System1 Annual Report 2011

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S T E A M S H I P S T R A D I N G C O M PA N Y L I M I T E D
A n n u a l R e p o r t 2 0 1 1

L815 - ACA Steamships AR 2011 Covers 25/4/12 10:16 AM Page 2

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PIONEERING SUSTAINABLE PROGRESS

Steamships Trading Company has a 93-year tradition of investing in Papua New Guinea’s growth,
development and progress. Its transition from pioneer coastal trader to a diversified leader in shipping,
transport, property, manufacturing, hotels and information technology has been integral to, and part of,
Papua New Guinea’s development into a modern and formative leader within the Asia Pacific region.

That tradition continues today.

Committed to our people, the sustainability of our operations, and the future of Papua New Guinea,
Steamships Trading Company is pioneering sustainable progress in PNG into the twenty-first century.

WEWAK

MADANG

MT HAGEN

GOROKA

KIUNGA

KAVIENG

RABAUL

BUKA

KIMBE

KIETA

LAE

POPONDETTA

ORO BAY

PORT MORESBY

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C O N T E N T S

Brief Profile of Steamships Trading Company Ltd . 2
Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Chairman’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Directors’ Economic Analysis . . . . . . . . . . . . . . . . . . . . 8
Directors’ Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Logistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Steamships Shipping. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
East West Transport. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Property and Hotels . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Steamships Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Coral Sea Hotels. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Manufacturing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Information Technology. . . . . . . . . . . . . . . . . . . . . . . . . 29
Key Subsidiaries and Associates . . . . . . . . . . . . . . . . 31
Consort Express Lines. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Pacific Towing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Colgate Palmolive (PNG) . . . . . . . . . . . . . . . . . . . . . . . . 31
Sustainability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Steamships’ Sustainability Focus Areas . . . . . . . . . 34
Our People. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Our Environment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Our Community. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Corporate Governance Statement . . . . . . . . . . . . . . 52
FINANCIAL SECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Statements of Comprehensive Income. . . . . . . . . . 54
Statement of Changes in Equity. . . . . . . . . . . . . . . . . 55
Statements of Financial Position. . . . . . . . . . . . . . . . . 56
Statements of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . 57
Notes to and Forming Part of the Accounts . . . . . 58
Independent Auditor’s Report to the
Shareholders of Steamships Trading
Company Limited. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Directors’ Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Table of Comparisons. . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Stock Exchange Information. . . . . . . . . . . . . . . . . . . . . 86
Company Directory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

S T E A M S H I P S T R A D I N G C O M PA N Y L I M I T E D
A n n u a l R e p o r t 2 0 1 1

B R I E F P R O F I L E O F
S T E A M S H I P S T R A D I N G C O M P A N Y L T D

Steamships Trading Company is a Papua New Guinean
success story. Today the Company is a well established
business conglomerate with diverse commercial interests
and listings on both the Australian and Port Moresby
Stock Exchanges; a fact that belies its humble origins.

The Steamships story began in the early years of the 20th
century in what was then one of the least known parts of
the world. The Company was founded by retired Sea
Captain, Algernon Sydney Fitch, to run salvage
operations in Australia. A dynamic, dedicated and
progressive man, Fitch was not averse to taking risks.
Before too long he sailed the Company’s first ship, the

SS Queenscliffe, to Port Moresby to trade along the
Papuan coast. In 1924 the Public Company was formed
and the Steamships story had well and truly begun. It was
to be not only the story of a company, but of the
formative years of Papua New Guinea (PNG), for the
fortunes of the Company and the country have, from the
first, been very closely intertwined.

In 2011 Steamships Trading Company had annual
revenues of K934.7 million and assets of over K1.28 billion.
The Group employs over 3,200 PNG citizens and non-
citizens in six diverse companies grouped under three
operating divisions: Logistics, Property and Hotels, and

STEAMSHIPS GROUP

STEAMSHIPS HEAD OFFICE

LOGISTICS
DIVISION

PROPERTY AND HOTEL
DIVISON

COMMERICAL
DIVISION

KEY ASSOCIATES
AND SUBSIDIARIES

Coral Sea
Hotel Group

Pacific Palms
Property

Datec

Laga
Industries

Consort
Express Ltd

Pacific Towing

Colgate

Steamships
Shipping

Shipping
Agents

Stevedoring
Companies

Coastal
Shipping

East West
Transport

~ Pioneering Sustainable Progress ~

B R I E F P R O F I L E O F S T E A M S H I P S T R A D I N G C O M P A N Y L T D ( c o n t i n u e d )

It continues to uphold a company
Commercial.
philosophy, embraced from the beginning, which aims to
offer quality, competitive goods and services to all its
customers; provide secure and challenging careers for its
staff; maintain the highest business ethics at all times;
protect the environment from harm; and earn superior
returns for its shareholders.

its

Steamships is aware of its pre-eminent position in the
community and
responsibility to serve that
community. The Company continues to be one of PNG’s
largest private sector employers and one of its largest
supporters of community initiatives in education, health,

environment and social welfare. Steamships ensures that
core sustainability concepts are embedded in our
business models and systems. We are wholly aware that
our business goals cannot be achieved unless this is the
case. We cannot succeed without the engagement and
support of the people we employ, the loyalty of and
satisfaction of our customers, and a commitment to the
local communities and environment in which we
operate.

Over ninety years on, Steamships is still showing it has
the resources and capacity, vision and capability to meet
the dynamic needs of a growing country.

SS Queenscliffe, 1918

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

F I N A N C I A L H I G H L I G H T S

Revenue

Operating Profit

Profit attributed to shareholders

Cash generated from operations

2011

K'000

934,717

265,116

158,261

252,509

Net cash inflow/(outflow) before financing

36,267

Shareholders' funds

External borrowings

Note

Earnings per share

Dividends per share

Shareholders’ funds per share

Note

2. Gearing ratio – percentage

Interest cover – times

4. Dividend cover - times

Notes

578,549

379,088

2011

Toea

510

190

1,866

2011

66%

8.5

2.7

Change

16.8%

29.7%

35.9%

58.1%

1,466.5%

27.9%

0.6%

35.6%

90.0%

27.9%

2010

K'000

800,333

204,472

116,445

159,740

(2,654)

452,357

377,014

2010

Toea

376

100

1,459

2010

83%

8.7

3.8

Earnings per share have been calculated by dividing the profit attributable to shareholders by the weighted
average number of shares on issue during each year.

Gearing represents the ratio of net borrowings to shareholders' funds.

Interest cover is calculated by dividing operating profit by net finance changes.

Dividend cover is calculated by dividing profit attributable to shareholders by the total dividends paid
during the year.

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

C H A I R M A N ’ S R E P O R T

PNG leaders have long aspired to emulate the Asian
‘Tiger’ economies. Economic growth of 9 percent in 2011,
the highest in PNG since Independence, satisfied these
ambitions. Fittingly, Steamships Trading Company
Limited had a record year.

Total turnover grew by 17% and Group profits increased
36% after tax. The Shipping businesses within the
Logistics Division have been the cornerstone of the
Group for its entire history. The past three years has seen
significant growth in capacity and profitability. However
the Road Transport business continues to struggle with
poor road infrastructure and strong competition. Recent
growth in Steamship’s Property arm and the Coral Sea
Hotels Group has been particularly pleasing. Both made
major contributions to Group turnover and registered
double-digit profit growth this year. The Commercial
Division showed improvement over 2010 and further
improvement is expected in 2012.

increased, reaching 9.5%

The high growth in PNG has stemmed largely from
higher global commodity prices and continued demand
for PNG’s exports. This has increased employment
opportunities and stimulated a real estate boom.
Inflation also
in 2011.
Steamships has been careful to invest in businesses in
which growth will endure and to be wary of activities that
have only shorter term business prospects. This year the
Group oversaw the expansion of its shipping and land
transport fleets; a comprehensive redevelopment and
expansion of its hotel assets; and the continued
development of a number of exciting residential and
commercial properties. Steamships also celebrated the
opening of the flagship Grand Papua Hotel in Port
Moresby. The Grand Papua is a 161-room luxury hotel and
the most technically advanced, and environmentally-
friendly, building of it’s type in the country.

In today’s world, no responsible company focuses only
on the bottom line. Steamships has always been proud
of its record of environmental protection, community
engagement and its commitment to enhancing the skills
and capabilities of its people. We have taken the
opportunity to feature a number of these people
throughout this report. Their personal stories help put a
face to our business operations in PNG. They also

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

C H A I R M A N ’ S R E P O R T ( c o n t i n u e d )

highlight the impressive diversity and capabilities of the
people employed by Steamships.

This year’s Annual Report also includes a more detailed
look at how we are managing our sustainability
responsibilities. Our review of performance so far is based
on the reporting framework of one of the world’s leading
sustainability programs, the Global Reporting Initiative
(GRI), which has been adopted by the Swire Group of
which Steamships is a member. This Annual Report sets
out a framework to demonstrate our performance
against some of the key GRI indicators that we consider
critical. We have recently started to collect data in a
number of these areas including economic contribution
the
to society, environmental stewardship and
development and improvement of the welfare of our
people. We intend to continue to build on this approach
in the future.

The 2011 Annual Report also features an expanded
analysis of the PNG operating environment. The
Director’s Economic Analysis gives economic and
political context to the performance of the Group’s key
business divisions, which are outlined in the Director’s
Review of Group activities.

Papua New Guinea faces major challenges in the coming
years. The mining boom has stretched the economy and
country’s infrastructure beyond capacity. Action is
required to manage inflation and ensure non-mining
industries are not ‘hollowed out’ by a high Kina and the
escalating costs of doing business. A major challenge is
to ensure that the new prosperity spreads to areas of PNG
where incomes are low and services poor. A decade of
stable government in PNG has demonstrated that it is a
critical foundation of sustained economic growth. We
must praise the PNG public service, government
authorities and the general public for the professional
way they conducted themselves during the political
tensions which unfolded towards the end of 2011. The

challenge for PNG law-makers in 2012 is to ensure
stability in Government in the lead up to and after the
national elections, to ensure business confidence
remains high and buoyant economic conditions
continue.

The O’Neill government has pledged to implement key
reforms to support economic growth. It passed PNG’s
largest ever budget (PGK10.5 billion) in December 2011
to fund the reform program. Education, infrastructure
development, the creation of a Sovereign Wealth Fund,
and maintenance of key infrastructure including the
Highlands Highway, airports and seaports are top
priorities. These programs must be
implemented
irrespective of the political campaigning that will
dominate headlines in 2012. Reducing the cost of doing
business is also vital. Past experience shows that when
Governments cut red tape and engage the private sector
to operate profit-making enterprises, everybody benefits
from
the
that
the economic gains
improvement in the services provided.

result and

At a forecast 7 percent, economic growth is expected to
remain strong in 2012 and especially in some of those
industries in which Steamships is actively involved. The
Group’s operating companies are looking ahead with
confidence and with comprehensive plans to expand
their businesses
in this exciting and challenging
environment. A continuing commitment to PNG, our
employees, local communities and long-term economic
development will be central to Steamship’s growth in the
year ahead.

the

contribution of

In closing, on behalf of the Board, I would like to
acknowledge
Steamships
management and staff during 2011 and thank them for
their commitment to the Company. Our continuing
success would not be possible without their valuable
efforts.

W.L. Rothery

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

D I R E C T O R S ’

E C O N O M I C A N A L Y S I S

Papua New Guinea enjoyed record economic growth in
2011. Running at an estimated 9 percent, this placed it
among the leading growth economies in the world. This
was the nation’s eighth consecutive year of economic
expansion, creating the longest period of economic
growth since independence.1

PNG’s economic performance in 2011 contrasts with the
world economy where growth continues to slow,
principally because of the European sovereign debt crisis
and delays in reducing public debt in the United States.
The World Bank estimates global GDP growth of around
2.7 percent in 2011. This is largely attributed to emerging
and developing countries that are set to grow at 6
percent compared to growth of only 1.6 percent in high
income economies.2 In a more worrying sign, the World
Bank recently revised global growth estimates down to
2.5 percent in 2012.

instability

the world’s

Financial
industrialised
economies has led to a softening in export demand
globally. This growth slowdown has been particularly
prominent in the industrial sector, while demand for
commodities from resource rich economies, such as PNG,
still remains strong.3 The Group operations remain
relatively self-contained and closely tied to the
continuing successful performance of the PNG economy
which in turn is linked to the demand for agricultural
commodities, oil and gas, and mineral resources.

in private
in all sectors,

Growth in PNG in 2011 was driven by higher commodity
sector employment,
prices, growth
investments
increased Government
spending and increased private sector credit. As the
economy expanded, total lending to the private sector
increased. Advances were strongest to the transport and
communication sectors, manufacturing, housing and
agriculture.4 Construction grew 22 percent; Wholesale

and Retail, 18 percent; Transport, Storage and
Communications, 16 percent; and Manufacturing, 13
percent.5 Steamships Group, with its diversified interests,
benefited from many of these macro economic trends.

formal employment, with the total

The strengthening of the economy has led to an increase
in
level of
employment in PNG increasing by 7.3 percent in the year
to September 2011. Inflation in 2011 was estimated to
have risen to 9.5 percent. This led the Bank of Papua New
Guinea to tighten monetary policy by increasing interest
rates from 7 to 7.75 percent by September 2011.6
Inflation is expected to reach 8.0 percent in 2012 and
remains a concern.7

Trade

Steamships is not an export business, but booming
exports and investment in export industries is the driver
of current growth in PNG.

