1.1 About Farstad Shipping
Farstad Shipping ASA is a major international provider of big, modern offshore support vass.
It has a fleet of 57 vass and presently has one vas under building. It is headquartered in
Aelesun on the North West seashore of Norway. It has offices in all major ports of the universe
including Aberdeen in Scotland, Melbourne in Australia, Singapore and in Macae in Brazil.
Through a joint venture it besides has presence in Angola. In 2008 the freight income was earned in
the undermentioned markets: 16.0 % in Norway, 14.0 % in the UK, 45.0 % in the Far East/ Australia,
19.0 % in Brazil, 6.0 % in West Africa and Mexico. Farstad Shipping has been listed on Oslo
Stock Exchange since 1988 and has over the old ages given the stockholders a competitory return on
their investing. The figure of outstanding portions is 39 million out of which about
46 % is owned by the Farstad household ( Fastard Shipping, 2009 ) .
1.2 Brief History
The transportation company Sverre A. Farstad & A ; Co was established in 1956 by Consul Sverre A.
Farstad and the ship-owners Ole Schroder and Sverre Farstad Junior. The first vas, an ore bearer of
10 500 DWT, was ordered the same twelvemonth from Haugesund Mek. Verksted. In early 1988 Farstad
bought the “ empty ” company Hemes with the intent of being quoted on the Oslo Stock
Exchange. Soon after the acquisition of Hemes, parts of the Farstad ship owning involvements went
public through the debut of Far Shipping A/S to the Oslo Stock Exchange.Far Shipping
A/S subsequently changed name to Farstad Shipping ASA. The company became an integrated transportation
company in the twelvemonth 1993 and in 1997 it established a JV with P & A ; O, which was followed by a
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JV with Petroserve in 1999. In subsequent old ages the company has expanded its operations in the
Indian Ocean and set up offices in Signapore and West Africa.
1.3 Core Valuess
In order to understand the scheme of Farstad transporting it is of import to observe the values which
are imbibed in the employees of the corporation. They are the following
Safety Minded: The company believes that all its employees should be trained in basic safety
steps and drills. It wants to be a responsible employer where the services rendered to the
client are done with compromising the safety of the employees
Value Creative: The Company wants to make value for all its stakeholders including
employees, stockholders, clients and the society in general.
Reliable The Company believes in having up to the determination it has taken and believes in
exerting a high sense of unity
Inclusive The Company wishes to be single focussed taking into account their different demands
through sharing cognition and experience.
Visible and Transparent: The Company wishes to stand with its clients and clients in their
enterprises. It besides wishes to back up the local community.
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1.4 MISSION AND OBJECTIVES
Farstad Shipping ‘s wants to be a long-run, major provider of big, modern offshore supply
vass to the oil industry worldwide. It besides endeavors to accomplish the followers
1.4.1 Core Focus
i‚· Anchor managing tug supply vass ( AHTS ) larger than 10000 BHP and platform supply
vass ( PSV ) larger than 2000 DWT.
1.4.2 New Areas:
i‚· Focus on the supply vas market which is most complex in footings of progress and big
sum of tunnage
i‚· Target subsea and building activities leveraging the experience gained. This would
allow the company to back up its clients plunder into this country
1.5 Financial Overview
The company achieved in 2008 runing grosss of NOK 3,019.7 million, which is the highest
in the company ‘s history. The consequence after revenue enhancement amounted to a net income of NOK 1,225.6 million ( NOK
89.3 million shortage ) after the acknowledgment of NOK 316.3 million in revenue enhancement income, of which NOK
317.8 million came from the reversal of the environmental part associated with the new revenue enhancement
government in 2007.
In Q-2 2009 the company had a had an operating income of NOK 839 manganese as compared to an
income of NOK 662 manganese. The profitableness as measured by EBIDTA besides improved well
to NOK 451 manganese as compared to NOK 346 manganese in the old twelvemonth. The PAT for the one-fourth was
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NOK 366 manganese as compared to NOK 225 manganese in the same one-fourth old twelvemonth ( Fastard Shipping,
2009 ) .
2 Industry Analysis
Due to the planetary economic lag the seaborne trade grew at merely 3.5 % in 2008 as compared
to 4.5 % in 2009. However the past tendencies continue where the development parts offered the
maximal lading accounting for 60 % of the tunnage and developed states had 33.6 % of the
tunnage. The overpowering laterality of Asia was rather start with it commanding about 40 % of
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2.1 PEST Analysis
2.2.1 GDP Growth
The planetary GDP growing in 2008 has slowed down to merely 2.0 per centum as compared to 3.7 % last
twelvemonth and below the one-year norm of 3.5 % recorded during the period 1994-2008. World end product
has contracted by 2.7 % in 2009, first clip of all time since 1930. Since the demand for maritime
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conveyance is dependent on planetary growing in production, the maritime industry is besides expected to
endure the autumn out of this autumn in demand.
