) for the contracts cancelled until 31 December 2010. This amounted to SAR 641.3 million and all other expenses incurred which amounted to SAR 45.2 million; resulting a net compensation of SAR 15.1 million.
The National Shipping Company of Saudi Arabia Annual Report 2010
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REPORT OF THE BOARD OF DIRECTORS
• The National Chemicals Carriers signed a contract on 21 December, 2010 with (SLS) to purchase (2) of the cancelled tankers for an amount of SAR 322.5 million and an expected delivery during the first half of 2011. Con- sidering that the company had contracted to build these tankers but due to delay in delivery they were cancelled; thus the company saved SAR 45 mil- lion, which is the difference between the amount of the original contract value and the value of the repurchase. • Reorganizing the administrative structure of certain business sectors of the company. • Amendment of some terms under the time charter agreements for chemical tankers with some customer(s) to benefit the company. • Approved new building of a special petrochemical tanker with a capacity of (75,000) dwt. • Complete the inspection and operational phase of the Enterprise Resources Planning (ERP) system in the company adopted by the Human Resources Management & Corporate Administration and the Finance Division. • Settlement of the company issues with the Department of Zakat until the end of the year 2000, as well as finished payment of installments of tax interest claim for the period from 1982 to 1995. The final installment was paid at the end of June 2010, further more the status of the National Chemicals Carriers with zakat for the period from 1991 to 2004. • In the year 2010, NSCSA obtained International Quality Certificate “ISO 9001:2008”. • NSCSA won first prize for the transparency award which was organized by the (BMG) Financial Group as the most transparent company in Saudi Arabia during 2010. In conclusion, I would like to extend my gratitude to the Government of the Custodian of the Two Holy Mosques, represented by the Public Investment Fund for their continued support to the company and also extend my appre- ciation to the previous members of the Board of Directors for their sustained efforts during the previous session (2008-2010). I would also like to welcome my fellow Board Members for the current session (2011-2013) and wish to all the best of success and guidance in their endeavors. I also extend my appreciation to the owners and customers of NSCSA for their support to the company, as well as all the employees for their commendable efforts in the implementation of the directives and decisions of the Board and the Management for the benefit of the company and its shareholders.
Cooperation for Integration!
Abdullah Sulaiman Al Rubaian Chairman of the Board
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Accept the challenge!
The National Shipping Company of Saudi Arabia Annual Report 2010
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REPORT OF THE BOARD OF DIRECTORS
Management Report
The National Shipping Company of Saudi Arabia Annual Report 2010
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Company’s Letter
NSCSA manages a portfolio of diversified marine assets for the purpose of creating long term shareholder value. NSCSA accomplishes this purpose by:
•Actively managing the commercial and technical operations of the marine business it is invested in. • Strategically investing and divesting in marine sectors according to past performance and future outlook. •Achieving the highest standards and maintaining transparency in the work. • Participation in the national economic development. • Achieving the best returns to shareholders. The National Shipping Company of Saudi Arabia was formed in 1979 as a Saudi Joint Stock Company by the Royal Decree No. M/5 dated 12/02/1398H (22/01/1978) to be the national carrier and a leading shipping company in the region. The Government of the Custodian of the Two Holy Mosques through the Public Investment Fund has a share of 28% of NSCSA’s capital. NSCSA started its operations in the General Cargo sector in the year 1983. In 1985, as a part of strategic planning to diversify the sources, NSCSA entered into the transporting of petrochemical products. In 1995, NSCSA entered into the crude oil transportation, and also purchased a share in Petredec Co. Ltd. for the transportation of LPG. Establishing this national entity aims to have a role in developing the country’s economy. Shipping acts as the main method for the Kingdom’s trade with the world and NSCSA provides a realiable shipping transportation to the Kingdom. NSCSA services cover multiple markets around the world in various sectors of the marine transportation through its branch offices and a network of agents. NSCSA has also established subsidiary and joint venture companies to expand its investments to ensure continues high profits each year. NSCSA also works to provide high quality services to meet their customer’s requirements, in addition to creating employment opportunities for the qualified Saudi cadets and participating in building the national economy. Since its inception, NSCSA committed itself to complete transparency in its dealings in all its activities and the disclosure of the financial results as well as factual information. NSCSA adopts all safety standards in its operations to preserve the environment and is committed to its social responsibility. Furthermore, NSCSA won the first prize for the (BMG) transparency award for the year 2010. Through implementing the successive strategic plans, NSCSA continues to grow and focus on the mission and stated objectives by utilizing its resources in order to achieve the best returns for the owners and shareholders.