Papua New Guinea’s trade account recorded a surplus of
USD2.4 billion over the nine months to September 2011,
an increase of 16.1 percent over the corresponding
period of 2010. The value of merchandise exports
increased 8.7 percent in the September quarter of 2011
as compared with the corresponding quarter of 2010.
This increase was due to higher export values of most
major exports, with the exception of gold, cocoa, tea, logs
and marine and refined petroleum products. This surplus
in the trade account was largely due to high commodity
prices. The weighted average price of PNG’s exports
increased 15.2 percent in the September quarter of 2011
compared with the same quarter in 2010. This included
a 16.3 percent increase in the weighted average of
mineral exports and a 12.1 percent increase for non-
mineral exports.8

Deloitte (2011), 2012 Budget Alert, Executive Commentary and World Bank (2011a), Navigating Turbulence, Sustaining Growth, East Asia and Pacific
Update 2011, Volume 2, Washington
IMF (2011), Slowing Growth, Rising Risks, World Economic Outlook, September 2011

3 World Bank (2011a), Navigating Turbulence, Sustaining Growth, East Asia and Pacific Economic Update, p. 1
4

Bank PNG (2011), Quarterly Economic Bulletin, September 2011, Port Moresby, p. 4
Deloitte (2011), p. 4.
6 World Bank (2011a), p. 65

IMF (2011), p. 189
Bank PNG (2011), p. 14

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

D I R E C T O R S ’

E C O N O M I C A N A L Y S I S ( c o n t i n u e d )

The IMF estimates that PNGs’ export volumes for goods
and services increased by 15 percent in 2011. This is
partly due to strong growth in exports of coffee.
Steamships’ logistics businesses, in particular, benefited
from this increase. A general rise in income levels for
coffee producers trickled back into the economy,
boosting disposable income. This increase benefited
both Highland and island people in PNG and increased
demand for consumer goods.

Growth in Japan and Australia, PNG’s main trading
partners, is expected to increase in 2012 from 0.5 percent
to 2.3 percent and 1.8 percent to 3.3 percent, respectively.
This is likely to result in continued demand for Papua
New Guinea’s products including gold, petroleum, silver
and platinum, and coffee.

The Kina continued to appreciate against major
currencies in 2011, including the Australian dollar and the
United States dollar. The increasing Kina will reduce the
competitiveness of Papua New Guinea’s exports, but will
also reduce the price of imports. Given Steamships’
businesses are focused on the internal PNG market, direct
exposure to exports is limited, with the exception of the
logistics businesses.

PROSPECTS AND CHALLENGES FOR 2012

Economic growth is expected to remain strong in 2012,
despite easing to 7 percent according to the World Bank,
as the rate of construction of the LNG PNG project begins
to decrease and older mines mature. In the 2011/2012
PNG budget, growth in mining is anticipated to be a
strong 20.2 percent, wholesale and retail sector 19
percent; electricity, gas and water 12 percent and the
construction sector 9 percent.

It is difficult to forecast the extent to which the unfolding
financial crisis in Europe will slow down the global
economy and impact on PNG. China is expected to
increase domestic demand, however uncertainties such
as the makeup and policies of the new Chinese
leadership to be installed in 2012 and growing concern
about levels of debt and a potential property bubble in
China may negatively affect China’s strong growth rates.

The new, high rates of economic growth in PNG, whilst
raising living standards for parts of the population, and
stimulating demand, have also generated new economic
challenges. They include the capacity limitations of key
infrastructure such as the unreliable Highlands Highway
and the congested Lae Port, inflationary pressures and,
above all, containing the threat of “Dutch disease” –
strong commodity exports increasing the exchange rate
to such an extent other sectors become uncompetitive
and contract.

While economic growth has been positive, an estimated
9 percent in 2011, it is an unhappy fact that PNG’s
performance on important social indicators such as
poverty and rates of completion of primary and
secondary school, is poor. Between 2000 and 2005 per
capita GDP decreased by 12 percent and 75 percent of
children were not educated. Provision of social services
by Provincial Governments has also declined.

These issues have not gone unnoticed. The PNG
Government recently promised to provide free education
to children up to year 10 and made a large provision in
the national budget to support this plan. Reform of this

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

D I R E C T O R S ’

E C O N O M I C A N A L Y S I S ( c o n t i n u e d )

magnitude is required across the economy to ensure the
benefits from Papua New Guinea’s economic growth are
passed down to the bulk of the population that live in
rural areas.9 While the natural resource sector is a
significant contributor to economic growth in Papua
New Guinea, linkages with the rest of the economy are
relatively weak.10 For example, in the Southern Highlands,
despite substantial income flows from minerals coming
into the region, the local people still remain among the
poorest in the country.11 Steamships strongly supports
initiatives to raise standards of living across the country.
As a non-resource-based company, well integrated into
the PNG real economy, Steamships continues to support
the PNG community through the efficient provision of
essential goods and services, local employment and the
distribution of wealth in the form of wages and payments
for services.

Inflationary pressures

Increased demand for labour, particularly from the
minerals sector, has created a shortage of skilled labour
and driven significant wage inflation. For Steamships, this
has become a key challenge to our growth. Competition
for resources has increased prices and is making it
increasingly difficult for businesses competing with the
minerals sector to secure access to materials.

for

food, housing,

In the September quarter of 2011, the highest price
increases were recorded
fuel,
electricity, and clothing.12 These inflationary pressures are
expected to continue into the near future if adequate
monetary policy settings are not
implemented.
Increasing global prices for goods have benefited many
businesses operating in PNG, including exporters. They
will however provide a mixed bag for Steamship’s
business activities.

Duncan, R. (2010), Managing natural resource revenues in Papua New Guinea, policy dialogue, Pacific Economic Bulletin, Vol. 25, No. 3, pp. 261- 264
10 Datt, G., Walker, T. (2006), Does mining sector growth matter for poverty reduction in Papua New Guinea?, Pacific Economic Bulletin, Vol. 21, No. 1, pp.

71-83
Gouy, J., Kapa, J., Mokae, A., Levantis, T., (2010), Parting with the past: Is Papua New Guinea poised to begin a new chapter towards development?,
Pacific Economic Bulletin, Vol. 25, No. 1, pp. 1 - 23
Bank PNG (2011), p. 13

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

D I R E C T O R S ’

E C O N O M I C A N A L Y S I S ( c o n t i n u e d )

Papua New Guinea and Dutch Disease

PNG authorities, including the Bank of PNG Governor, Loi
Bakani, warned this year the PNG LNG project threatened
afflicting the PNG economy, particularly the agriculture
sector, with the resource curse known as ‘Dutch Disease’.13
This is the phenomenon where an increase in the
exploitation of natural resources leads to a decline in
other sectors of the economy, such as manufacturing
and agriculture.14 This occurs, for example, if the natural
resources boom appreciates the Kina to such an extent
other export industries become uncompetitive and
increased investment in the booming sector draws
scarce resources, such as labour, away from the lagging
industries. Given our exposure to the wider economy,
Steamships remains concerned with the effect of this
phenomenon on our businesses.

settings

loose monetary

The “disease” can be treated if infrastructure capacity is
increased, other costs throughout the economy are
lowered and inflation is contained, particularly by
curbing aggressive government expenditure and
to mitigate
avoiding
appreciation of the exchange rate and inflation. A key
Government strategy is to establish Sovereign Wealth
Funds - foreign currency denominated assets - which
sterilise foreign exchange inflows and reduce the
upwards pressure on the real exchange rate. A key
challenge for the Government in Papua New Guinea is to
ensure these funds are used to finance long-term
development programs and not more
immediate
operational expenditures. Steamships fully supports the
establishment and effective deployment of these funds
in the future.

Capacity constraints

Strong investment in natural resource development,
particularly the PNG LNG project, has placed great strain
on
increases,
Despite
infrastructure is still chronically inadequate and creates

infrastructure.

funding

tremendous challenges and costs for the country in
maintaining efficient supply chain logistics. This has had a
significantly negative effect on Steamships businesses.
Ports and the Highlands Highway in particular are
currently acute bottlenecks for business.

In urban areas such as Port Moresby and Lae the supply
of appropriately qualified human capital is also a
significant challenge to doing business. As well as
Government support, it is incumbent upon companies
such as Steamships to continue to help develop PNG’s
private sector skill base and we continue to work in this
area.

MEETING THE DEMAND FOR
CAPACITY

INCREASED

To mitigate the pressures generated by the current
economic boom, physical infrastructure needs to be
increased, as does the skilled workforce. Government
expenditure and a focus on the key issues have a very
important role to play. Other measures to enhance
economic efficiency are also vital.

A refocus on privatisation

Privatisation is an established strategy in other countries
to reduce economy-wide costs and to unblock
infrastructure bottlenecks and expand
facilities.
Privatisation, when accompanied with a pro-competitive
legislative framework governing the operation of
privatised entities, generally improves efficiency and
expands infrastructure. PNG has already experienced
how privatised enterprises can produce better returns
and services and make prices more competitive. The sale
a decade ago of the PNG Banking Corporation
demonstrated this clearly. Strategies to privatise Air
Niugini, PNG Power, Telikom PNG and the PNG Harbours
Board were developed around the same time, but never
followed through.15

13 Malum Nalu, (2011), Dutch Disease a real threat to Papua New Guinea with gas project, Thursday March 31 2011, accessible at:

http://malumnalu.blogspot.com/2011/03/dutch-disease-real-threat-to-papua-new.html
The term ‘Dutch Disease’ was coined in the 1960s when the Netherlands experienced reduced non-gas exports and economic growth after the
discovery of natural gas reserves in the North Sea.
Curtin, T.
(n.d.), Privatisation Policy
http://epress.anu.edu.au/ssgm/policy_making/pdf/ch18.pdf

in Papua New Guinea, Chapter 18, Australian National University, accessible at:

(2009),

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

D I R E C T O R S ’

E C O N O M I C A N A L Y S I S ( c o n t i n u e d )

- are under serious strain due

Port operations and road transport - core businesses for
Steamships
to
infrastructural challenges to meet the demands of PNG’s
burgeoning economy. The incapacity of PNG’s ports
infrastructure is a direct retardant to the sound economic
development of PNG.16 Land titling also needs to be
reformed to provide the necessary security of title for
in
land to be traded and developed, especially
commercial and industrial areas. This issue directly
impacts the ability of Steamships Property and Hotel
companies to grow.

Stable Government

PNG has enjoyed steady growth in the past decade. A
key feature has been stability in Government. In all
countries, a constant change of government correlates
directly to greater economic uncertainty and slower
growth. Continuity and stability in Government are
fundamental requirements to manage the challenges
brought on by PNG’s current phase of unparalleled
economic growth.

Business confidence remains high in PNG despite the
political tensions of late 2011. With the 2012 general
elections on the horizon, PNG law-makers must ensure
the business community is provided with continuity and
a stable investment platform to plan ahead with
confidence. The implementation of vital reforms in
education, infrastructure development, the creation of a
Sovereign Wealth Fund and further development of key
infrastructure including the Highlands Highway, airports
and seaports is essential. Fully committed to PNG,
Steamships will continue to support initiatives to address
the various challenges ahead.

Independent Consumer and Competition Commission, (2007),
Review of the PNG Coastal Shipping Industry, Final Report, 16th
February 2007

~ Pioneering Sustainable Progress ~

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I A N N U A L R E P O R T 2 0 1 1

D I R E C T O R S ’ R E V I E W

Steamships has had a successful year, with consolidated
group profit after tax increasing by 36% to K158.3 million.

In the Logistics Division, Steamships Shipping performed
well in 2011 with growth for shipping, stevedoring and
agency interests driven by strong cargo volumes and
charter activity through PNG’s major ports. Steamships
coastal vessels achieved a record number of project
charter days for customers in 2011. Meanwhile, increased
demand for river liner services in the North Fly region of
Western Province has seen improved utilisation of assets.
Human resources were reorganised to capitalise on
growth opportunities and raise our standards of
customer service.

Steamships stevedoring and handling businesses
processed the highest volume of cargo in PNG history in
2010-2011, moving close to 2.3 million tonnes. This was
aided by management efforts which helped significantly
raise Port Moresby stevedoring productivity. Plans are
currently in place to roll out these improvements to
PNG’s other major ports in 2012, with raising productivity
in the Port of Lae an immediate priority.

East West Transport (EWT) began to see more solid
improvements in the second half of what was another
challenging year. 2011 volumes were in the region of
535,000 freight tons of cargo along with 330 million litres
of fuel, which was an increase on 2010 levels. Boosted by
these numbers, EWT recorded an increase in year-on-year
(YOY) revenues, although this result lagged general
growth in the industry, which was one of the nation’s top
performing sectors
in 2011. However, operational
measures put in place in 2011, along with current growth
trends, bode well for increased volumes and an improved
performance in 2012.

The Property and Hotels Division performed strongly in
2011. Steamships Property revenue was up YOY,
capitalising on a PNG property boom in commercial
centres across the country. The Group’s commercial and
residential properties throughout PNG have maintained a
steady occupancy rate of 96.6%, excluding projects
under construction.