Developed states are the 1s which have suffered the most in footings of GDP growing with a
lessening in GDP by 4.1 % in 2009. Developing states nevertheless continued to spread out end product
by 5.3 % in 2008 down from 7.3 % in 2007.China continued to take, with its GDP growth by 9.0
per cent. Other major states such as India and South Africa continued on the growing
flight although at a slower rate of growing ( UNCTAD Report 2009 ) .
2.2.2 Impact on Merchandise Trade
The lessening in the planetary end product worldwide has had a material impact on the growing in universe
ware trade. Although the volume in 2008 grew by 2 % this was 4 % points lower than that
in 2007. In most of the old old ages the growing in planetary trade outpaces the growing in GDP,
nevertheless this twelvemonth the same was non noticed.
In 2008, the American export volumes grew by a meager 1.5 % while the European Union
registered the slowest growing of all time. There was a rapid diminution in imports every bit good, with US hitting
-2.5 % and the EU a negative 1 % ( UNCTAD Report 2009 ) .
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2.2.3 Trade Finance
Trade finance is a cardinal influencing factor when it comes to the maritime industry. In fact experts
believe that this unmet demand of trade finance is the cardinal grounds for a rapid diminution in maritime
activity with the coming of the fiscal crisis. Banks have become conservative in publishing letters
of recognition and other instruments which facilitate trade. This has had a considerable impact on the
trade peculiarly amongst developing states. The unmet demand for trade finance is estimated to
be USD 100 bn to USD 300 bn yearly ( UNCTAD Report 2009 ) .
2.3.1 Attempts by Government to Stimulate Economy
A planetary economic recovery and by extension, a recovery in ware trade and demand for
maritime conveyance services will depend on actions by universe authoritiess to excite investing
and ingestion and therefore promote trade. ( Scott and Jeferrey 2007 )
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Governments separately and as portion of the G-20 have taken action to regenerate the economic system. In
the G-20 meet in April 2009, they agreed on a $ 1.1 trillion support attempt with $ 250 bn out of this
attributed merely to merchandise finance. States such as India and China have lowered involvement rates to
stabilise fiscal sectors and excite the economic system ( Harrigon and Deng 2008 ) .
2.3.2 Security at Sea
A cardinal challenge confronting the maritime industry has besides been the safety of the maritime vass at
sea. This has been challenged by a rush in buccaneering incidents in cardinal strategic theodolite points such as
Gulf of Aden. These incidents of buccaneering have a considerable impact on ships, crew and ladings
and on the maritime industry. It threats planetary seaborne trade ( over 80 % of trade traveling through
the Gulf of Aden is In add-on to the direct impact on ships, crews and ladings, and on the
maritime industry and authoritiess, buccaneering threatens planetary seaborne trade ( over 80 per cent of
seaborne trading traveling through Gulf of Aden goes to Europe ) . This jet in buccaneering has led to
high insurance costs for the ships go throughing through the Gulf of Aden with the war insurance
premium mounting to USD 20000 per ship from USD 500 bn twelvemonth ago. ( Clark 2007 )
2.3.3 Climate Change
The issue of clime alteration has been going progressively of import. There has been
obliging scientific grounds about the earnestness of the menace which has moved the issue to
the head of the international docket. The impact has been more important in the more
vulnerable states. Maritime conveyance as a major transit industry besides has a function to
play given the fact that by volume it carries over 80 per cent of planetary trade, has a function to play in
turn toing this formidable challenge.
International maritime conveyance faces a double challenge. As a transit sector it ‘s a
subscriber to the nursery gas emanations and therefore faces anger of conservationists. It is besides
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straight impacted by the clime alteration factors such as lifting sea degrees, extreme conditions events
and lifting temperature. The broad runing impact clime alteration is likely to hold on maritime
conveyance and the deduction for trade growing and development demand to be addressed by
incorporating this in the scheme planning procedure for a maritime conveyance company ( UNCTAD
2009 ) .
2.4.1 Dependence on Oil
Maritime conveyance industry relies on oil, in peculiar on heavy class fuel oil for propulsion.
Although there is a possibility of utilizing alternate energy beginnings such as air current and solar power
for giving extra power to the ship. LNG may be used as an alternate fuel in transportation ;
nevertheless it besides faces the challenge of being stored aboard.