Introduction
The National Shipping Company of Saudi Arabia Annual Report 2010
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REPORT OF THE BOARD OF DIRECTORS
Strategy, Future Objectives & Projects
NSCSA has adopted a well-established and consistent strategy for growth and expansion in the Chemical and Dry Bulk sectors. This allowed the strengthening of core business and expansion into various other shipping activities. At the end of 2008, the Board of Directors adopted NSCSA’s new five-year plan (2009–2013), which was prepared in coordination with an international consulting firm. The findings of this plan confirmed NSCSA’s sound financial and operational position and its competitive edge in the global markets, which includes the expansion of its VLCC fleet over the past three years in which the vessels are now in operation. 16 new chemical carriers have also been ordered which are expect to be delivered by 2010-2011. In 2010, (7) tankers’ contracts were cancelled due to the delay of delivery by the ship builders. NSCSA recovered a compensation amounting to SAR 15.1 million. NSCSA repurchased the first (2) tankers that were cancelled, which saved a total amount of SAR 45 million compared to the orginal purchase price which will be delivered in the first half of 2011. The remaining tankers are expected to be delivered during 2011- 2013. NSCSA continued to make good progress in line with the strategy. The rationale is to broaden the scope of the business which has several diverse routes consisting of fleet growth, operational expansion,and administrative restructuring. • National Chemical Carrier / Odfjell LTD “NCC Odfjell Chemical Tankers JLT” (NOCT), which is located in Dubai UAE. It has commenced commercial operations in January 2010 with a pooled fleet of 15 (45,000 DWT IMO2) chemical tankers. • On July 4, 2010, National Chemical Carrier (NCC) signed a contract with Daewoo Shipbuilding and Marine Engineering Co. Ltd. (DSME) to build a specialized chemical tanker carrying a capacity of 75,000 DWT. It is expect to be delivered during the year 2013. • On August 28, 2010, NSCSA signed an agreement with Arabian Agricultural Services Company “ARASCO” to establish a joint venture company to transport dry-bulk cargo which was named “Bahri Dry Bulk”. New Projects Implemented:
The National Shipping Company of Saudi Arabia Annual Report 2010
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Financial Statements & Operational Results
In 2010, NSCSA achieved a net profit of SAR 414.88 million compared to SAR 369.3 million in 2009. The total profit from operations during 2010 is SAR 344.08 million compared to SAR 277.45 million during 2009 with an increase of 24% which was due to the improvement in average time charter equivalent (TCE) rates in the Very Large Crude Carrier (VLCC) spot market and due to the cancellation of the contracts to build seven chemical tankers through its subsidiary company National Chemical Carriers Ltd. Co. (80% owned) recovering a total compensation of SAR 15.1 million.
NSCSA results of operations shown in the following tables and financial statements:
Financial Results for the Past Five Years (In Thousands Saudi Riyals)
Year
2010
2009
2008
2007
2006
Operating Revenue
2,049,830 1,672,016
2,594,530 1,703,294
1,651,281
Operating Expenses
(1,601,945) (1,299,545)
(1,633,882)
(1,251,958)
(1,161,006)
Operating Income
447,885
372,471
960,648
451,336
490,275
General and Administrative
(103,801)
(95,020)
(105,718)
(87,301)
(81,344)
Other Income (Expenses), Net
107,159
126,439
(50,491)
76,960
51,870
Zakat & Tax
(36,365)
(34,590)
(54,471)
(18,419)
(19,305)
Net profit
414,878
369,300
749,968
422,576
441,496
Earning Per Share (SAR)
1.32
1.17
2.38
1.48
1.96
Diagram of Financial Statements & Operational Results for the Past Five Years
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REPORT OF THE BOARD OF DIRECTORS
Statement of Assets and Liabilities for the Past Five Years (In Thousands Saudi Riyals)
Caption
2010
2009
2008
2007
2006
1,578,464 1,226,805
1,579,185 1,400,642
558,011
Current Assets
736,030
609,791
817,726
717,011
1,472,536
Current Liabilities
842,434
617,014
761,459
683,631
(914,525)
Operating Capital
1,977,930 2,381,013
2,581,331 1,761,709
1,788,351
Other Long Term Assets
6,409,885 6,730,766
5,658,910 4,634,435
3,650,744
Fixed Assets
9,966,279 10,338,584 9,819,426 7,796,786 5,997,106
Total Assets
736,030
609,791
817,726
717,011
1,472,536
Current Liabilities
3,818,540 4,516,180
3,709,941 2,229,291
1,336,078
Long Term Loans
33,326
34,974
37,888
37,002
34,612
Other Liabilities
4,587,896 5,160,945 4,565,555 2,983,304 2,843,226
Total Liabilities
3,150,000 3,150,000
3,150,000 3,150,000
2,250,000
Paid up Capital
1,939,691 1,837,520
1,940,796 1,509,793
754,619
Reserves & Retained Earnings
288,692
190,119
163,075
153,689
149,261
Minority Interests
5,378,383 5,177,639
5,253,871 4,813,482
3,153,880
Equities
9,966,279 10,338,584 9,819,426 7,796,786 5,997,106
Total Liabilities & Equities
Affiliates and Segments
NSCSA owns or participates in a group of companies both within and outside the Kingdom of Saudi Arabia, as shown in the table below:
Head Office Location
Geographical Scope of Activity
Date of Incorporation
Ownership (%) 2010
Company’s Name
Activity
NSCSA (America) Inc.