Steamships Property completed the construction of a
number of major projects this year and more will be
completed in 2012. These include the eight ‘Captain Fitch’
townhouses at Ela Beach, the 40 unit ‘Stage 2 Windward
Apartments’ in Port Moresby, the SVS supermarket and
the 12 unit ‘Blaikie Apartments’
in Lae. Once again
property and land acquisition has proven difficult in a
market where prices have risen dramatically over the last
four years. In spite of this, the Company did make some
acquisitions throughout the year and will continue to
acquire strategic properties to add to its significant land
banks in Port Moresby and Lae.

for both

long and

The Coral Sea Hotels Group (CSH) also had a strong year.
CSH capitalised on a generally buoyant economy and
high demand
short-term
accommodation to record a significant revenue increase
over 2010 and improved results across the board. Six of
the CSH Group’s nine hotel assets completed major
expansion and upgrading works in 2011, while work is
planned for the remaining assets in 2012. The most
significant development for CSH this year was the
opening of the Grand Papua Hotel in Port Moresby in
November. The Grand Papua is a luxury 161-room hotel
and the most technically-advanced building in the
country, utilising a fully-integrated management system
to maximise energy efficiency. Delivered on time and to
budget, the Grand Papua will be a flagship asset for the
Steamships Group for many years to come.

In the Commercial Division, Laga Industries had a
stronger year on the back of substantial sector-wide
growth and a continued focus on improving operating
efficiencies. Profit and sales figures improved over what
was a poor set of 2010 results. Driven by a brand-focused
growth strategy, Laga Industries successfully launched a
number of new products during the year and made
significant investments in operational assets to support
this. The Company installed and commissioned new
plastics machinery and a new, world-class powders
temperature-controlled packing facility. In addition the
Company achieved 100% HACCP certification across total

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D I R E C T O R S ’ R E V I E W ( c o n t i n u e d )

manufacturing in April. This ensures the entire business is

compliant to international standards and will not be

restricted selling to customers that require suppliers to

have internationally-recognised certification.

Datec registered growing demand for most lines of
business in 2011. While overall revenues were slightly
down on last year, improvements in efficiencies increased
YOY Profits for 2011. The Company’s primary focus this
year was a restructuring of the business to improve the
delivery of long-term solutions for clients. These efforts
are expected to bear fruit in 2012. The Company
experienced growth in its training and education
business, its Retail Megastore and its CCTV and Cabling
business, the latter of which was able to leverage from
the success of PNG’s current building boom. This year
Datec also began moving forward with construction of a
next generation ISP infrastructure which will provide PNG
with a more reliable internet service and improve the ISP
business unit performance of the Company.

Steamships has three major subsidiary or associate
companies in which it holds an interest. Subsidiary
Consort Express, a liner coastal shipping operator, had a
reasonable year, although congestion in Lae and
increasing competitive pressures
impacted results.
Associates Pacific Towing, a marine towing business, and
Colgate Palmolive (PNG), a manufacturer of personal care
products, both had satisfactory years. Pacific Towing
benefited from increased ship movements in Port
Moresby and outlying ports, as well as growth in salvage
and the external towing business. Performance at
Colgate was buoyed by increased demand for consumer
goods and relatively firm margins.

In August, Mr C.R. Kendell retired from the Board after
4 years service. The Directors would like to record their
thanks to him for his contribution to the success of the
Steamships Group over that time. At the same time,
Mr T.J. Blackburn, a Senior Manager with the Swire Group,
was appointed to the Board.

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

S T E A M S H I P S : O U R P E O P L E , O U R F U T U R E

‘Five minutes with Monica Toisenegila’

Monica Toisenegila has worked for Steamships for seven
years. Hailing from Central Province, Monica started as
Group Payroll Manager at Steamships Head Office and
soon progressed to her current role as Group Human
Resource Manager.

In 2011 Monica’s superior work and outstanding
commitment was recognised at the Westpac Women in
Business Awards. These awards
the
achievements and successes of women in Papua New
Guinea. They aim to lift the profile of women and assist in
establishing networks that support women in reaching
their goals.

recognise

We recently spoke to Monica about her time and role at
Steamships Trading Company:

1. How has Steamships developed in the time

you’ve been here?
I have seen the Company grow from strength to
strength. Strategically, I think Steamships
management has been very astute. In my time the
Group has sold some of its weaker business
operations and acquired others that have become
core to its operations. The Company is a true
business leader in PNG today.

2. What exciting developments have taken place in
your department over the last 12 months?
The Human Resources Department has been busy
designing and implementing our new Human
Resource System, the HR Portal. This exciting new
system is going to help streamline our Group-wide
HR processes. In line with the new system, we have
also been reviewing and updating position
descriptions for the entire group. Another exciting
development has been the acceptance of the
Company’s new Tuberculosis (TB) Policy, which we
will roll out across the Group in the coming weeks.

3. How is your department supporting local

communities and charities?
We have close ties with World Vision for our TB
Policy and the PNG Business Coalition against HIV
and AIDS (BAHA) for our HIV policy. The Company
has also sponsored and encouraged staff to help
raise donations for charity organisations working in
local communities. Examples include staff

participation in charity soccer games, The Corporate
Canoeing Challenge, support for The Heart
Foundation and the Violence against Women and
Children campaign.

4. What does Steamships do better than other

companies in PNG?
Steamship’s and Swire’s involvement in the
rainforest project in Madang is very unique in PNG,
and very important. It is a great initiative owned by
the Company and I am proud to be part of this
project.

5. Why is protecting the environment so important

for companies in PNG?
As a corporate leader, it is essential that Steamships
protects and takes care of the environment it is
operating its business in. Human-beings and the
environment must co-exist. When one is affected,
the other will eventually suffer as well. Sustainability
must be a part of all our business operations in PNG
and at Steamships it most certainly is.

6. Why is Steamships a great place to work?

The Company’s historical background, its
commitment to the training and development of its
employees and the opportunities it offers to
students for work experience are very unique in
PNG. This is what sets Steamships apart from the
rest. I also play netball for Steamships FIN division.
Many of the other Steamships companies also have
netball teams which play against each other in a
PNG league. We use the Steamships HQ car park to
practice and our MES unit are currently making us
new goal posts!

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

L O G I S T I C S

STEAMSHIPS SHIPPING

Steamships Trading Company has been a leader in
coastal shipping in PNG since 1919. Today the Company,
through its Steamships Shipping Division, operates a fleet
of 17 coastal vessels all designed for shallow water and
river passage, with safety and technical specifications
maintained to International standards. The fleet includes
landing craft, bulk carriers, diesel tankers, tugs and
barges. While the Company specialises in river shipping, it
also has 6 vessels, fully certified for international trading,
which regularly operate for charters to Australia and on
occasion as far as Singapore.

Steamships Shipping provides short and long term vessel
charters, and reliable cargo liner services in the Gulf of
Papua. It also develops, implements and supports inter-
modal logistics solutions, linked to land based services
such as road transport, cargo handling and storage. In
addition to owning vessels, Steamships is a shareholder
and manager of stevedoring companies at 7 of the
country’s ports, where it also operates the largest
shipping agency network in PNG. As representatives for
Swire Shipping and other international lines, these
agents link the PNG economy to the world using a
diverse fleet of vessels.

Steamships Shipping performed well in 2011 with
satisfactory YOY growth. Demand for shipping services
has mirrored economic growth. The PNG economy was
buoyant in 2011 with increased activity generated by
both the mining and non-mining industries. Cargo
volumes and charter activity through PNG’s major ports
has been strong, leading to increased business for the
division’s shipping, stevedoring and agency interests.

Steamships coastal vessels achieved a record number of
project charter days for customers in 2011. Further
resource exploration in the North Fly region of Western
Province grew liner service cargo volumes to Kiunga this
year. To match this expanded demand, the division
improved its utilisation of assets whilst adding resources
to the management team to improve on our service
commitments to customers.

The division’s ship repair facility, which offers dry-docking
of vessels up to 45 metres in length and 500 tonnes in
weight, had a busy year in 2011. As did the division’s life

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

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L O G I S T I C S ( c o n t i n u e d )

raft servicing station, which is the only internationally-
approved facility of its kind in PNG. In 2011 the station
serviced in excess of 150 life rafts for domestic and
international customers.

Steamships JV Stevedoring businesses offer a full range of
ship handling facilities and operate in the main ports of
Port Moresby and Lae and in the smaller ports of Oro Bay,
Madang, Kimbe, Kavieng and Kiunga. With a young fleet
of specialist equipment, the businesses handle all types
of containers, as well as project cargo, breakbulk, RO-RO,
LO-LO and grains. Several of the smaller locations also
operate local trucking businesses. The stevedoring
companies are joint venture partnerships between
Steamships and local landowner groups at the ports.
They employ a local workforce and are structured to
allow for earnings to filter back into the nearby
communities.

Port Moresby stevedoring productivity by 20 percent in
2011, reducing to some extent the congestion that has
plagued port operations this year. Plans are currently in
place to roll out these improvements to PNG’s other
major ports in 2012. The Port of Lae is an immediate
priority as its congestion challenges remain critical.

Recruitment and retention of quality human capital
remains a challenge to the Company and in 2012 the
introduction of an onshore cadet program across the
various business units is intended to build a strong base
of talent to help facilitate the growth opportunities
ahead.

face
Other unique challenges and opportunities
Steamships Shipping in 2012 and beyond. Priorities for
2012 include:

Improved crew standards and responsibility

Buoyed by increased activity at most of PNG’s major
ports, Steamships JV Stevedoring businesses had a robust
year in 2011. The companies handled the highest volume
of cargo in PNG history in 2010-2011, moving close to 2.3
million tonnes. Management efforts have helped raise

Improving the standards and responsibility of PNG-
certified ship officers and crew is a priority for 2012. The
division aims to increase its cooperation with other Swire
Shipping companies to provide both training and
increased opportunity for Steamships officers to advance

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

L O G I S T I C S ( c o n t i n u e d )

in the international shipping industry. The number of
foreign officers providing onboard training will be
increased on all vessels. A shortage of qualified PNG
officers remains an ongoing concern, and over time will
be addressed by increased cadet training and continued
support of the Madang Maritime College.

Fleet Expansion and Renewal

To manage the expected growth of the division’s project
and liner shipping business, two new vessels are being
built for delivery in 2012. These double-skinned and
fuel-efficient vessels are constructed to the latest
technological specifications, and will be the first new
builds for Steamships Shipping since 1995. These
in PNG shipping will help to keep
investments
Steamships Shipping at the forefront of the industry in
the face of increased competition.

The division is also developing a long term fleet growth
and renewal program for the next decade. The program
will ensure the Steamships Shipping fleet provides the
required capacity and reliability to meet the future
demands of both the resource industries and general
commercial customers.

Greater involvement in development of the
industry

is committed

Steamships Shipping
to greater
communication and co-operation with the National
Maritime Safety Authority (NMSA) to improve PNG
shipping safety and officer competence in 2012. As a
matter of priority, the division also plans to open
discussions with the NMSA and the Transport Ministry
over the allowance of foreign-flagged vessels to
participate in local project shipping in PNG. Ignoring the
rules currently governing this makes it increasingly hard
for PNG companies to operate PNG flagged vessels
efficiently and will seriously erode the viability of a home
grown and expanding PNG maritime industry.

Developing new business opportunities

By the close of 2012, Ok Tedi Mining Ltd (OTML) will end
its charter of Steamships’ vessels after twenty-five years of
shipping copper concentrate and general cargo on the
Fly River. The challenge will be to secure replacement

business. New opportunities in the project space are
being pursued, as is the expansion of our Gulf of Papua
liner network.

Over the next 10 years PNG is expected to experience
continued economic growth, leading to growth in
disposable income and increased opportunities for
coastal shipping in areas outside of the two major
population centres of Port Moresby and Lae. Steamships
Shipping aims to capitalise on this growth by developing
a fleet manned with PNG nationals to meet the demand.
It will continue to uphold international standards for
safety and environmental protection which exceed the
current minimum regulations in PNG and remains
committed to operating as a PNG-flagged operator.

~ Pioneering Sustainable Progress ~

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S T E A M S H I P S : O U R P E O P L E , O U R F U T U R E

According to Lea, the increase in business has meant
that a number of new positions have been added to
the team of staff to ensure the expanding client base
is kept happy. “We maintain a good relationship with

our clients and I am proud to say that we

are doing quite well as a shipping

agency compared to our competitors.”

Lea is also quick to commend the
Company for the work it does
in the community, “I really

think the various donations
and contributions we have
made to certain programs
have really helped the

local people.

Lea Henao, Steamships Shipping Agency

“I just love my job; I wake up
every morning looking
forward to going to work…
that’s how passionate I am
about my job.”

Having worked for
over 15 years with the
Company, Lea has
seen Steamships

Shipping grow considerably in that time.

“When I started here we had very few service
lines in operation, but now we have our
coastal shipping liners doing charters and
Western Province runs; our New Zealand
and Australia lines and vessels have
increased from 3 to 5; and our South-
East Asia lines have increased
from 2 to 4. Our tonnage has
also increased and that has
increased the operation
of the agency.”

L O G I S T I C S ( c o n t i n u e d )

EAST WEST TRANSPORT

East West Transport (EWT) is one of Papua New Guinea’s
largest multifaceted transport and logistics companies.
The Company is based in Lae, but also has a significant
presence in Port Moresby, Goroka, Wewak, Madang,
Rabaul, Kavieng and Mount Hagen.

EWT operates across a wide spectrum of transport-
related activities including bulk fuel, containerised-grain,
coffee and break-bulk cargoes. It also offers specialised
project solutions for the mining and oil and gas sectors.
Equipment hire, warehousing and yard storage facilities
are available for clients in all main depots. In addition, the
Company offers a licensed customs cargo clearance
service in Lae and Port Moresby and provides customised
transport solutions through its close relationships with
sister companies in shipping and stevedoring. A large
coffee processing facility is operated in Lae which
services coffee produced for export in the Highlands
regions of the country.

