Oldendorff Centenary Book - Flipbook - Page 48
THE PATIENT PREDATOR
How a patient, long-term outlook and the ability to strike swiftly
is a powerful combination.
The trust that Oldendorff puts in its
people enables fast decision-making.
If the opportunity is there, we go
for it. But the ability to act fast does
not mean we do not have patience.
Shipping is all about planting the
seeds with long-term positioning,
followed by decisive action, once the
field crops are ripe for the harvest.
Like a predator, we are willing to
bide our time and wait for the right
moment. And when it presents itself,
we pounce on the opportunity in
a flash. However, even though the
opportunity to act is fleeting, decisions
are always necessarily taken with
the long-term in mind and it may take
many years to reap rewards.
First and foremost, we have to be
viciously countercyclical when riding
the short and long market waves.
To put it in Henning’s words: “Buy
cheaply, and we can navigate on
autopilot, buy expensively, and we
will struggle forever.”
This is only possible because of the
trust shown by our shareholder. The
company’s unique way of trusting
in people to do the right thing was
Henning’s idea – and he is therefore
willing to show trust himself. One
of the reasons that competitors
may fail to move in time to take an
opportunity is that they become
anxious without a short-term benefit
to show shareholders. We have one
shareholder, and he is extremely
patient and trusting.
Henning’s passion lies in dealmaking
on the asset side, i.e. trying to buy
and sell ships at the right time. The
chartering teams and commercial
board members are doing something
similar, when they are trying to ride
the waves to get the timing right
for booking cargoes and contracts,
taking ships on charter or buying and
selling freight derivatives.
Oldendorff could be seen as a nimble
and aggressive predator with a gentle,
beneficent presence. We will not be
hurried, yet we will also not be beaten
to the punch. A paradox perhaps, but
also a highly potent combination that
has enabled the company to prosper
in the last few decades.
WHY THE 2008 CRASH MEANT
PARTY TIME IN LÜBECK
Jens Jacobsen recalls: “We had started
selling early on in 2007 already,
producing substantial losses for the
company. The value of this approach
came into sharp relief in September
2008. During the preceding months,
while the shipping industry was
booming, the chartering guys had
been busy signing up customers on
long-term contracts. They wanted
to secure the good prices while they
were there. Customers, for their part,
saw the prices rising all the time and
were happy to secure a future price
before they went up again. The price
of taking these long-term contracts
was to accept the short-term losses.”
However, we knew that change was
coming at some point, but we didn’t
know when. The high markets couldn’t
last, and it was only a matter of time
before a crash would happen. The
key was to position the company for
the long term.
When the 2008 shipping crash
came, the cost of chartering a ship
dropped by 99% in a few months.
In April it cost $234,000 per day to
charter a typical “Capesize” bulk
44
carrier; by October, it was $2,300 per
day. The world had panicked, but we
were prepared.
This meant that the asset value of
the Oldendorff fleet plummeted too,
but we had also been busy selling
off nearly 100 ships while times
were good and prices were high. For
example, Henning contracted nine
32,250 tdw bulk carriers in Japan for
delivery from 2001 to 2005. He sold
most of them before the crash. The
two oldest units, which had long
been earned down, were sold at the
peak of the market in summer 2008
at $52.5 million each, despite the fact
that everyone said: “Don’t sell”. The
market crashed two months later.
But the long-term contracts were
still in place. And our costs of fulfilling
those contracts – with ships chartered
at lower rates – had dropped. While
everyone else was staring down the
barrel, we were looking forward to
years of good business, locked in to
pre-crash freight rates.
And it gave us a chance to invest once
more in hardware. Even though the
value of ships had fallen, not many
owners had the money to buy them.
In fact, most companies needed to
sell. With cash reserves and fewer
demanding shareholders, Oldendorff
was able to exploit the market. The
value of those vessels would rise over
time, and only companies with deep
pockets and a prudent sense of market
timing would be able to leverage it.
So, in autumn 2008, when banks
were foreclosing on distressed
shipping assets and the business
world seemed to be unravelling, it
was not a crisis in our little corner
of Lübeck. It was party time.