NSCSA ships agent
USA
Global
1991
100%
Mideast Ship Management Ltd. Technical Ship Management
Dubai
Global
1996
100%
National Chemical Carriers Ltd. Co.
Petrochemicals Transportation
Riyadh
Global
1990
80%
Bahri Dry Bulk
Dry bulk transportation
Riyadh
Global
2010
60%
LPG transportation and Trading Glass Manufacturing & Trading
Petredec Co. Ltd.
Bermuda Global
1980
30.3%
Arabian United Float Glass Company
Riyadh
Domestic
2006
10%
The National Shipping Company of Saudi Arabia Annual Report 2010
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Summary of Financial Results of Affiliates for the Fiscal year 2010 (In Thousands Saudi Riyals)
Percentage contribution in Company’s Net Profit
General & Administrative Expenses
Other income (Expenses)
Operating Expenses
Net profit (Loss)
Company’s Name
Operating Revenue
NSCSA (America) Inc.*
23,651
(6,696)
(19,426)
915 (1,556)
(0.4%)
Mideast Ship Management Ltd. *
34,658 ---
(34,124)
(266)
268
(0.1%)
National Chemical Carriers Ltd. Co.
266,744 (153,855)
(6,765)
(13,256)
92,868
(22.4%)
* Dependent entirely on the parent company in generating their income.
NSCSA operates an independent strategy for the oil & gas sectors, chemical transportation, general cargo and the dry bulk sector. The chemical and dry bulk sectors operate through a limited liability subsidiary companies National Chemical Carrier (NCC) and Bahri Dry Bulk respectively. Given that they consist of strategic partners.
Revenues of the Company’s Main Segments for the Fiscal Year 2010 (In Thousands Saudi Riyals)
Operating Revenue
Operating expenses Operating Income
Segment
% Total
Crude Oil & LPG Transportation
1,445,532
(1,070,421)
375,111
84%
Petrochemical Transportation
266,744
(153,855)
112,889
25%
General Cargo Transportation (liner)
337,554
(377,669)
(40,115)
(9%)
Bulk Transportation
---
---
---
---
Total
2,049,830
(1,601,945)
447,885
100%
Operating Revenue
Operating Expenses
Gross Operating Income
)9%(
24%
16%
25%
13%
10%
71%
66%
84%
Crude oil & LPG transportation Petrochemical transportation General cargo transportation (Liner) Bulk transportation
Crude oil & LPG transportation Petrochemical transportation General cargo transportation (Liner) Bulk transportation
Crude oil & LPG transportation Petrochemical transportation General cargo transportation (Liner) Bulk transportation
The National Shipping Company of Saudi Arabia Annual Report 2010
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REPORT OF THE BOARD OF DIRECTORS
Asset and liability distributions over the company’s segments as of 31st December 2010 (In Thousands Saudi Riyals)
Petrochemicals Transportation
General Cargo Transportation
Bulk Transportation Combined
Crude Oil & LPG Transportation
Total
Assets
5,519,163
2,961,285
207,488
200,000 1,078,343 9,966,279
Percentage
55%
30%
2%
2%
11%
100%
Liabilities
2,460,319
1,917,823
61,724 ---
148,030 4,587,896
Percentage
54%
42%
1% ---
3%
100%
Assets
Liabilities
1% 3%
11%
2%
2%
54%
55%
42%
30%
Crude oil & LPG transportation Petrochemical transportation General cargo transportation (Liner) Bulk transportation Combined
Crude oil & LPG transportation Petrochemical transportation General cargo transportation (Liner) Bulk transportation Combined
Crude Oil & LPG Transportation Sector: The Oil & Gas sector is responsible for operating a fleet of 17 VLCCs (Very Large Crude Carriers) in the Spot & Time charter markets. The risk management strategy is to balance employment between the fixed and the variable income which should not be less than 35% of the fleet to be on time charter contracts. At Year end 2010, 6 VLCCs were on time charter and 11 VLCCs were in the spot market. Charter rates are determined according to the internationally acceptable prevailing rates at the time of signing the contracts. Crude oil and Liquefied Petroleum Gas (LPG) transportation sector represents a major source of NSCSA’s income and posted an annualized operating income of SAR 375.11 million in 2010, compared to SAR 268.77 million in 2009, representing 84% of the total operating income in 2010. The fleet transported approximately 196 million barrels of crude oil during 2010. Note that the company’s 17 operating crude oil fleet has the capability to transport 36 million barrels. The total number of ports docked during the year 2010 was 309.