The Company experienced another challenging year in
2011, although began to see a sustained improvement in
the second half. Volumes for the year were in the region
of 535,000 freight tons of cargo along with 330 million
litres of fuel, which was an increase on 2010 levels.
Boosted by these numbers, EWT recorded an increase in
YOY revenues. This result lagged the general growth in
the industry, which was one of the nation’s top

performing sectors in 2011, but operational measures
put in place in 2011 bode well for an improved
performance in 2012.

A number of developments supported the increase in
volumes in 2011. Most notably, EWT was able to get
larger double-configured trailers back on the Highlands
Highway, which provided a much-needed boost to
volumes. Similarly, an increase in coffee processing and
transportation contributed to overall growth, while the
Company was also successful in retaining major town
transport and fuel distribution contracts in Port Moresby
and Lae. Based on current growth trends, EWT expects
volumes to increase again in 2012.

The EWT fleet continues to evolve in line with an
increased and diversified demand from the resources
sector. The Company, with a current fleet of 167 vehicles,
owns a wide range of equipment ranging from 4 tonne

~ Pioneering Sustainable Progress ~

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L O G I S T I C S ( c o n t i n u e d )

flat deck trucks to long haul prime movers capable of
hauling three 20’ containers within the metro areas or the
Highlands regions of the country. Cargo handling
equipment such as side-loading trailers and forklifts also
form a large component of the Company’s fleet with
each depot having this capacity. In 2011 the Company
welcomed the arrival of new equipment for the Port
Moresby and Lae depots. These included twelve prime
movers from China, one 52 tonne forklift, two 32 ton
forklifts, two side loaders and five fuel tanker trailers.

EWT secured contract extensions in Port Moresby and
Lae this year. It also began transporting bulk fuel to
Mount Hagen. Looking ahead the Company will continue
to focus on long term clients serving the local PNG
economy and will benefit from the increased demand for
transport services from the mining and energy sectors.
EWT’s growing reputation for reliability, safety and
security, as well as its understanding of the unique
challenges associated with delivering transport solutions
in PNG should ensure it is the partner of choice for
established
resource
conglomerates and fuel and energy providers.

businesses,

large

PNG

Whilst integral to its customers needs, serving the
Highlands region of PNG presented EWT with very
significant operational and financial challenges in 2011.
The continued deterioration of road and security
conditions along the Highlands Highway regularly
jeopardised customer supply chains to this populous
region. The highway recorded 35 days of road closure this
year, a figure marginally lower than previous years, and in
all likelihood, one that is destined to increase in 2012.
While the transport sector is the highest funded sector in
PNG’s development budget, only limited funds are being
committed towards the rehabilitation and ongoing
infrastructure. Until this
maintenance of highway
situation changes, EWT must continue to absorb the high
operation costs associated with using this important
highway.

There are a number of other challenges on the horizon.
The increasing cost of labour and rising fuel prices
present a significant concern to the industry going
forward, with fuel and tyre costs facing some of the
highest price increases in 2011. EWT must also contend

with increased competition across metro and highway
operations from a plethora of smaller operators. To
compete effectively EWT must focus on key customers
and ensure performance standards are met.

The Company has committed to ensuring unnecessary
staff turnover is kept to a minimum in the face of rising
wages and
in other
industries. In the coming months the Company’s OH&S
policies will be updated to focus on reinvigorating staff
training, welfare and retention.

job opportunities

increased

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

P R O P E R T Y A N D H O T E L S

STEAMSHIPS PROPERTY

Steamships Property is one of the largest and most
dynamic property developers in PNG. The Company
provides residential, commercial, retail and industrial
property throughout the country. The division was
originally established to manage the Steamships Group’s
internal needs, but today over 74% of its business is
conducted with external clients. Steamships Property
overseas building and land assets in Port Moresby, Lae,
Madang, Wewak, Goroka, Mt. Hagen, Popondetta and
Rabaul. The division currently holds a total lettable space
of 10,739m2 of commercial property, 180,671m2 of
industrial property, 18,904m2 of retail property and
17,785m2 of residential property (comprising 100 units in
total).

Steamships Property performed strongly
in 2011.
Revenue was up YOY as the division capitalised on a PNG
property boom that has driven rental prices and
occupancy rates up
in Port Moresby and other
commercial centres across the country. The Group’s
commercial and residential properties throughout PNG
have maintained a steady occupancy rate of 96.6%,
excluding projects under construction.

Shortages in commercial, residential and industrial
properties have led to a building boom in commercial
centres including Port Moresby and Lae. Despite this,
there are still significant property shortages across PNG,
an issue the division has continued to address in 2011.

completed

This year Steamships Property
the
development of five warehouses in the Badili Estate as
well as the new Port Moresby premises for East West
Transport including offices, workshop and a hardstand
area. Construction is currently underway on a further
three warehouses in Badili and an EWT bond store and
warehouse complex in Baruni.

A number of other major projects are in various states of
construction and are due to be completed in 2012. These
include the eight ‘Captain Fitch’townhouses at Ela Beach,
the 40 unit ‘Stage 2 Windward Apartments’
in Port
Moresby, and the SVS supermarket and the 12 unit
‘Blaikie Apartments’ in Lae.

Looking ahead, the division will commence construction
on the Nichiha Office project in Badili, two warehouses in
Madang and
the considerable Central Waigani
Commercial Centre project, which aims to develop a new

~ Pioneering Sustainable Progress ~

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P R O P E R T Y A N D H O T E L S ( c o n t i n u e d )

9,300m2 shopping district in the heart of Port Moresby’s
administrative district. Planning is also well advanced on
the construction of a multi-storey office block and marina
development at the Port Moresby waterfront.

Once again property and land acquisition has proven
difficult in a stagnant market where prices have increased
to high levels over the last four years. However, the
division did make some acquisitions throughout the year,

purchasing an area of residential land in Port Moresby
and a vacant 5,600m2 lot in Madang with a commercial
lease. While Steamships Property will continue to acquire
strategic properties to add to its significant land banks in
Port Moresby and Lae, current market conditions,
coupled with capacity constraints brought on by the
country’s land tenure system, have made this difficult in
recent times.

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

P R O P E R T Y A N D H O T E L S ( c o n t i n u e d )

CORAL SEA HOTELS

Steamships Hotels Division is known in PNG by its trading
name, Coral Sea Hotels (CSH). CSH operates nine hotel
and apartment complexes offering full hotel facilities and
serviced apartments plus extensive meeting and
banqueting facilities.

This group of nine hotels comprises: the Ela Beach Hotel
and Apartments, the Grand Papua Hotel, Whittaker
Apartments and the Gateway Hotel and Apartments in
Port Moresby; the Huon Gulf Hotel and Apartments and
Melanesian Hotel and Apartments in Lae; the Highlander
Hotel and Apartments in Mount Hagen; the Bird of
Paradise Hotel and Apartments in Goroka and the
Coastwatchers Hotel in Madang.

The CSH Group is the largest and most represented hotel
group in PNG. Today it offers a group total of 626 hotel
rooms and 135 apartments in PNG’s major commercial
centres, a number that increased by approximately 67%
over 2010.

2011 was a good year for CSH. The Group capitalised on
a generally buoyant economy and high demand for both
long and short-term accommodation, particularly in Port
Moresby, to record a significant revenue increase over
2010 and an improved pre tax profit driven by solid
annual group occupancy
for rooms and
apartments.

figures

It was a year of transformation for the CSH Group, which
completed a number of expansion projects and
maintained an ongoing upgrade program for existing
facilities. Were it not for a six month delay in the
completion of some of
these projects, group
performance would have been even stronger in 2011.

The most significant development in 2011 was the
opening of the flagship, Grand Papua Hotel in Port
Moresby in December; a major project that was delivered
on time and budget. The Grand Papua is a luxury 161-
room hotel, situated on the highest point in the city, close
to Ela Beach and the city’s business and commercial
centre. The hotel is the most technically-advanced
building
integrated
management system to maximise energy efficiency. This
includes an innovative paperless check-in system using
tablet technology. Other features include an exclusive
executive lounge, three boardrooms, six conference
rooms, three levels of underground secured parking,
24-hour security, spa and beauty treatment services,
outdoor Jacuzzi, a 15-metre swimming pool and a fully-
equipped fitness centre.

in the country with a

fully

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

S T E A M S H I P S : O U R P E O P L E , O U R F U T U R E

Henao Garo, Manager, Huon Gulf Hotel,
Coral Sea Hotels Group.

An employee of the Coral Sea Hotels Group for 20
years, Henao Garo, has never struggled to make
guests feel at home in PNG.

“Because I come from a Christian background with
Christian values, the concept of hospitality isn’t a new
thing. My family are hospitable people and that sort of
came easy for me when it came to dealing with hotel
guests.”

Assistant Manager at the
Huon Gulf Hotel. She
then moved
the
Melanesian Hotel where
she was Front Office
Manager
then
Assistant Hotel Manager.
In 2009, Henao returned
to where it all began for
her and she has been Manager of the Huon Gulf
Hotel since.

and

Hailing from Rigo in Central Province, Henao started
with the CSH Group as a switchboard operator at the
Huon Gulf Hotel in the 1990’s. From there she
worked her way up through various roles at
reception, on the reservation desk and in other areas
of the hotel. By 1998, she had risen to the role of

According to Henao, “Steamships, through the Coral
Sea Hotels, is a great company because it has a career
path for all of its employees. Throughout my stay with
the Company, I have been through numerous trainings
which have equipped me with the skills and knowledge
that has made me a Manager today.”

P R O P E R T Y A N D H O T E L S ( c o n t i n u e d )

The Gateway Hotel and Apartments had another strong
year, recording good room occupancy despite the hotel
being given a major facelift throughout much of the year.
This expansion project included the completion of 35
additional hotel rooms, an upgraded lobby and new bar
and conference facilities with the capacity to hold 600
delegates. All standard hotel rooms were also upgraded
to premier rooms and 12 two bedroom units were
constructed for Gateway staff.

A considerable expansion and upgrade program was also
completed at the Ela Beach Hotel over the course of
2011. This project included the addition of 42 new rooms,
a business centre, gym, pool and public areas.
Renovations were also carried out on 30 tower rooms
and the exterior of the hotel. The hotel performed
admirably over the year maintaining room occupancy of
76%, despite the ongoing construction work.

The Highlander Hotel in Mount Hagen was another
beneficiary of a wholesale redevelopment program,
which saw the completion of 20 additional hotel rooms,
a new restaurant, gym, bar and conference facilities.
General upgrading of rooms and facilities was also
carried out at the Bird of Paradise Hotel and the
Coastwatchers Hotel.

In line with the Group’s current growth strategy, plans are
already underway for the Melanesian Hotel in Lae to be
redeveloped over a two year period. This significant
investment calls for a phased redevelopment of the site
to accommodate a new 97-room hotel which will replace
the existing 65-room hotel.

Looking ahead, the CSH Group foresees both challenge
and opportunity on the horizon. Most pressing is the
oversupply of hotel and apartment rooms in Port
Moresby from 2012. Close to 317 new 3.5 to 5-star rooms
have been added to the market in just 3 years, equal to a
50% increase in supply. With another 286 rooms opening
in 2012, CSH foresees overall occupancy levels beginning
to plateau and possibly fall in the year ahead. Coupled
with this, increasing labour costs may also create a
challenge for the hotel industry at a national level.

program. Outside

To maintain and improve rates of occupancy and
revenues in Port Moresby and across the country, the
CSH Group will continue to aggressively implement its
upgrade
infrastructure
improvements, this includes the continued training and
development of its staff in order to meet the challenges
of providing superior service to the current hotels’
clientele and to satisfy the demand for personnel across
the expanded Group
facilities. The Group has
commenced discussions with an international training
institute to conduct in-house training of cookery
apprentices and is considering new programs for
plumbing, refrigeration and electrical apprentices. Plans
to introduce an 18-month corporate training scheme for
young graduates are also well advanced. The Group will
build on its relationships with domestic and international
tour operators and travel agents to ensure CSH hotels,
and especially the new Grand Papua Hotel, are the first
choice of all potential clients.

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

C O M M E R C I A L

MANUFACTURING

Laga Industries is PNG’s premier consumer goods
business and the country’s leading manufacturer of ice
cream, vegetable oil, drink powders, condiments and
spirits. The Company is also a distributor for international
consumer goods companies including Diageo and
Constellation Wines.

Headquartered in Lae, Laga Industries proudly produces
two of PNG’s most popular consumer product lines: Gala
Ice Cream, distributed from the Gala Parlours found in
most leading retail supermarkets, and Trade Winds spirits
and popular RTD premixed drinks. Operationally, the
Company owns a plastics manufacturing plant in PNG
and has a freezer and dry goods distribution facility in
Port Moresby and sales offices in Madang, Wewak,
Goroka, Mt Hagen, Kimbe, Kavieng, Rabaul and Buka.

Laga Industries had a stronger year in 2011 on the back
of substantial sector-wide growth and a continued focus
on improving operating efficiencies. The Company
recorded an increase in sales and profit in 2011 over what
was a poor set of 2010 results.

Driven by
its brand-focused growth strategy, the
Company successfully launched a number of new
products throughout the year.