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2.4.2 Emergence of Green Ships
Evergreen Line a company which runs transporting operations worldwide has introduced green ships
which are much more fuel efficient and engineering advanced to run into the challenges posed by
clime alteration. These include following distinguishable characteristics
1. Alternate Nautical Power: Connects to alternate power from shore to cut down air
pollution during loading/unloading
2. Superior Hull Design: This improves velocity and reduces fuel ingestion to do the
ship more efficient.
3. Waste Storage Chambers: Treats refuse to keep first-class healthful status.
4. Low Sulfur Fuel System: Reduces emanation of SOx gasses to forestall air pollution
( Clark et al 2005 )
2.5 Social and Cultural Factors
2.5.1 Demographic Change:
It is to be noted that the ingestion goaded economic systems of Europe and North America have
shown mark of decelerating down. Although the issue in North America is chiefly due to the after
effects of the fiscal crisis, the state of affairs in Europe possibly even more complex. This is
chiefly due to the quickly ageing population. A quickly ageing population normally points
towards a displacement off from a ingestion driven economic system and a stable or worsening population
growing rate. This is in contrast to the population composing in China and India which is chiefly
immature, with about 50 % being under the age of 30 old ages. This demographic displacement in population is
edge to act upon maritime trade which is likely to acquire a encouragement in these states.
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3 Analysis of Farstad Shipping
3.1.1 Strong Order Book
1. The company has been awarded a four twelvemonth contract with Petrobras in Brazil. Startup of
the contract was terminal of January
2. The company has been hired to supply charter services for a period of 12-15 months to
support boring operations in New Zealand and Australia.
3. Shell Australia has besides contracted the company to back up the operations in western
Australia for oil boring and geographic expedition
4. Shell has awarded a contract to the company for geographic expedition around the Irish shelf.
( Fastard Shipping 2009 )
3.1.2 Induction of New Technology Ships
The company has started using platform supply vas which is designed for transit
of supplies/equipment to and from seaward installings. Transporting single points chiefly in
containers on deck, in add-on to a assortment of different merchandises ( dry and moisture ) in separate armored combat vehicles.
3.1.3 Strong Financial Condition
The company is strong in footings of its fiscal status. The undermentioned fiscal parametric quantities
point out that the company is under leveraged, has fund raising ability and has been steadily hard currency
positive in the last few old ages
1. Debt/Equity Ratio: The company has a debt equity ratio of ~0.8 i.e. & lt ; 1. This implies
that the company is well under leveraged as compared to its equals. The company
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has considerable debt elevation capacity which when done in Norway and other developed
states would be available cheaply. This can be used to fund the chances which
exist for the company in emerging market and new countries of involvement.
2. EBIDTA: The hard currency coevals ability of the company as measured by the Net incomes
Before Interest Depreciation and Taxes is rather strong. The EBIDTA for twelvemonth 2009 was
1736 NOK manganese as compared to 1729 NOK manganese in 2008 and much higher than 1376 NOK
manganese in 2007. Thus in malice of the planetary fiscal crisis the hard currency bring forthing ability of the
company has non been impacted.
3. Cash and Cash Equivalents: The hard currency and hard currency equivalents of the company were 1544
manganese NOK in the twelvemonth 2009 as compared to 1189 NOK manganese in the old fiscal twelvemonth.
Therefore the company ‘s hard currency militias have increased well in the last twelvemonth owing to
( Fastard Shipping 2009 )
3.2.1 Cost of Human Capital
Since the company is chiefly based out of Norway, the strength of its human capital comes from
the developed states. Therefore given the pay derived function between developed states and
developing states the company operates at a high cost of human capital. It is likely to confront
challenge from bearers runing from developing states such as India and China.
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3.3.1 Foreign Exchange Risks
Due to the company ‘s planetary operations it carries a foreign exchange hazards on its grosss,
net incomes every bit good as beginnings of financess. The company has a negative impact of 273 manganese NOK due to
the unfulfilled foreign currency loss. Thus it is of import for the company to fudge against the
foreign currency hazards ( Fastard Shipping 2009 )
3.3.2 European Crisis
By the terminal of twelvemonth 2009, the fiscal crisis was looking to be over with the autumn in idle claims
in the United States. However the impact of a free Wheeling pecuniary policy unleashed in the
aftermath of the fiscal crisis has started stating on European states. States such as Greece and
Italy which were ever fighting with the financial shortage seem to be fighting with their
burgeoning financial shortage. If the tendency continues and the crisis spreads to the human dynamos of
European economic system i.e. France and Germany, we might be in for a unsmooth drive out of the recession.