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VLCCs Fleet
Weight (Static Tons)
Length (Meter)
Width (Meter)
Number of Reservoirs
Speed (Knots)
Sequence VLCC Name Year Built
Type
1
Ramlah
1996
Double-Hull
300,361
340
56
17
15
2
Ghawar
1996
Double-Hull
300,361
340
56
17
15
3
Watban
1996
Double-Hull
300,361
340
56
17
15
4
Hawtah
1996
Double-Hull
300,361
340
56
17
15
5
Safaniyah
1996
Double-Hull
300,361
340
56
17
15
6
Harad
2001
Double-Hull
302,700
333
58
17
17.1
7
Marjan
2002
Double-Hull
302,700
333
58
17
17.1
8
Safwa
2002
Double-Hull
302,700
333
58
17
17.1
9
Abqaiq
2002
Double-Hull
302,700
333
58
17
17.1
10
Wafrah
2007
Double-Hull
318,000
333
60
17
16.7
11
Leyla
2007
Double-Hull
318,000
333
60
17
16.7
12
Jana
2008
Double-Hull
318,000
333
60
17
16.7
13
Habari
2008
Double-Hull
318,000
333
60
17
16.7
14
Kahla
2009
Double-Hull
318,000
333
60
17
16.7
15
Dorra
2009
Double-Hull
318,000
333
60
17
16.7
16
Ghazal
2009
Double-Hull
318,000
333
60
17
16.7
17
Sahba
2009
Double-Hull
318,000
333
60
17
16.7
Total Capacity
5,256,605
Transportation of Liquefied Petroleum Gas (LPG): Petredec Co. Ltd. was founded in 1980 by a group of international investors, and currently operates exclusively in the trade and transport of liquefied pe- troleum gas. This Bermudan based company has offices in Monaco, Singapore and the Bahamas. In 2005, the National Shipping Company of Saudi Arabia (NSCSA) bought a 30.3% stake in the share capital of Petredec Co. Ltd. The business activity of Petredec limited in liquefied petroleum gas is supported by a fleet of specialized gas carriers, consisting of (60) vessels of various sizes, of which (16) vessels are company-owned and the remaining number of carriers are chartered on spot and long-term operational contracts. Petredec business covers Asian and European markets as well as the Caribbean region. Over the past years, NSCSA realized remarkable profits from this investment. NSCSA’s share in Petredec’s net profits amounted to SAR 36.93 million in 2010, compared to SAR 84.94 million in 2009.
The National Shipping Company of Saudi Arabia Annual Report 2010
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REPORT OF THE BOARD OF DIRECTORS
Petrochemical Transportation Sector: In 1990, NSCSA in collaboration with Saudi Basic Industries Corporation (SABIC) founded the National Chemical Carriers Company (NCC) with a capital of SAR 200 million and ownership of 80% and 20% respectively. Later, addition- al funds were injected to support the expansion plans of the National Chemi- cal Carriers with a capital currently amounting to SAR 610 million. As of 31st December 2010, NCC owns (13) chemical tankers. On January 31, 2009 (3) tankers were leased to Odfjell, a Norwegian company, under a bare- boat capital lease arrangement. On June 15, 2009, NCC signed a 50% joint venture agreement with Odfjell to establish a company in Dubai, UAE in the name of NCC Odfjell Chemical Tankers JLT (NOCT). The joint venture started operating in January 2010 with (15) tankers with a capacity of approximately 660,000 tons. (3) NCC tankers were assigned to the joint venture and are op- erating under a pool arrangement with other Odfjell tankers. (6) tankers are chartered to the International Shipping and Transportation Company (ISTC) a subsidiary of SABIC and (1) tanker is chartered to Saudi International Petro- chemical Company (SIPCHEM). In line with the strategic plan of NCC to increase the capacity of its fleet to approximately 1.3 million static tons and the number of owned vessels to (29) carriers, NCC entered into a contract in 2006 with SLS Shipbuilding Co. of South Korea to build (10) new carriers and another contract during 2007 to build (6) additional petrochemical carriers. These were expected to be de- livered during the period 2010 to 2012. However, in May 2010 and September 2010, it was mutually agreed by both parties to cancel the contracts for (7) tankers under construction due to the delays by (SLS) to deliver the tankers as stipulated in the contract. As a result, NCC realized a gain on the cancella- tion of the new-buildings for SAR 15.1 million. Also on July 4, 2010, NCC signed a contract with Daewoo Shipbuilding and Marine Engineering Co. Ltd of South Korea to build a (1) specialized chemi- cal tanker of 75,000 DWT at a contract price of SAR 245 million. This vessel is expected to be delivered in 2013. Moreover, on 21 December, 2010 the BODs of NCC agreed to sign a contract with SLS Shipbuilding of South Korea to purchase (2) tankers. The Petrochemical transportation sector realized a total operating income of SAR 112.89 million in 2010, compared to SAR 151.81 million in 2009, which constitutes 25% of the total operating income of the company in 2010.