Two new products were added to the Gala Ice Cream
family. The first, a premium product, branded the Gala
Gold Selection, was received very well and garnered
immediate repeat orders from key customers. The
second, an 8L bulk pack designed for the extended
family, youth and church groups also had a strong off-
take. The Company also launched a range of new Trade
Winds alcoholic products for which there have been
strong ordering patterns from all key accounts. In
February, Laga Industries commenced distribution of a
new range of 600ml water products and is currently
producing 7 varieties of labels, including a new brand,
Tropical Oasis, for key accounts.

Buoyed by strong growth in the sector and increased
uptake of key product lines, the Company made a
number of significant investments in operational assets
in 2011. The Company installed and commissioned an
additional cap injection machine, an additional PET blow-
mould machine and a perform injection machine to

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

C O M M E R C I A L ( c o n t i n u e d )

ensure the business had a level of self sufficiency in terms
of producing all bottles and caps for vegetable oil/water
and demand for most condiments.

Industries has already committed to investing in an
uninterruptible power supply (UPS) system to eliminate
this issue in 2012.

A new powders temperature-controlled packing facility
was also constructed to ensure all mixing of ingredients,
filling and packing is conducted in conditions that meet
world food safety standards. These investments highlight
the Company’s optimism for continued growth in the
manufacturing sector.

In another pleasing development, the Company
total
achieved 100% HACCP certification across
manufacturing in April. This ensures the entire business is
compliant to International standards and will not be
restricted selling to customers that require suppliers to
have
internationally-recognised certification. The
Company still sees significant advantages in improving
operational efficiencies in 2012.

to be a problem

Despite encouraging growth in 2011, erratic electricity
supply continues
for PNG’s
manufacturing industry and has resulted in significant
damage to the Company’s plant and equipment
throughout the year. This has led to high levels of
machine downtime, which has had some effect on the
Company’s supply to market. Looking ahead, Laga

The Company is also committed to increased investment
in its people. The manufacturing industry and many
other non-mining
sectors have experienced a
considerable drain of quality employees in 2011 due to
the development of PNGs’ resources sector and the
unprecedented increase in wages and conditions being
offered. Laga Industries has felt the effects of this drain,
with 3 senior managers and a number of quality
employees
leaving the Company this year. As a
consequence, the Company has put processes in place to
ensure a full team is onboard for 2012, all quality
employees are retained and training and development is
increased across the board.

Laga Industries supports the government’s efforts to
encourage growth in the manufacturing sector. It
welcomes the removal of impediments to business and
the reduction of regulatory burdens, the lowering of
import tariffs and investment in land and transport
infrastructure. The Company believes these reforms,
when completely implemented, should help to reduce
production costs within the industry and spur continued,
sustainable growth.

S T E A M S H I P S : O U R P E O P L E , O U R F U T U R E

Brasty Kaupa,
Laga Industries

“The priority that the Company
has given to safety in the
workplace speaks volumes of
our no nonsense commitment
to our safety policies. That’s
something I’m proud of.”

Brasty has been the Production Manager at Laga
Industries for 5 years. All of the Company’s products, apart
from the Trade Winds brands, come under his supervision.

“There has been rapid growth in the Company since I
joined 5 years ago. Our product range and product

volume has increased over the years, which says a lot
about the demand for our products. Meeting the
demand is a great challenge, but it’s satisfying when we
see that our clients and their customers enjoy our
products”.

According to Brasty, the increase in product range,
volume and staff has resulted in an increased focus on
the Company’s safety priorities. “Safety takes precedence
at our operations and no one works without having
proper safety equipment on. The Steamships policy on
safety ensures that the safety and well being of its staff
are taken seriously. The Company really does care about
its employees.”

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

C O M M E R C I A L ( c o n t i n u e d )

INFORMATION TECHNOLOGY

Steamships technology arm, Datec, has been in business
in PNG for 26 years and is a leading ICT company and
Internet Service Provider (ISP). Datec provides a suite of
ICT solutions to assist companies through the entire asset
life cycle, from sourcing equipment to technical support,
authorised repairs, maintenance and even assistance in
retiring old equipment.

The business has expanded to include a data centre in
Port Moresby; the largest computer retail store in the
country; and corporate and degree-level training and
education. The ICT services provided cover network and
communications, uninterruptible power supply, office
automation and even software development. More
recently, demand has driven the development of a CCTV
and Cabling business which designs, installs and services
CCTV and electronic surveillance systems, as well as full
service project management capability.

Datec currently has a 20 percent share of the roughly
K500 million ICT market in PNG. In 2011 the Company
employed 230 IT professionals and it forecasts this
number will grow to 300 by the end of 2012. Datec is
proud to note that the majority of technical staff are
national citizens.

Datec registered high demand for most lines of business
in 2011. While overall revenues were slightly down on last
year, improvements in efficiencies increased YOY profits
for 2011. The Company’s primary focus this year was to
build a scalable platform to leverage for future growth.
This involved restructuring the business to improve the
delivery of long-term solutions for clients.

The Company experienced growth in its training and
education business and has forecast another strong year
in 2012. Datec recently invested in a new office space to
accommodate future growth. The Retail Megastore and
the CCTV and Cabling business also experienced growth

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

C O M M E R C I A L ( c o n t i n u e d )

in 2011, driven by improving inventory management and
stronger corporate relationships. Similarly, the CCTV arm
was able to leverage from the success of PNG’s current
building boom, emerging as a market leader in this
relatively new industry for PNG.

In another pleasing development, the Datec Project
Management Office (PMO) is now being requested by
clients as a standalone chargeable service. This demand-
driven growth has opened up a new range of
commercial possibilities, which will be further developed
in 2012.

Datec acknowledges that the government has taken a
number of steps to promote growth in the industry,
including the liberalisation of the communications sector
and the development of an industry regulator, the
National Information and Communications Technology
Authority (NICTA), in 2010. The Authority gives PNG’s IT
companies the reassurance and confidence necessary to
expand in the sector and invest in infrastructure projects.
As a consequence, Datec is currently investing in the
construction of next generation ISP infrastructure which
will provide PNG with a more reliable internet service.

Datec operates one of the few authorised IT repair
centres in PNG. Its national employees embody a large
technical skill set developed from the Company’s training
programs. The result is that many major businesses,
including PNG’s banks, rely on Datec for their service and
repairs. The creation and success of the Datec Concierge
Desk has also been a pleasing development in 2011. It is
a single point of contact to ensure the management and
resolution of all stakeholder requests. Currently this is a
unique service offering in PNG and Datec expects it will
be the seed of a potential Business Process Outsourcing
business.

Despite the improving performance of 2011, challenges
to sustainable growth remain. The ICT sector is a young
and emerging industry in PNG and competition has
intensified in recent years. At the same time increased
disposable income and rapid advances in technology,
including smartphones, and the spread of social media,
are likely to generate exponential demand for ICT
services. Datec will need to continue to innovate and add
value to capitalise on this growth and maintain its
position as a market leader.

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

K E Y S U B S I D I A R I E S A N D A S S O C I A T E S

CONSORT EXPRESS LINES

Consort Express Lines Limited, based
in Lae, was
established in 1975 to conduct coastal trade in Papua
New Guinea. The Company, currently operating 8 ocean
going vessels, has grown to be the preeminent coastal
liner shipping service in PNG. Consort’s express shipping
services regularly call at 14 key ports within Papua New
Guinea, as well as Townsville, Australia. The Company
also holds significant interests in several stevedoring
operations across PNG.

Consort had a reasonable year in 2011, producing a
satisfactory overall trading result. Shipping revenues
continued to experience modest growth. Overseas
volumes passing through Townsville were slightly down
on last year, due to the impact on operations of Cyclone
Yasi and the Queensland floods. However PNG coastal
shipping volumes
remained buoyant, driven by
continued strong commodity prices for PNG’s agricultural
exports, and the downstream demand stimulation
effects that these prices have had on local economies.

The modest revenue growth was achieved in the face of
significantly increased activity from local competitors and
severe berth congestion in several PNG ports, most
notably the Port of Lae. In 2012, Consort plans to
capitalise on anticipated increases in cargo volumes by
adding an additional vessel to its fleet.

PACIFIC TOWING

Established in 1977 Pacific Towing PNG Limited is a joint
venture between Svitzer and Steamships Trading
Company, which has a 50% beneficial interest. Pacific
Towing is headquartered in Port Moresby and provides
specialist and interrelated services to the marine industry.
These comprise harbour towage and moorings services,
terminal, and ocean towage, diving, salvage and
emergency response services. The Company operates 22
vessels, comprised of tugs and line boats, in 5 ports
across PNG.

The Company turned in a satisfactory performance in
2011, with a YOY growth in revenues driven by increased
vessel movements across several of the PNG ports of

operation and a control on operating costs. The smaller
ports of Rabaul and Madang, as well as Port Moresby, saw
particularly good growth, while operations at the Port of
Lae were restricted by ongoing congestion issues. The
Company’s performance was boosted by several ad hoc
salvage jobs and its commercial diving capability, which
is both a useful and unique service in PNG.

Looking forward, the Company expects further growth in
regional tows as a consequence of the surge in non-liner
traffic at Port Moresby and Lae, both of which continue to
support the construction phase of the PNG LNG project.

COLGATE PALMOLIVE (PNG)

Steamships Trading Company holds a 50 percent
beneficial interest in Colgate Palmolive (PNG) Ltd, a
company that manufactures and distributes personal
care products in PNG. Management control is exercised
by Colgate Palmolive Australia.

The business had a strong year in 2011, exceeding both
revenue and profit figures from the previous year. The
Company managed to capitalise on the generally
buoyant economy, which has increased both the
demand for, and prices of, consumer goods. At the same
time Colgate Palmolive (PNG) has also benefited from
cost reductions due to changes in foreign exchange and
duty conditions.

The Company developed and implemented two key
strategic programs in 2011. The first was aimed at
building Colgate’s key brands in PNG and included
garnering commercial and government endorsement for
the successful Bright smiles for adults and hand hygiene
(BSBF) program. The second, an innovation growth
strategy, included the launch of a new demand planning
module, which will be used to improve company
processes and inventory management.

Looking forward, Colgate Palmolive (PNG) is planning to
align its PNG operations more closely with those in Fiji to
leverage synergies and share market research, especially
in regards to the development of a number of innovative
promotional and educational campaigns.

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

S U S T A I N A B I L I T Y

A MESSAGE FROM THE BOARD OF DIRECTORS

investment

Sustainability to the Steamships Group represents a
meaningful
in our people’s future, a
fundamental commitment to the highest standards of
health and safety at work, practical efforts to improve the
lives of the communities in which we operate and
genuine measures to ensure we minimise any negative
environmental impacts from our diverse activities. Only
by focusing on these areas will the Steamships Group be
able to ensure that our long term growth, along with the
economic and social development of Papua New Guinea,
is truly sustainable.

Improving sustainability is, however, a process and
It starts with robust
requires systematic strategy.
monitoring, and culminates in action. We are still at the
early stages of this process and have set up a
Sustainability Action Group to start to manage our
impacts and to focus on three broad areas: Our People,
Our Environment and Our Community. The
initial
challenges are in creating a long term plan and ensuring
it is updated and expanded; and in the collection of
meaningful data.

Credible sustainability planning requires engagement
with stakeholders – staff, local communities, government
bodies, investors and Non-Government Organisations
(NGOs) - to understand properly their needs and
problems. Our Sustainability Group will be the principal
interface between Steamships and our PNG stakeholders.

We have begun to consider some key benchmarks from
the global standard on sustainability reporting – the
Global Reporting Initiative (GRI) - in our 2011 annual
report for the first time. By starting to collect the data and
monitoring our progress against these benchmarks, we
aim to improve operations and increase transparency
over the coming years. We believe these first steps will
also lead to the production of a stand-alone Sustainability
Report in the future.

The evolving sustainability strategy will guide our
business operations and reflect our commitment to the
safety and well being of our people; to the development
of local communities; to generate wealth for the
Government and improved welfare for the people of

PNG; to implement and support public health initiatives;
to reduce environmental impacts; and to conserve PNG’s
unique landscapes.

Building on the legacy of 90 years of business leadership
in PNG, Steamships aims to pioneer sustainable progress
in PNG. Our dealings will be transparent and based on
good governance. This first effort at incorporating
sustainability benchmarks lays the foundation of our
approach to sustainability and demonstrates our
commitment to mitigate the negative environmental
impacts and enhance the beneficial social and economic
impacts of our operations. We do so because we
understand that only business operations that are
imbued with the principles of sustainable development
can achieve their long-term business objectives.

STEAMSHIPS TRADING COMPANY AND THE
GLOBAL REPORTING INITIATIVE

For the first time, Steamships has utilised the Global
Reporting Initiative’s G3.1 Guidelines as a framework for
its sustainability monitoring and reporting. Steamships
have based this report on a C level of application of the
GRI guidelines.

Because 2011 is the Group’s inaugural year for utilising
the GRI’s monitoring indicators, the Company has not
included specific data to compare yearly progress in this
report. Rather, this report serves as an introduction to the
Group’s sustainability initiatives and plans. Building yearly
data sets through continuous monitoring and reporting
is a goal over the coming years.

Materiality of reporting content was determined from
engagement with internal stakeholders. The content of
this report is not exhaustive, and there are a number of
indicators that are material to Steamships’ operations on
which we do not yet report. Steamships will improve its
processes for monitoring and recording such data over
the coming years to enable expanded reporting.

