The beginning of the year has shown signs that the markets are starting to loosen up a little, but the budding recovery is not strong and is still moderate enough to ensure that price remains the key factor when businesses choose their suppliers, Blue Water Shipping CEO Kim Hedegaard Sørensen tells ShippingWatch after the company presented its results for last year, where revenue grew to EUR 595 million, up from EUR 555 million, while the company's result before taxes was reduced by more than half in 2013, to a profit of EUR 4.7 million.
We're quite confident that we'll grow more than the market, and that goes for both wind, oil, and the traditional forwarding business in air and sea, and then we need to handle this price pressure properly.
"It's been a market still characterized by the fact that Europe is in the midst of a major crisis," he says about 2013, pointing out that, since more than half its revenue comes from Northern Europe, the company was not able to work around this fact.
"In late 2013 and in 2014 until now, things are starting to loosen up a little with a budding recovery emerging. It's not strong, but volumes continue to rise in 2014, and Southern Europe is getting a little more on track. But the recovery is still so moderate that Europe remains focused on prices, and this hits us as well as our competitors. The market is under a heavy price pressure, and even though our volumes grew more this year than they did in the annual report for last year, we still need a higher number of shipments in order to deliver the same profit as last year."
Investments impact bottom line
Kim Hedegaard Sørensen also points to investments performed in 2012 and 2013 as contributing factors behind the reduced result. Last year Blue Water Shipping opened ten new offices, strengthened its IT platform, and invested in warehouses in the Port of Esbjerg. All these initiatives have taken a toll on the bottom line, though they should contribute to improved results in 2014 and especially 2015.
"We're pleased to grow more than twice as fast as the market. If you look at the various business areas, they've made an okay profit, though I won't call it great. I'm not pleased that the net result ends up far lower than last year," he says, though stressing that this was expected.
As such, the company will now reduce its investment level in the years to come, opting instead to focus on achieving a solid return on investments made in the last few years.
"We're slowing down in 2014, to implement the investments completely so that the shareholders will receive a solid return," says Kim Hedegaard Sørensen.
Price pressure continues in 2014
The company will still open new offices, just not at the same pace as in 2013. The goal for the coming years is a "strong" expansion of the company's position within the general forwarding business in the North, which specifically covers Norway, Sweden, and Finland as core markets. The company currently has two, three, and two offices, respectively, in these countries - numbers that should preferably grow to between four and five in time, explains Kim Hedegaard Sørensen.
"We're quite confident that we'll grow more than the market, and that goes for both wind, oil, and the traditional forwarding business in air and sea, and then we need to handle this price pressure properly. Our biggest challenge will be to convert volume growth - and thus also revenue growth - into profit growth. That's the biggest focus right now. We expect our revenue to grow between 5-10 percent, which is somewhat above our competitors' growth, and we're pleased with that. As for profits, we expect a small increase, but likely not very much. The price pressure is still there, so we have to run even faster than in 2013."