Growth of Chemical Carriers Fleet
Description
Number of Carriers
Capacity (Static Tons)
Fleet as of 31 December 2010
13
574,000
Carriers under construction and expected to be delivered during 2011-2013
12
645,000
Total
25
1,219,500
The National Shipping Company of Saudi Arabia Annual Report 2010
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Chemical Carrier Fleet - Operational and Under Construction
Weight (Static Tons)
Length (Meter) 183.10 183.10 183.10 183.02 183.02 183.02 183.02 183.02 183.02 183.02 183.02 183.02 183.02
Width (Meter)
Number of Reservoirs
Speed (Knots)
Sequence Carrier Name Year Built
1 NCC Makkah * 2 NCC Riyadh * 3 NCC Jubail * 4 NCC Najd 5 NCC Hijaz 6 NCC Tihama 7 NCC Abha 8 NCC Tabuk 9 NCC Qassim 10 NCC Rabegh 11 NCC Sudair
1995 1995 1996 2005 2005 2006 2006 2006 2006 2007 2007
37,500 37,500 37,500 46,200 46,200 46,200 46,200 46,200 46,200 46,200 46,200 46,200 46,200 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 75,000
32.2 32.2 32.2 32.2 32.2 32.2 32.2 32.2 32.2 32.2 32.2 32.2 32.2 32.2 32.2 32.2 32.2 32.2 32.2 32.2 32.2 32.2 32.2 32.2 36.8
52 52 52 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 30
16 16 16 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 15 14
12 NCC Dammam 2008
13 NCC Hail
2008
14 NCC Noor ** 15 NCC Huda ** 16 NCC Amal ** 17 NCC Safa **
Expected in 2011 Expected in 2011 Expected in 2011 Expected in 2011
183 183 183 183 183 183 183 183 183 183 183 228
18 NCC Danah ** Expected in 2011 19 NCC Nesmah ** Expected in 2011 20 NCC Shams ** Expected in 2011
21 NCC Najm ** 22 NCC Reem **
Expected in 2011 Expected in 2011
23 NCC Samaa ** Expected in 2011
24 NCC Bader **
Expected in 2011 Expected in 2013
25 NCC Fajer
Total Capacity
1,144,500
* Tankers NCC Makkah, NCC Riyadh and NCC Jubail have been chartered out under a bareboat contract to Odfjjell for a period of ten years, with an option to exercise the right to purchase after the third year. ** The schedule of delivery shown is as per the latest update from (SLS) company and there could be a possible delay in delivery until the year 2012.
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REPORT OF THE BOARD OF DIRECTORS
General Cargo Transportation Sector: The General Cargo sector is considered to be the oldest operating sector for NSCSA. It operates on a liner service between the eastern coast of the US and Canada to the Indian sub-continent passing through the ports of Italy, Jed- dah Islamic Port on the Red Sea, King Abdulaziz port in Dammam as well as Jebel Ali port in Dubai. The General cargo vessels transported approximately 1,257,282 tons of cargo during 2010, compared to 1,060,956 tons during 2009. There was an increase in the tonnage transported of approximately 19%; however, the transport rates for this sector were lower than expected and the transport rates are forecasted to increase during 2011. During 2010, the management of the company reached a decision based on its strategic plan to replace the four vessels which should be between 2012 and 2013 in which the four current vessels will end their service. The manage- ment study ensured the investments in this sector and the investments in building new modern vessels with lower operating cost percentage. NSCSA completed the vessel design during 2010 to be constructed and the company’s management are reviewing the proposed offers from ship building yards; the decision will be taken when a suitable offer is considered. The General Cargo transportation activity posted total operating losses in 2010 of SAR (40.11) million compared to an operating loss of SAR (48.11) million in 2009. This contributes to (9%) of the consolidated gross operating revenue in 2010.