This would intend a period of stagnated growing for another twelvemonth and a half. This combined with
an ageing population is likely to ensue in autumn in demand in the European mainland and therefore a autumn
in trade ( UNCTAD Report 2009 ) .
3.3.3 Climate Change
The issue of clime alteration has been highlighted above and is a turning and garnering menace to
the company in the long tally. Since the company has been runing its fleet for a long clip it has
many aged vehicles in the fleet. There is ever a fright that given the fact that the clime alteration
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has taken international Centre phase, a statute law enforcing more rigorous emanation norms on the
maritime industry is non far off.
The economic systems of China and India even in the worst times of the fiscal crisis have shown
resiliency, although have n’t been wholly untouched by it.
4.1.1 High Growth Rate
The states continue to turn above a growing rate of 7-7.5 % . This is chiefly on history of the
strong domestic demand supported by a favourable demographic profile. Given the fact that a
bulk of the population is under the age of 30 year, the working population in these states is
4.1.2 Rise in Imports:
The turning demand in developing states for white goods, luxury goods and trade goods is
all set to increase in the coming old ages given the increasing proportion of the in-between category. In
India entirely the population of the in-between category is likely to be 250 manganese in another five old ages, this is
approximately equal to the full population of the United States. Hence the addition in trade to and
from these geographicss is all set to increase exponentially.
4.1.3 Better substructure
Developing states such as Brazil, China and India have well increased their
outgo on substructure undertakings such as development of ports etc. This is likely to cut down
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the turnaround clip for the ships which use these ports frequently therefore diminishing the overall cost of
trip. This would be a positive development for Farstad Shipping.
( Harrigon and Deng 2008 )
4.2 Increase in Oil Monetary values
The oil monetary values which were on a downward spiral in the twelvemonth 2009 have stabilized and are all set
to lift as the Chinese growing engine gets into the fast cogwheel. An addition in all monetary values is likely to
rejuvenate the oil geographic expedition market and therefore supply chances for nautical support. A
higher oil monetary value means that the oil companies are ready to research countries where the chance of
happening oil may non be really high, since the chance cost of non researching the country is really high.
This translates into better and higher sum of concern for the maritime industry ( Berthelon
and Freund 2008 ) .
5 Competitor Analysis
The Norse transportation industry is composed of about 85 transportation companies which operate
in one or other niche. However there are merely four other bigger participants which challenge Farstad
in its sphere of AHTS and PSV. They are as follows:
1. Deep Sea Supply: he Group ‘s chief activities are ship owning and operating of several
Anchor Handling Tug Supply vass ( AHTS vass ) and Platform Supply Vessel ( PSV ) . The
Group operates in two sections AHTS and PSV. The Group operates in the followers
geographical countries: North Sea, Mediterranean, Africa, Australia/Far East and North & A ; South
America. It does non hold presence in the sub-sea class in which Farstad now operates giving
Farstad a unequivocal border in the market.
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2. DOF ASA: The group operates around 67 vehicles out of which 23 are owned by the group
and the remainder are leased. These include 23 PSV ‘s, 21 AHTS and about 23 Multi Purpose Vehicles.
This group has an extended presence in the bomber sea section and therefore poses a direct challenge to
Farstad ‘s domination in this sphere. The group is the largest Norse participant, following merely to
3. Havila Transportation: The company operates 10 supply vass and another 12 new edifices.
These include a sum of eight PSV ‘s, 9 AHTSV and three subsea building vass. The
company ‘s spread outing operations in the moneymaking bomber sea market threatens Farstad ‘s grosss
from the same.
( Fastard Shipping 2009 )
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6 Analysis of Farstad ‘s Scheme
Farstad ‘s scheme can be summarized as three pronged. The first two trade with its conventional
strengths in back uping the demands of the oil industry and transporting advanced tunnage while the
3rd one is the new country of focal point i.e. subsea activities.
a. Oil Focused: Farstad ‘s chief focal point has been to be a long term provider of big, modern
offshore supply vass to the oil industry worldwide. However this scheme comes with
hazards as it would do the company dependant on the lucks of the oil industry. In instance
of a dip in the oil monetary values it would set force per unit area on the company ‘s revenus and borders.
B. Supply Vessel Market: The company besides endeavours to fosu on the supply vas
market which demands the most advanced tunnage. Thus it besides belives that it can provide
to ware trade. In this class the company is amongst the top 5 service provides
with a planetary market portion of 5 % .
c. Subsea Activities: The company ‘s new are of focal point is leveraing the experience gainsed
from the conventional offshore activities to beef up its presence in the bomber sea
acitivites to back up client demands.