Please note that this sustainability report has not been
subject to audit. The Company believes that the report
presents a
its
sustainability activities, but Steamships does not warrant
the completeness or accuracy of the information
contained in the report.

fair and reasonable overview of

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

S T E A M S H I P S ’

S U S T A I N A B I L I T Y F O C U S A R E A S

Our systems for sustainability monitoring and reporting
have only recently been developed. As they become
more established, the accuracy of annual data will
improve.

expanding reporting systems to provide a larger set of
data from across the whole Group and to cover more of
the GRI reporting requirements on a progressive basis
into the 2013/2014 period.

The full list of GRI Indicators adopted by Steamships
Trading Company can be found below. Data collection
for these indicators was initiated in 2011 and will be
improved upon in 2012. Steamships are committed to

For any additional information, or to offer any comments
regarding the content of this report, please contact our
Iain Martin-Blakey,
Group Sustainability Manager
imblakey@steamships.com.pg.

GRI GUIDELINES ADOPTED BY STEAMSHIPS TRADING COMPANY

AREA OF INTEREST

ASPECT

Economic Performance

Market Presence

Labour Practices, Staff
Development and
Welfare Performance

Employment

Occupational Health
and Safety

GRI

EC1

EC7

LA1

LA2

LA6

LA7

Training and Education

LA10

Environmental
Performance

Energy

Water

Emissions, Effluent
and Waste

Local Community
Support

Community
Engagement

EN3

EN4

EN8

EN16

Part of EC1

INDICATOR

Direct economic value generated and
distributed, including revenues, operating costs,
employee compensation, retained earnings,
and payments to capital providers and
governments

Procedures for local hiring and proportion of
senior management hired from the local
community at locations of significant operation

Total workforce by employment type,
employment contract, and region, broken
down by gender

Total number and rate of new employee hires
and employee turnover by age group, gender,
and region

Percentage of total workforce represented in
formal joint management–worker health and
safety committees that help monitor and advise
on occupational health and safety programs

Rates of injury, occupational diseases, lost days,
and absenteeism, and total number of work-
related fatalities, by region and by gender

Average hours of training per year per
employee by gender, and by employee
category

Direct energy consumption by primary energy
source

Indirect energy consumption by primary source

Total water withdrawal by source

Total direct and indirect greenhouse gas
emissions by weight

Funds committed to Community Health and
Social Welfare, Education, Sports and Culture
development

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

S T E A M S H I P S ’

S U S T A I N A B I L I T Y F O C U S A R E A S ( c o n t i n u e d )

OUR PEOPLE

People are Steamships’ greatest asset. As one of the
largest private employers
in PNG, the Company
it serves the country’s overall
understands that
development and business interests to continue to build
local talent. Effective and motivated people are at the
heart of Steamships’ ability to deliver continued value to
customers and shareholders.

Steamships’‘People’ Strategy

A coherent and long term ‘People’ strategy is a crucial
pillar for Steamships’ long-term success. The Company’s
goal is to provide an enjoyable, rewarding and long-term
career to employees. Steamships aims to create an
environment that supports a satisfied workforce; provides
clear objectives and regular development feedback;
provides technical training; and improves management
skills to facilitate an emerging generation of leaders.

Steamships understands that by building a culture of
trust, safety, respect and fairness it can foster an
environment which helps its people to succeed. To
ensure this, it has prioritised occupational safety, health
and education as Key Performance Indicators.

In 2011 Steamships developed a ‘People and Culture’
Portal to improve administration of its people. The portal
places the organisation on a more robust administrative
platform and provides a level of transparency that
Steamships has not achieved before. The system will be
further expanded through 2012. To improve monitoring
and reporting, and assist in increasing transparency, the
Group has also
indicators for
employment, occupational health and safety, and
training and education. Continued monitoring of these
indicators will both increase transparency in corporate
governance, and
resource
capabilities over the coming years to the benefit of both
the Company and its people.

improve our human

identified five GRI

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

S T E A M S H I P S ’

S U S T A I N A B I L I T Y F O C U S A R E A S ( c o n t i n u e d )

Review of Activities and Objectives

2011 highlights

2012 objectives

Created a central Human Resources Steering Committee
to manage and promote key people issues across the
Steamships Group

Develop action plans for divisional operations in training,
performance management, procedures and policies

Health, safety and security for staff became a KPI of the
Divisions under the umbrella of the Sustainability
Action Group

Ensure top down commitment to a Health and Safety
culture that is the priority of the Group and raise senior
management leadership and cultural buy-in at all levels

Implemented occupational health initiatives such as
employment of public health specialist, various first aid
courses, and health awareness campaigns

Conduct a schedule of audits across the year and
improve the audit process by developing internal HSSE
Audit guidelines

Develop new in-house occupational health training
modules for the specific needs of each Division

Commenced reporting on designated GRI indicators for
employment, safety and training and education

Develop further GRI measures in areas of employment,
occupational health and safety and Training

Invested over four million Kina in training programs
throughout 2011

Review training budgets to more effectively target
spending on value-adding skill development

Funded and developed programs to nurture local
management talent, such as Chevening scholarships
and the Accountant Graduate program

Develop a Group-wide Graduate Management trainee
scheme
Promote recruitment and development of PNG national
staff throughout management layer of our organisation

Developed a leading ‘People and Culture’ Portal to
administer our people more efficiently

Improve usage and functionality offered by this Portal
including the addition of a HSSE module

Set up access to an Employee Assistance Program
(EAP) for staff counselling and advice related to work
issues and events

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

S T E A M S H I P S ’

S U S T A I N A B I L I T Y F O C U S A R E A S ( c o n t i n u e d )

Health

Steamships has commenced a number of initiatives to
improve health indicators within the Group. For instance,
the Group has employed an occupational health
specialist with the aim of improving staff health
knowledge and awareness of key health issues; actively
participated in an Oral Health Awareness campaign;
implemented an HIV and AIDS awareness program; and
conducted various first aid courses and safety training
sessions throughout 2011.

Steamships’ programs cover HIV/AIDS, TB, Malaria,
Hygiene, Childcare, Nutrition and other welfare initiatives.
For instance, Steamships has committed to a workplace
Tuberculosis policy and a corresponding Memorandum
of Agreement was signed by Steamships, the PNG
National Department of Health and World Vision in 2011.

The Group advanced a program to establish formal joint
management-worker health and safety committees to
help monitor and advise on occupational health and
safety initiatives. The goal is to ensure suitable levels of
representation of staff on divisional HSSE committees.
The results so far have been pleasing, although more
work is needed.

Safety

Safety is the management priority at all levels of the
organisation. Steamships prioritises a culture of safety
and aims to be an incident-free company. In order to
achieve this, the Group has
introduced a Safety
Management System and strategies for corrective action.

This management system ensures that all injuries are
recorded and analysed. Using the ‘safeguard’ system,
corrective actions are developed to reduce repeat
occurrences. This approach has assisted to decreased
rates of injury, and lost days through absenteeism and
work-related fatalities.

The Action Plan is based on a goal of zero tolerance of
safety-related incidents. Improved safety statistics reflect
the success of current initiatives. The total number of
injuries consistently declined across the Divisions in 2011
and our goals are to continue this trend.

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

S T E A M S H I P S ’

S U S T A I N A B I L I T Y F O C U S A R E A S ( c o n t i n u e d )

Safety management, specifically in the logistics area, is
highest on the agenda. Various new initiatives involving
improved resourcing, specialist training and proactive
maintenance scheduling are being put in place to
continuously improve safety performance for 2012.

Security

Security is an operational challenge for many businesses
in PNG. Carjacking and hold-ups are
increasingly
common in Lae and Port Moresby. Unfortunately several
staff have been affected by this.

Steamships has developed a security policy to minimise
the risk to personnel. This includes regular site audits and
implementation of worksite security policies. The Action
Plan outlines security guidance to all staff and assists
them in dealing with a security situation both at the

workplace and beyond. In 2012 Steamships intends to
conduct a security audit of key operational premises of
the Group, to ensure all Divisions remain vigilant and
proactive for the security of staff and assets.

Training and Development

Quality staff training and educational initiatives are a key
component of the Steamships ‘People’ strategy. The
Group invested heavily in training across the organisation
in 2011. This equated to a commitment of over four
million Kina to deliver 50 000 hours of staff training over
the course of the year.

Each Steamships Division has established training plans
based on specific training modules, as well as external
opportunities for training in fields such as information
technology. Training modules are tailored to the scope

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

S T E A M S H I P S ’

S U S T A I N A B I L I T Y F O C U S A R E A S ( c o n t i n u e d )

as management,

and skills required by each Division, but include areas
such
safety,
communication, first aid, and technical/operational
training (includes plant and equipment operations and
specialised training to meet industry and international
standards).

occupational

In future these efforts will expand to include a Group-
wide Graduate Management Trainee scheme targeting
high calibre graduates. This program will join existing
initiatives such as the Accountant Graduate program,
through which Steamships assists junior accountants to
complete their professional qualifications and become
charted accountants.

Group Managers also participate in the Swire Group
talent management program, which offers a variety of
executive education courses provided by INSEAD in
leadership and
Singapore and France, and
development initiatives organised by Swire’s internal
talent management organisation ‘Ethos.’

Steamships

includes providing
approach
The
scholarships and support to young Papua New Guinean’s
seeking educational opportunities. Steamships and Swire
fund and support two Chevening Scholarships for
Steamships employees in conjunction with the UK

Government. The program provides candidates with the
opportunity for postgraduate study in UK universities.
One candidate was accepted into the prestigious
program in 2011, while two candidates have been
accepted to study towards Business and Law degrees in
2012.

Company Culture

Steamships acknowledge and reward the work and
efforts of staff. Employee remuneration is fair and wealth
and benefits distribution is transparent. The number of
staff employed by Steamships increased significantly
during 2011 in line with business expansion. The Group
gained almost 200 new full time employment positions.
In 2011, only two percent of total staff were non-citizens,
with a 98% Papua New Guinean workforce. A growing
proportion of National Senior Managers are also
employed, although the percentage is still below our
increase this
Our goal remains to
expectations.
representation in the years ahead. High staff turnover
remains an issue for many companies operating here,
and Steamships has experienced unsustainable levels of
staff throughput in recent years. Although the levels have
moderated in 2011, excessive turnover and wage
inflation remain key challenges to address in the years
ahead.

S T E A M S H I P S : O U R P E O P L E , O U R F U T U R E

Daniel Kuna, Chief Officer
of the Kiunga Chief, Coastal
Shipping

Daniel Kuna from Madang
Province has been with
Steamships Shipping Division
for over 10 years. He has been
an officer on board various
Steamships vessels as they
operate liner services to the Western Province and
elsewhere.

According to Daniel, “Steamship’s Shipping operations
have grown a lot over the years. In my time here, the

Company has improved its ISO code and provided a lot

of training to our seafarers, including sponsoring them to

take up cadetships through the PNG Maritime College in

Madang.”

After completing his ‘Mate 4’ studies at the Maritime

College, Daniel was pleased to be placed onboard a

Swire vessel, the Kokopo Chief, as part of his training.

Armed with an education and onboard experience, he

has never looked back - “Our seafarers are given the

opportunity to work onboard Swire vessels to gain

experience in international waters and that gives them a

boost in their career.”

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

S T E A M S H I P S ’

S U S T A I N A B I L I T Y F O C U S A R E A S ( c o n t i n u e d )

OUR ENVIRONMENT

PNG is fortunate to contain hugely diverse landscapes,
climates and environments. Biodiversity is extremely rich,
including over 10,000 known plant species, over 200
mammal species, and over 400 bird species. PNG is also
home to a vast variety of reptiles, amphibians and fish
species. Flora and fauna species new to science are still
being regularly discovered.

Steamships recognises that to co-exist with these unique
environments, the potential environmental impacts of
business operations have to be identified and then
minimised through every stage of each operational
process.

Approach to Environmental Sustainability

The Steamships Sustainability Strategy elevates
environmental sustainability as a corporate priority.
Environmental sustainability has become a Key
Performance Indicator for the Group.

The Strategy requires each Division to compile an
environmental impact register. This has been coordinated
by the Group Sustainability Manager. This register is used
to identify the environmental impacts of business
operations and show where management action is
required to eliminate or minimise these
impacts.
Preparation of the register has facilitated the development
of an initial Environmental Action Plan in each Division.
Progress in implementing these plans will be reported
through the inspection and audit process in 2012.

Steamships has already launched a number of initiatives
to address the issues identified in 2011; progress in each
is outlined in the following section. The Group also
developed three GRI environmental reporting indicators
for energy consumption, water management, and
greenhouse gas emissions.

This year Steamships actively participated in community
environmental programs in collaboration with the PNG
Department of Environment and Conservation, and
sponsored environmental educational activities across
the country. The Company is particularly proud of the
ongoing success of the Swire Papua New Guinea
Rainforest Study (SPRS), as well as communication of the
Swire Green Guidelines to minimise environmental
impacts of business activities across Steamships
Divisions. 2012 will see even greater focus in this area.