General Cargo Fleet
Saudi Hofuf
Saudi Diriyah
Saudi Abha
Saudi Tabuk
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Specifications of General Cargo Fleet
Weight (Static Tons)
Length (meter)
Width (meter)
Draft (meter)
Speed (knots) Horse power Container Capacity
Type
Number
Containers/RoRo
4
42,600
236.95
32.29
11.12
2,050
27,600
18
NSCSA Owned Containers and Trailers as of Dec, 31st 2010
Sequence Type
2010 2,835
2009 2,828
1 2 3 4 5 6 7 8 9
20ft standard container
20ft open-top container
332
333
20ft flat bed
55
87
40ft standard container
556
558
40ft high cube container
1,340
1,341
40ft open-top container
146 153 225 248
146 153 227 250
40ft flat bed
20ft trailers (chassis) 40ft trailers (chassis) 20ft Mafi – 30 tons 20ft Mafi – 60 tons 20ft Mafi – 80 tons 20ft Mafi – 100 tons
10 11 12 13 14
4
4
69
69
8
8
212
212
62ft Mafi – 80 tons
15
15
Container Yard: NSCSA owns a spacious container yard in the Jeddah Islamic Port. This yard is used as a work shop for repairing NSCSA containers and for the storage of containers and related equipments. This contributes to the rapid handling of containers to and from vessels and speeds up the clearance of customer ship- ments. Mideast Ship Management is responsible for the technical management of NSCSA and its affiliate’s fleet in accordance with the requirements of Inter- national Maritime Organizations (IMO) which is affiliated with the regula- tion of the countries that the vessels visit their ports. These regulations are continuesly becoming more stringent, the company ensures to have continues improvements of its operations such as human resources and the information technology of the Mideast Ship Management (100% owned).
Ship Management of Vessels
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REPORT OF THE BOARD OF DIRECTORS
Mideast Ship Management recruited crew for the ships in accordance with the specifications of high efficiency and seeks to update and train the crew on all new plans and devices adopted and used by the company. The total number of crew members in charge of the vessels were approximately 827 employ- ees from 28 different nationalities. 750 of those employees are employed on board of the vessels and 77 are employed off shore in the Dubai office. These employees are a highly competent specialized team of captains, engineers and technicians with extensive experience in the technical and administrative aspects of the management and operations of the fleet. Mideast submits technical reports to NSCSA on the performance and status of ships, fuel consumption, results of periodic inspections and makes their recommendations in this regard. Mideast Ship Management also provides peri- odic financial reports on operating expenses and budgeting along with several other reports. In accordance with the strategic plan recommendations and considering the role of NSCSA in the Kingdom, current comprehensive development as the first national carrier in all segments (Crude Oil, Petrochemicals & General Cargo). As per the expansion strategy of the company’s activities in marine trans- portation, NSCSA signed an agreement with Arabian Agricultural Services Company (ARASCO) to establish a joint venture company for transporting dry bulk cargo with a capital of SAR 200 million out of which NSCSA owns 60% and 40% for ARASCO. NSCSA is primarily engaged in purchasing, chartering and operating the vessels for the transportation of dry cargo. The joint venture is expected to commence its operations in transportating dry bulk cargo during the year 2011 after the acquisition of the Panamax sized vessels in which each holds a capacity of 76,000 DWT. The size of the investment in the newly established company is estimated to be SAR 656 millions and shall be increased to reach around SAR 1.3 billion during the next three years. 30% of this project shall be financed by partners and 70% through shareiah compliance loans from local financial institutions. Let it be known that the Chairman of the Board of the Directors for the Na- tional Shipping Company of Saudi Arabia is also the Chairman of the Board of Directors of the Arabian Agriculture Service Company and owner. By signing this agreement and establishing this company, NSCSA adds to its activities the dry bulk cargo transportation. As a commitment from the company to serve all commercial sectors in gen- eral and the national obligations in particular, an extensive study was made to explore new opportunities to improve the General Cargo sector. In this regard, a feasibility study for replacement of the existing aged RO-RO ves- sels was made during May 2010 and a final design for the new vessels for this sector was completed in October 2010. NSCSA is currently studying the offers received from the shipyards and the project bid shall be awarded in due time.
