Overview

Against a background of fluctuating though steadily improving market conditions as the year progressed, 2004 must be viewed as an encouraging one for the I.M. Skaugen Group. The past 12 months can be seen as one of integration - of new vessels into the fleet and of alliances, both beginning in late 2003.

For the year, the I.M. Skaugen Group reported a pre-tax profit of US$5.7 million in 2004 (US$20.2 million in 2003, which included a gain from the sale of assets of US$19.3) and a net result after tax of US$11.6 million. The result on an EBITDA basis is US$28 million in 2004 (US$24.4 million in 2003).

The gas carrier market, through Norgas, has seen improved earnings levels during 2004, particularly in the second half of the year. The year has also seen our first full year of cooperation through the revenue sharing pool, Mærsk Norgas Gas Carriers (MNGC) and we consider the start up period to be successful.

MNGC's specialisation is the smaller-sized vessel segment of the petrochemical gas and LPG industry. The MNGC alliance had its first year of operation in 2004 and operates 35 ethylene-specific vessels - more than twice the number controlled by the number two operator. MNGC retained through 2004 its approximately 60 per cent market share of the ethylene transportation sector.

The year saw a strengthening of activities in China – including further market growth in the delivery of LPG in the Yangtze area and an increase in needs for education and training. The effort of the past 12 months has tried to ensure that I.M. Skaugen has a key position as it looks to take advantage of the country's growing economic development.

SPT - which undertakes ship-to-ship oil transfer (tanker lightering) activities - achieved a solid performance in spite of volatility in the oil and corresponding tanker market through the year. Full-year EBITDA earnings managed to exceed US$16 million (US$19 million in 2003) (on a 100 per cent basis) due to strong results in the fourth quarter of 2004. SPT was responsible for lightering an average of one million barrels of crude oil per day during 2004 - over 10 per cent of all sea-borne oil imports into the US.

The IMS share price increased eight per cent during 2004, with a year-end closing price of NOK154 per share. The yield over the year was 13 per cent, including a dividend of NOK7 per share, paid in March 2004.

At the Annual General Meeting on 1st March, 2005, the Board will recommend a dividend payment of NOK7.50 per share (NOK7 in 2004 and NOK20 in 2003). This dividend represents approximately a five per cent yield on the share price at year-end.

With the current outlook for our business units - and based on both the contract coverage and spot market conditions - we think 2005 should be a year of solid financial performance for the Company and with significantly higher EBITDA earnings.