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

S T E A M S H I P S ’

S U S T A I N A B I L I T Y F O C U S A R E A S ( c o n t i n u e d )

Review of Activities and Objectives

2011 highlights

2012 objectives

Created a Sustainability Action Group to promote
environmental sustainability

Develop 2012 environmental action plans for Divisional
operations

As part of the Sustainability portfolio, environmental
sustainability became a KPI of the Divisions for the
first time

Include environmental aspects in the regular HSSE
internal audit process

Communicated the Swire Green Guidelines to
minimise environmental impacts of our business activities

Raise levels of awareness of these guidelines across the
Group and further down in the organisation

Commenced monitoring and reporting on designated
GRI indicators for energy, consumption, water usage and
greenhouse gas emissions

Extend GRI reporting by adding further indicators where
material

Developed an environmental impact register to
manage future impacts on the environment

Use this register to develop new initiatives to raise levels
of sustainability

Contributed to environmental projects such as the
Swire PNG Rainforest Study

Further promote conservation and sustainability training
through introduction of an Environmental scholarship for
PNG citizens wishing to pursue a Master course in 2012

Steamships was the major sponsor of the annual
‘World Environment Day’ activities in PNG during 2011

Increase support in 2012 to 40,000 Kina

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

S T E A M S H I P S ’

S U S T A I N A B I L I T Y F O C U S A R E A S ( c o n t i n u e d )

Energy

The Group has for the first time developed mechanisms
to report on direct and indirect energy consumption by
primary source. Steamships has identified various energy
management issues and corrective actions as part of the
comprehensive action review in each Division. For
instance Steamships Shipping is developing an efficiency
measure process to monitor fuel consumption and
ascertain each vessel’s most fuel efficient operating
speed. The Company expects this will result in optimised
fuel efficiency with a target reduction of 5% of fuel
consumption. The Coral Sea Hotels Group has also made
significant adjustments
its energy
consumption. After identifying a 13% increase in
electricity usage, Huon Gulf Hotel developed a strategy
to install energy efficient lighting throughout the hotel, in
addition to running staff awareness training on electricity
conservation.

to decrease

Emissions

shipping and

In 2011 the Group made some gains in reducing
greenhouse gas emissions, largely by improving energy
efficiency. However, its accumulative greenhouse gas
emissions increased slightly, mainly as a result of
increased activities
transport.
Steamships are working hard to reduce CO2 emissions on
a monthly basis. In 2011, Steamships Divisions undertook
internal audits to identify the environmental impacts of
their operations. This returned a number of areas where
the Group are now introducing measures to reduce our
emissions. For example, Laga Industries identified an
issue with GHG emissions from the operation of a
production plant. The Company subsequently reviewed
the issue and set targets to reduce emissions. The
implementation of energy efficiency strategies has
already resulted in a 5% reduction of energy usage levels.

instance, East West Transport identified the need to install
a water treatment plant, and has already purchased
equipment for the plant’s installation. Likewise, Laga
Industries developed a water recycling system to divert
waste water, reducing water usage by 180 000 litres per
week.

Water

In 2011 Steamships developed reporting mechanisms to
record water usage, with a view to improve long term
water management. This data has already assisted the
Group in building a strategy to improve its water
management. Steamships has identified a number of key
challenges for 2012 and produced an action summary of
improve management. For
2012 commitments to

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

S T E A M S H I P S ’

S U S T A I N A B I L I T Y F O C U S A R E A S ( c o n t i n u e d )

C A S E S T U D Y

The Swire Papua New Guinea Rainforest Study

The Swire Papua New Guinea Rainforest Study (SPRS)

was officially launched in late May 2010. In keeping

with Steamships’ commitment to the environment,

parent company, John Swire and Sons Pty. Ltd.,

provided a quarter of a million US dollars to fund the

extensive long-term study of PNG’s rainforests.

The initiative aims to support a number of world

leading international research institutions including

Harvard University and the Smithsonian Tropical

Research Institute, as well as the New Guinea Binatang

Research Centre, the University of Minnesota, and

several other partner institutions in PNG.

The project utilises a permanent 50 hectare forest-

monitoring plot in the Wanang area of Madang

Province, and represents the first long term study of

carbon dynamics in PNG forests. It aims to increase

scientists’ ability to assess the response of Pacific

forests to global climate change.

local

The project has been developed in partnership with
their
the
commitment to forest conservation by signing
conservation agreements over ten years ago.

community, who expressed

Part of the SPRS funding has been put towards
community development projects in the area. After
consultation with the community it became very clear
that there was a need for a primary school. Since its
construction, the Wanang School has grown rapidly to
include four teachers, three classrooms and 150
students.

For these students, some as old as 18, this is their first
experience of primary education. Steamships is proud
to play a part
in this successful example of
development through targeted conservation.

is also participating

Steamships
in the Swire
Conservation Scholarship program, which aims to
develop PNG leadership in the area of forestry science
and management by supporting post graduate study
overseas.

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

S T E A M S H I P S ’

S U S T A I N A B I L I T Y F O C U S A R E A S ( c o n t i n u e d )

C A S E S T U D Y

Steamships Property’s Harbourside Development,
PNG’s first green star development

Steamships Property’s Harbourside development on the
Port Moresby waterfront will be the first property in the
country designed to secure an international green star
rating.

The project, which was recently granted planning
approval, comprises two multi-storey commercial office
buildings consisting of 6 levels of commercial office
space, ground floor retail, basement car parking and a
small marina. It is being designed and will be constructed
using the Australian ‘Green Star’ rating tools for low
impact, environmentally sustainable buildings. ‘Green’
buildings are built for high energy and water efficiency
and are known to be up to 30% less expensive to operate.

The Australian system uses ‘star’ ratings from one (poor)
to six (world-leading) to evaluate buildings both on their

environmental sustainability at design and post
construction. The Harbourside property will be the first
PNG development to be measured against these
internationally-recognised criteria.

Upon completion, the development will also have its
emission levels measured against the Australian NABERS
(the National Australian Built Environment Rating System)
is a
energy measurement
performance-based rating system measuring operational
impacts on the environment.

framework.

NABERS

Steamships intend to carry out a NABERS Energy
modelling exercise to confirm what level NABERS Energy
rating the development theoretically would achieve if
situated in comparable environments such as Cairns or
Darwin, Australia. An operational rating will also be
evaluated after 12 months to confirm the NABERS Energy
rating.

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

S T E A M S H I P S ’

S U S T A I N A B I L I T Y F O C U S A R E A S ( c o n t i n u e d )

OUR COMMUNITY

Papua New Guinea is one of the most ethnically and
culturally diverse countries in the world. It is home to
over 830 known languages. Proud tribal traditions are
maintained through traditional ritual and custom and as
a way of life. High rates of internal migration have
presented challenges to the preservation of PNG
a
traditions; nonetheless
cornerstone of PNG society.

community

remains

Community
is also a cornerstone of Steamships’
recognises the
corporate culture. The Company
importance of community relations to the success of its
operations and to progress on local and national
development goals.

Approach to Community Development

Steamships believes in contributing to local communities
beyond the scope of its usual business operations. The
Steamships community investment program targets four
key areas: Health and Social Welfare, Education, Sports
and Culture. Overall funding to these areas reached well
over 1.6 million Kina in 2011. In order to achieve best
possible results and focus its contribution, the Group
conducted an audit of activities in 2011 that saw several
new initiatives join the existing community investment
program.
investment
The Company’s community
program is set to expand again in 2012, as it continues
support for existing projects and embarks on the
financing of a number of new programs.

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

S T E A M S H I P S ’

S U S T A I N A B I L I T Y F O C U S A R E A S ( c o n t i n u e d )

Review of Activities and Objectives

2011 highlights

2012 objectives

Develop a centralised team responsible for managing
the community investment program

Extend reporting by adding relevant GRI indicators
where material

Increase overall spend to 2 million Kina

Initiated a program of community investment of over
1.6 million Kina in activities focusing on local community
health, education, sports and culture

Commenced reporting on designated GRI indicators for
wealth generation and distribution, and procedures
for local hiring of staff and management

Advanced a number of community engagement
activities spearheaded by management of individual
Divisions

Conducted an audit of activities and identified several
new initiatives and existing initiatives that warrant
further support

Community Investments

Summary of Community Investments in 2011 (Kina)

AREA

2011 Budget

Actual Spending

2012 Budget

Health and Social Welfare

Education

Sports

Culture

TOTAL

735,000

365,000

105,000

120,000

1,149,500

497,400

106,000

168,100

1,140,000

655,000

105,000

100,000

1,325,000

1,921,000

2,000,000

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

S T E A M S H I P S ’

S U S T A I N A B I L I T Y F O C U S A R E A S ( c o n t i n u e d )

Health and Social Welfare

Business Coalition Against HIV and AIDS (BAHA)
-
Steamships are Gold sponsors of BAHA and contributed
K50,000 to the organisation in 2011 to assist in training
and HIV/AIDS awareness programs in both the private
and public sectors. Steamships has committed a total of
K150,000 to BAHA over a 3 year period.

YWAM Medical Ship - Steamships committed K400, 000
to support the work of the YWAM medical ship in 2011.
During its 2011 program in the Gulf and Western
Provinces, the ship visited 230 villages over 69 days
delivering a total of 39, 454 individual interventions in the
area of primary healthcare, dentistry, optometry,
education seminars, preventative health resource
distributions, ophthalmology, and immunisations.

Operation Open Heart (OOH) - Steamships presented
K10, 000 for the program, after the organisation assisted a
staff member to finance a heart operation. The Company
is looking to extend this initiative in 2012 by doubling its
contribution to the organisation.

Project Susu Mamas Inc - Steamships continues to assist
in funding the operation of clinics by covering nurse
wages, rent and general supplies. This year Steamships
donated K100,000 for their outreach and training
programs, focusing on nutrition, breastfeeding and

antenatal. In 2012 Steamships will continue with its usual
support towards Susu Mama’s vision to reduce maternal
and infant morbidity and mortality in PNG.

Cheshire Disbility Service - The Cheshire Disability Service
is the only organisation in PNG that takes care of, and
trains, people
living with disabilities. Steamships’
contribution represented a new funding initiative for the
Group, which it is looking to extend in 2012 by exploring
opportunities to assist the organisation’s rehabilitation or
infrastructure programs.

‘Red Shield Appeal’ – Steamships
Salvation Army
continues to pay rentals for the Salvation Army HIV/AIDS
Drop-in Centre and is also committed to its partnership
with the Salvation Army where it annually hosts the Red
Shield Golf Day tournament. Last year Steamships
presented over K148, 000 to the Salvation Army from the
tournament.

Rotary Against Malaria (RAM) – RAM is committed to
containing and preventing Malaria by distributing
mosquito nets to villages around the country. Steamships
assistance to RAM will allow for people in the rural areas
in which it operates to have access to treated mosquito
nets.

Halfway House – The Halfway House gives women and
children who are victims of violence and abuse a place to

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

S T E A M S H I P S ’

S U S T A I N A B I L I T Y F O C U S A R E A S ( c o n t i n u e d )

take shelter. Steamships supports the Halfway House
through its assistance in purchasing food for the women
and children who live there. In 2011 the Company’s
sponsorship was taken up in conjunction with the
Australian High Commission. Steamships’ direct
involvement will commence in 2012.

Education

PNG Children’s Library Project – the Buk Bilong Pikinini
(Children’s Libraries) organisation has to date opened six
libraries in the National Capital District. Steamships
assisted by distributing the basic school stationery to
children using the libraries. 2012 will see Steamships
support the Lawes Road library and Lae Library.

NCD School Projects – In 2011 Steamships supported the
National Capital District Governor by providing K20,000
towards a public private partnership program of
repairing and building classrooms for schools in the
National Capital District (NCD). Steamships, spearheaded
by the Property Division, will continue to support the
Governor’s project next year and increase the level of
support to K220,000.

Sport

Steamships has assisted a number of PNG sports teams
and events with a view to developing local talent. The

Company presented K11,000 to the PNG Paralympics
team to help them attend the South Pacific Games in
New Caledonia; sponsored the PNG Softball team by
providing K75,000 to assist them participate in the
Oceania Regional World Series Qualifier in Canberra;
presented K10,000 to the University of Papua New
Guinea team to help them compete at the Intervarsity
Games held in Eastern Highlands Province; sponsored
the annual PNG Golf Open; and took part in the annual
Trukai Fun Run by sponsoring schools.

Culture

Literary Development – Steamships has recently agreed
to sponsor PNG’s prestigious literary award, the Crocodile
Prize, allocating K10,000 for the 2012 Short Story Prize.
The Crocodile Prize encourages and publishes Papua
New Guinean writers, providing the opportunity for the
people of PNG to read their national literature.

Publication Support – Steamships is also sponsoring the
All Nation’s Women’s Group Book called "Moments in
Papua New Guinea, Artists, Cooks, and Storytellers," the
proceeds from which will be used to create an
educational bursary to help pay school fees for the
students at Hohola Youth Development Centre, located
in a community close to the East West container depot.

48
48

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

S T E A M S H I P S : O U R P E O P L E , O U R F U T U R E

Guba Halo, Forklift
Driver, Port Services

“Juggling my work as well as
my sporting career has been a
challenge, but the Company
has been very supportive.”

Guba is not your ordinary forklift driver; she has won
over twenty medals in the Arafura Games and the
South Pacific Games as a PNG weightlifter in the 69kg
category.

When she is not working, Guba is down at her small,
self-made gym in Hanuabada, lifting weights. Because
of her weightlifting career, Steamships has taken Guba

on as a permanent, casual staff member who gets
called in when she is needed on the job. The flexible
working hours allow her to train and prepare for the
various tournaments in which PNG participates.

Guba is grateful to the Company for giving her the
opportunity to pursue her career as a weightlifter
representing PNG, “I’m young and energetic, but the
training can take its toll on me. In that respect,
Steamships is very understanding when I need to
take time off to attend trainings or to travel overseas
with the PNG team. The Company is totally supportive
and has even assisted with my expenses. They have
been great.”