Planning and Business Development
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Communication & Public Relations
NSCSA has professionally managed the Communication and Public Relations department, which consists of a qualified team engaged in public relations initiatives, government liaison, media relations management, conferences and exhibitions within and outside the Kingdom. During 2010, NSCSA and its affiliates participated or organized the following functions: • Saudi Oil & Gas 2010 Exhibition. •NSCSA was one of the sponsors of the business meeting with HRH Prince Salman held in Delhi, India on 12th April, 2010. • Maritime Saudi Arabia 2010 Conference & Exhibition. • NSCSA India office participated in several local news papers on the occasion of Saudi National Day. • NSCSA America, along with NSCSA Jeddah Office held the National Sales Meeting in Jeddah on December 5th – 8th, 2010. • London IP Week Feb 2010. • Posedonia Greek Shipping Conference June 2010. • APPEC Singapore Sept 2010. • Vela Reception Dubai Oct 2010. • Islamic Ship owners Conference Dubai Oct 2010. NSCSA plans to upgrade the information systems were put into action suc- cessfully during the second half of the year 2010 and the implementation was gradually carried out as per the project plans. The implementation was based on the project management institute (PMI) methodology and Oracle international methodology for completing successfully such a project and in accordance with the Information technology strategy (Manarah) which has been aligned with the company strategic plans. It introduced the advanced and most appropriate technology solutions and systems for achieving the de- sired strategic business goals to support the various divisions and departments of the company; moreover, this helped to keep pace with the growth and advancement in the level of services provided and maintains NSCSA competi- tive edge. Among the most important projects implemented by the company is the Oracle Enterprise Resources Planning (Oracle ERP) which follows and applies the best international practices and methods. This new system will support the ability to measure and identify the company Key Performance Indicators (KPIs) with a wide range of business reports that will help in the decision making. It is also worth to mention that prior to the implementation of the new systems, Business Process Improvements (BPI) including updating the procedures and policies were conducted to ensure the company readiness and improve the business activities practices as well as bridging the gaps with the new systems.
Information Technology
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REPORT OF THE BOARD OF DIRECTORS
In addition, the implementation has been completed for the consolidated company budget system that is based on (Oracle Hyperion), which aims to smooth the budget preparation and monitoring process for the annual budget. This new system also will facilitate the integration between the corporate and business unit systems to generate the financial consolidated reports and leverage the finical forecasting and cash flow monitoring. NSCSA was awarded recently by Oracle in terms of the Excellency and Leader- ship in return for the successful implementation of the Oracle Corporate Gov- ernance, Risk Management and Compliance (Oracle GRC), as the first Saudi company and one of the leaders in the region of Middle East and North Africa. This achievement will contribute towards the enhancement of the company discloser and confirmation adherence to the standards and the regulations governing its Financial, Administrative and Operational activities. As part of the company IT strategy initiative (Manarah), the IT infrastructure also has been improved to ensure better performance, availability and secu- rity. It is also worth mentioning that the company Internet Website won an Award of Excellence for the year 2010 for the second time. NSCSA has an independent department for Internal Audit & Control that employes highly qualified professionals, in addition to competent, qualified technical marine staff with experience in the surveying and maintenance of vessels. The Internal Audit and Control Department works on improving the efficiencies and skills of its employees by using technology in its work with the application of internal audit programs & software. The Internal Audit and Control Department sets its plans and projects related to risk management audit to comply with the international audit standards. The Internal Audit and Control Department verifies the internal controls, which aims to safeguard the company’s assets, accounting records against misuse, also ensuring the implementation of accounting policies and internal procedures of the Company. The Internal Audit and Control Department arranged training for preliminary ISO courses, such as Basic Foundation, Internal Quality Auditor and Lead Audi- tor to promote the Quality Management System (QMS). During 2006, NSCSA recieved ISO 9001:2000, for Quality Mangaement System (QMS) and in 2009, the quality management system was successfully upgraded to conform with the standards of ISO 9001:2008. IACD implemented various tools & programs in the system which integrates NSCSA branches & regional offices.
Internal Audit and Control
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Quality Management had planned to include all business sectors of the company under one umbrella of (QMS). This is scheduled to be implemented during 2010 - 2012. Quality Management had also planned to implement a Total Quality Manage- ment System (TQMS). This system would be developed during 2011 - 2013. The Department also performed the supervision and implementation of Governance, Risk and Compliance System (GRC). The System was successfully finalized during the third quarter of 2010, and was implemented by IACD. IACD had completed the audit assignments for the year 2010 in compliance with the approved audit plan. The relevant recommendations & suggestions were communicated accordingly. The Human Resources Department is committed towards the development of the employees’ strategy which supports the achievement of the company’s mission and strategic goals. The strategy will be reviewed and revised an- nually in the light of changing HR priorities and the company’s needs. The HR department’s role is to add value to the company through the develop- ment and implementation of the HR plans as well as taking a leading role in enhancing the staff’s growth and training programs. NSCSA’s Training and Career Development program is aimed at optimizing the utilization of its human resources. This further helps the employees to achieve the organizational goals; which provides an opportunity and a broader structure for the development of its human resources’ technical & behavioral skills in the company. Saudization Policies: Saudization is one of the key areas wherein NSCSA concentrates in achiev- ing to bring more Saudis on board. Priority is given to Saudi nationals for all job vacancies in NSCSA. In 2010, Saudinization’s percentage rate at NSCSA in Saudi Arabia has reached 55% with 3% increase from the year 2009. NSCSA have introduced a “Professional Career Development Program” in 2010. Saudi graduates were inducted to this program to train in different departments for a possible permanent placement in NSCSA. Five selected trainees successfully completed their traning under this program. They have been appointment permanenetly in various departments, branch offices and subsidiary offices.