Farstad ‘s Fleet
a. AHTS ( Anchor Handling Tug Supply Vehicle ) Anchor Handling Tug Supply
Vessel – They are offshore supply vass specially designed to supply ground tackle
handling and towage services for semi submersibles, platform jackets, flatboats and
production modules/vessels. Certain AHTS in the fleet are equipped for fire
combat, deliverance operations and oil recovery
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b. PSV ( Platform Supply Vehicles ) : These vass are designed for transit
of supplies and equipment to and from seaward installings.
c. Subsea: These are customize for operations and building work on the ocean floor,
and support for subsea operations.
d. CSV ( Construction Support Vessel ) . Vessel particularly designed for operations
and installings at great ocean deepnesss. MPSV ( Multipurpose Supply Vessel ) big
supply vass equipped for support, care and installing of equipment
on the ocean floor.
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7 Critical Success Factors
Critical success factors for the company will be determined by the company ‘s internal strengths
every bit good as the chances which exist in the market. The critical success factors for the
company based on the above are as follows:
1. Meet the Challenge of Climate Change: Climate alteration issue as discussed earlier is
probably to hold a major impact on the nautical conveyance industry. Hence it is of import to
tackle this issue through a combination of efficient ships and smarter tonss. Therefore Farstad
transporting demands to accomplish this to remain competitory and be a leader in the industry.
2. Exploit Emerging Markets: Emerging markets such as India and China are likely to be
key to the success of Farstad. As they are the growing markets for any new company, so
farther add-on to the company ‘s top line would be dependent on its attempts to work the
trade paths emanating from these states.
3. Target Oil Operationss: Oil is a critical resource and given the recent tendencies, the monetary value of
oil is likely to lift as the universe recovers from the fiscal crisis. Therefore given the high
borders on oil it is likely that deep sea oil geographic expedition is likely to be a major growing country.
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26 FARSTAD Transportation
2. Merchandise Development: Given the altering kineticss of the transportation industry, there is a
demand to develop new merchandises which are faster and more fuel efficient. This would
distinguish the service offering in the market and therefore pull more clients.
3. Market Development: In this instance the company can leverage its bing strengths in
transportation and spread out its markets to the two major untapped countries i.e. North America and
4. Diversification: The company should go on to concentrate on its core countries of operations and
non venture into unrelated variegation given the volatility of the external environment.
To enable this the followers should be the cardinal pillars of company ‘s scheme traveling forward:
1. Target Emerging Economies: The Company has non as yet exploited the rapid
growing in the emerging economic systems of China and India. It is critical traveling frontward
that it is able to capture some of the demand emanating from these states. The
states are dependent on imported oil and are confronting terrible resource restraints
in happening vass for the import of such oil. China is come ining into long term
strategic partnerships with Africa to acquire oil.
i. Farstad should work its presence in Angola to provide to the concern
which this strategic partnership is likely to bring forth.
two. Farstad should besides set up a presence in the major ports in the part
particularly Shanghai and Mumbai which are the new fiscal hubs of the
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E. The company ‘s concern development attempts in these metropoliss can
exponentially turn its grosss.
2. Transporting Operationss to North America: It is indispensable that the company takes
advantage of the resuscitating U.S. economic system and expands its concern to the U.S. and
beyond. As the company expands its presence in U.S. and China it can capitalise
on the immense sum of trade which happens between these two states and therefore
addition grosss every bit good as profitableness
1. Deep Sea Oil Exploration: Given the highs touched by Crude oil monetary values it is
obvious that one time the universe economic system recovers the oil monetary values are likely to head
North with a demand supply mismatch given the production cuts by OPEC. In an
epoch of high oil monetary values deep sea oil blocks which were earlier non really profitable to
explore are likely to go profitable marks for geographic expedition. Therefore if the
company is able to take a measure frontward from its strengths in sub sea building
and supply vass for Deep sea oil geographic expedition it will be capitalize on a new
beginning of gross.
2. Ship Procurement and Development: It is of import to recognize that the
challenge of clime alteration is merely traveling to acquire bigger with clip and there is
traveling to be considerable force per unit area on the maritime industry to cut down on
emanations. Therefore this needs to be reflected in the ship edifice and development
attempt of the company so that more fuel efficient vehicles can be built. It might be
prudent to analyse the development attempts of the Greenline transportation company to
understand how these attempts can be made more fruitful.
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