Human Resources
NSCSA also provides trainings to new entrant Saudi sailors on board NSCSA vessels.
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REPORT OF THE BOARD OF DIRECTORS
Marketing & Customers Services
NSCSA is dedicated to achieve a strong commercial relationship with its main customers. Among the major customers of NSCSA in the market are Shell, BP, Chevron, Exxon, RWEA the German company, Euronav, Hanjin the Korean company, Chinese oil companies and Vela which is Saudi Aramco’s shipping subsidiary. A customer satisfaction survey was successfully conducted for the year 2010 by the Commercial department in the Oil & Gas business unit. The outcome of the survey as follows: 40% of our customers were surveyed for the year 2010 during customer visits or via telephone. The results of the satisfac- tion survey data showed a 100% satisfaction rating which is an improvement results compared with the 2009 results which showed a satisfaction rate of 92%. Moreover, the Commercial team from the Oil & Gas business unit visited the oil major companies in the United States of America and China during the month of September in 2010. The General Cargo sector annually organizes a conference to invite company’s respresentives and research officials from this sector to study the customer requirements to ensure an improvement in the services provided to them. NSCSA regularly assess and upgrades the safety equipments on board the fleet to conform with the latest regulation requirments. In 2006, NSCSA was awarded (ISO 9001-2000) and (ISO 14001-2004) quality certificates, Interna- tional Maritime Organization (IMO) certificate and Lloyd’s certificate. Further in 2009, NSCSA was awarded ISO 9001 – 2008 for Quality Management System (QMS). Our commercial procedures are compliant with the latest ISO 9001:2008 standards. In December 2010, an external audit was conducted by Det Norske Veritas (DNV) for “Commercial Operations of Ships” and was completed suc- cessfully. NSCSA ’s Quality Policy: NSCSA is committed to achieving commercial operational excellence and de- livering flawless customer service using an integrated risk managed approach. The following beliefs are essential to the achievement of this goal: • Take all necessary steps to safeguard assets and customer property. • Meet all regulatory and statutory requirements. • Proactively develop and manage customer relationships. • Use performance measures to drive continuous improvement. • Maintain steadfast adherence to conduct business affairs with integrity and sincerity.
Quality Assurance
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Environmental & Safety
The shipping industry is globally spread and has an impact in the sea environ- ment and climate changes, NSCSA maintains a strong commitment towards safety and complies with all the regulations imposed by the global legislative bodies and environmental organizations; in which to preserve the integrity of the marine environment and climate. NSCSA is determined to observe all the requirements necessary for this purpose in the technical specifications of its fleet and to minimize the negative impact on the environment by the pollu- tion from vessel’s engines and equipment used on board the fleet. NSCSA con- ducts periodic inspections of the fleet and equipment through global consult- ing firms to ensure safety and conformity to the technical specifications and standards adopted universally. NSCSA regularly conduct revision of the safety equipment on board the fleet to conform to the latest standards.
NSCSA always takes important measures for the safety and health of its em- ployees as well as those employees on board the fleet.
Social Responsibility
NSCSA always goes beyond the commercial interests and believes that social responsibility is an obligation to make decisions as well as take actions that will enhance the welfare and interest of the society and the company. NSCSA is committed to establish an active presence in the community served. NSCSA believes in the importance of social responsibilities due to the benefits gained from the society; therefore, NSCSA have an obligation to improve it. It is part of it’s objectives for the impact reflected on the employees, custom- ers, community, and other organizations or groups. NSCSA aims to build confidence and close relations within the community and its reputable customers throughout it’s business, and has earmarked a special provision in its budget for social and educational activities, awareness-raising and general development projects.
NSCSA’s contributions to social activities during 2010 are as follows:
• Contributed to “Insan” Charitable Organization. • Cholesterol awareness campaign organized by the Ministry of Health (MOH). • Annual Janadriyah Festival.
Risk Management
The shipping industry is complete with risks at the financial, informational and operational levels. NSCSA has paid great attention to these risks and pro- ceeded to apply a set of measures to address such risks through a controlled system. All departments and employees at NSCSA are responsible for imple- menting such appropriate internal controls and risk management to ensure the company reaches its goals and save its resources.
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