S T E A M S H I P S ’

S U S T A I N A B I L I T Y F O C U S A R E A S ( c o n t i n u e d )

C A S E S T U D Y

East West Transport assists community enterprise
in Baruni

Steamships form stevedoring joint ventures with
local communities

Steamship’s East West Transport (EWT) shifted operations
to Baruni from its Hohola Depot in 2011. Acknowledging
that its operations would require frequent transiting
through the Baruni Village, EWT consulted the villagers in
order to understand how the operations could benefit
the local community.

particularly

EWT met with senior members of the village, including
Reverend Gahuna Obaha. It was decided that the
outsourcing of business operations to village-based
companies would
beneficial.
Consequentially, EWT assisted the village to form a local
community-based company, Tago Security Services. The
Company engaged and trained village people to perform
security roles. It has since developed into a successful
outfit of twenty employees, specialising in the provision
of security services for facilities, vehicles, personnel and
cargo.

Steamship’s Port Services Stevedores have set up several
joint venture (JV) arrangements with local landowner
communities to manage and operate stevedoring
businesses at the ports of Port Moresby, Lae, Kimbe,
Madang and Kavieng.

The JV companies employ over 800 local employees and
managers from nearby villages, providing permanent
and part-time opportunities for young men and women
in the various areas of the operation. The JV companies
provide employees with experience and additional
training to develop specialist skills such as vehicle and
ship handling; health, security and safety awareness; and
advanced management and technical skills.

In addition to the significant financial returns that are fed
back into the communities from the jointly-owned
businesses, Steamships provides support to local cultural
and sporting activities
through our community
investment program. The Group intends to continue
building on these strong relationships with the
communities where we operate.

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

S T E A M S H I P S : O U R P E O P L E , O U R F U T U R E

‘Five minutes with Luke Heve’

Luke Heve has worked for Steamships for just over 3
years. Born and raised in Morobe Province, Luke started
with the Company as a Lab technician before moving
into the role of New Products/Process Research and
Development Officer. Today he is a Lab Manager with
Laga Industries, part of Steamship’s Commercial Division.
In this role he manages the lab and coordinates New
Product Research and Development as well as other Line
Quality Control staff.

We recently spoke to Luke about his time and role at
Steamships Trading Company:

1. Why is Steamships a great place to work?

It is a big company and part of one of the world’s
oldest and biggest business groups, that is, the
Swire Group. So I always have the feeling I belong to
an organisation that is grand and has ancient
origins.

2. How has the Company developed since you

first started at Steamships?

When I first started in 2008 Laga Industries had only
one production plant, which manufactured ice
cream, vegetable oil, plastics, and condiments. Now,
Laga also owns the Trade Winds factory, with its
own production staff, managers, supervisors and QC
staff. Staff numbers for the production plant alone
have doubled since I first began.

One of the biggest changes has been the
imposition of stricter standards of work, especially in
the areas of HSSE and good manufacturing practice,
on the production floor. This has led to Laga
Industries eventually being audited by NCSI and
being awarded with an HACCP certification.

3. How is your company working with local

communities?

Our company is very involved in the community. We
are involved in a number of initiatives including the
donation of ice cream to clubs such as the Lioness
Club, who then do charity work at hospitals and the
Angau Children’s Ward. The Company also donates

200L plastic drums to displaced/homeless victims
for collection of their drinking water. We also
support Colgate Palmolive Healthy Teeth and Hands
Awareness where Colgate’s health educator
promotes awareness and provides free tooth
brushes and paste to Laga staff.

4. What does Steamships do better than other

companies in PNG?

Steamships has an effective HSSE Management and
Monitoring Systems which has resulted in a
reduction of unnecessary injuries. Laga Industries
has seen a huge improvement in these areas in 2011
and I hope we maintain this.

5. Why

is protecting the environment so
important for PNG companies like Steamships?

It is important that Steamships treats the
environment with respect and minimises the
impact of its operations where it can. I get a good
sense from the various activities that I see or hear
about that our company understands this
commitment. After all, how can our people, which
are any company’s most important asset, survive
without breathing clean air and drinking
uncontaminated water?

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

C O R P O R A T E G O V E R N A N C E S T A T E M E N T

Steamships and its Board are committed to achieving
and demonstrating the highest standards of Corporate
Governance and ethical standards, and they expect these
standards from all employees. The Company believes that
the maximisation of long term returns to shareholders is
best achieved by acting in a socially-responsible manner
that recognises the interests of other community
stakeholders.

Steamships is committed to:

•

Providing high-quality products and services to
meet customers' needs;

Maintaining high standards of business ethics and
corporate governance;

Ensuring the safety and well-being of employees,
and others with whom the Company has contact;
and

Promoting sustainable business practice.

A description of the Group's main corporate governance
practices is set out below. Steamships complies with the
August 2007 ASX Principles of Good Corporate
Governance and Best Practice Recommendations except
where noted below.

Board of Directors

The Board of Directors has the responsibility to set the
strategic direction of the Company, to review the
operational and financial performance of the Group's
activities, to monitor the achievements of the Group
against its objectives, to review the management of
business risk, and to report to the shareholders.

The Steamships Board currently comprises two executive
Directors, two independent non-executive Directors,
Lady Winifred Kamit (chairperson of the Audit & Risk
Committee) and Mr Gerea Aopi, and four non-executive
Directors, of whom three are also Directors of other John
Swire & Sons subsidiary companies.

The Australian Stock Exchange (ASX) recommends that
the Chairperson and a majority of the Board, and all of the
members of
the Audit Committee, should be
independent Directors.

The Company currently has 98% of its shares held by
three major shareholders, one of which holds 72% of the

the grounds of

shares. The pool of available independent representatives
in Papua New Guinea is small, and it would be very
difficult to find an adequate number of truly independent
Directors qualified to serve on the Board. To disqualify
existing Directors on
lack of
independence would deprive the Company of valuable
experience in the management of its affairs. While
ASX's
importance
recognising
recommendations, the Board feels that, under current
circumstances,
are not
practicable, and would not serve the interest of the
Company or its shareholders.

recommendations

the

Other than the Managing Director and the Finance
Director, who are appointed by the Board, all Directors
retire on a rotational basis at least every three years.
Retiring Directors are eligible for re-election.

The Chairman in conjunction with all members of the
for overseeing the
Board has the responsibility
nomination of all Directors and for the review of the
Board's membership.

Executive Management

Steamships focuses on the long-term development and
growth of business where it can add value through its
industry-specific expertise, its partnerships and its
knowledge of Papua New Guinea, gained through its
long history in the country. In order to achieve this, the
Company combines
the efforts of dedicated
management teams in the individual business units,
supported by a small Head Office team to provide
services such as strategic direction, investment and
performance
resources
management and people development services.

treasury, human

review,

Steamships has adopted a structured approach to
strategic business planning across all divisions. The
Company has implemented a key performance indicator
monitoring system to ensure that the business remains
focused on the strategies and the action plans outlined
to achieve them. Progress against the strategies and
indicators are measured on a quarterly basis.

The Company is committed to the development of its
employees by ensuring its succession program is
appropriate and monitored. Although the expertise and
skills of expatriate staff are still required, an active

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

C O R P O R A T E G O V E R N A N C E S T A T E M E N T ( c o n t i n u e d )

program of training and skills transfer seeks to enable the
Company to promote citizen staff and to build a strong,
long-term workforce for the future.

Audit Committee and Internal Control

internal control and monitors

While the Board maintains overall responsibility for the
systems of
their
effectiveness, the Board is assisted in discharging its
responsibilities by the Audit Committee, which is
composed of an independent non-executive Chairman
and two Directors who are representatives of major
shareholders.

The Audit Committee recommends the appointment
and remuneration of the external auditors, reviews the
Company's financial statements and the adequacy and
effectiveness of existing internal and external audit
arrangements. It also considers management of the
Group's risk. The findings and recommendations of the
Committee are reported to the Board. The Committee
meets twice a year, at which time it receives and
discusses reports from senior management and from the
external auditors. The Audit Committee has a formal
charter.

Different divisions within the Company have a number of
internal audit and monitoring functions, dependent on
need. In addition to this, regular reviews of the monthly
accounts and balance sheets, conducted by senior
divisional and head office management, seek to ensure
that internal control is properly managed throughout the
Group. In the opinion of the Directors, this is the most
efficient and cost-effective means of managing internal
control, given the diversity of the business and the nature
of the risk.

Risk Management

The Company is committed to the management of risks
throughout its operations to protect its employees, the
environment, and Group assets, earnings and reputation.

Certain risks occur in the normal course of the Company's
business and include foreign exchange and interest rate
risks. Exchange risks are minimised by borrowing in
currencies other than Kina only when an equivalent cash
flow is received.

A computer-based risk management database has been
developed to assist the Company's Risk Management

Department to monitor and enforce compliance with the
risk management procedures and policies.

The Company also uses other risk management
techniques, including insurance, to reduce the financial
impact of any uncontrollable or catastrophic losses.

Remuneration Committee

A Committee comprising the Chairman, the Managing
Director and a non-executive Director meets annually to
determine the compensation of the Managing Director
and the senior executive staff. The Committee also
reviews the Company’s staff development plans and is
responsible for the succession planning of all senior
manager positions. The recommendations of this
Committee are minuted.

Strategic Planning Committee

The Strategic Planning Committee meets annually and
provides a detailed review of the annual budget and the
three year planning process in discussion with the
divisional General Managers. This is after a quarterly
review and update of the external plan by external
in no way diminishes the
advisors. This review
responsibility of the full Board of Directors to review and
approve the Company’s strategy at a more macro level.
The selected strategy is implemented by means of
programs, budgets and procedures. Implementation
involves the organisation of the firm’s resources and
motivation of the staff to achieve objectives.

Independent External Advice

In exercising their duties as Directors, the Board, and
individual members of
independent
professional advice at the Company's expense. Requests
for the provision of such advice are directed to the
Chairman.

it, can seek

Shareholder Information

The Board seeks to inform shareholders of major issues
affecting the Company by sending comprehensive
annual reports to the shareholders, and through the
release of reports to the Port Moresby Exchange, the
Australian Stock Exchange and appropriate media. These
detail
financial and operating
performance. At all times, the Board ensures that the
continuous disclosure requirements of the Port Moresby
and Australian Stock Exchanges are met.

the Company's

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

S T A T E M E N T S O F C O M P R E H E N S I V E I N C O M E
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

Consolidated

Parent Entity

Dec 11

Dec 10

Dec 11

Dec 10

Note

K’000

Revenue from Continuing Operations

Other revenue

Operating expenses

OPERATING PROFIT

Finance costs – net

Share of profit of associates and joint ventures

3(a)

3(b)

3(d)

9(c)

920,357

789,918

51,886

48,938

14,360

10,415

(669,601)

(595,861)

(4,971)

(4,508)

265,116

204,472

46,915

44,430

(31,149)

(23,638)

13,859

11,416

PROFIT BEFORE INCOME TAX

247,826

192,250

46,915

44,430

Income tax expense

4(a)

(67,727)

(53,935)

(332)

(35)

PROFIT FROM CONTINUING OPERATIONS

180,099

138,315

46,583

44,395

Other comprehensive income

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

180,099

138,315

46,583

44,395

Non-controlling interests

(21,838)

(21,870)

TOTAL COMPREHENSIVE INCOME

ATTRIBUTABLE TO SHAREHOLDERS

158,261

116,445

46,583

44,395

Basic and diluted earnings per share
continuing (toea)

3(f )

510t

376t

These statements of comprehensive income are to be read in conjunction with the accompanying notes.

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

S T A T E M E N T O F C H A N G E S I N E Q U I T Y
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

Share
Capital

Proposed
Dividend

Retained
Earnings

Total Capital Minority
Interest
& Reserves

Total
Equity

K'000

BALANCE AT 1 JANUARY 2010

24,200

26,667

327,216

378,083

45,211

423,294

Profit for the year

Other comprehensive income

Dividends paid

Dividends proposed

(42,171)

116,445

21,870

138,315

(42,171)

(4,230)

(46,401)

31,008

(31,008)

BALANCE AT 31 DECEMBER 2010

24,200

15,504

412,653

452,357

62,851

515,208

Profit for the year

Other comprehensive income

Dividends paid

Dividends proposed

Prior year adjustment *

(31,008)

158,261

21,838

180,099

(31,008)

(9,324)

(40,332)

58,916

(58,916)

(1,061)

BALANCE AT 31 DECEMBER 2011

24,200

43,412

510,937

578,549

75,365

653,914

This statement of changes in equity are to be read in conjunction with the accompanying notes.

No statement of changes in equity is presented for the Parent Entity as the only movement in equity is represented by
the retained earnings as shown in the statements of comprehensive income and dividends declared or paid during the
year.

* See note 1(z) for the details of the prior period adjustment.

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

S T A T E M E N T S O F F I N A N C I A L P O S I T I O N
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

Consolidated

Parent Entity

Dec 11

Dec 10

Dec 11

Dec 10

Note

K’000

EQUITY
Issued capital
Retained earnings
Proposed final dividend
Capital and reserves attributable to the
Company's shareholders
Non-controlling interests
TOTAL EQUITY

NON-CURRENT ASSETS
Property, plant and equipment
Investments in subsidiaries, associates
and joint ventures
Goodwill
Deferred tax asset

9(a)
10
4(c)

CURRENT ASSETS
Inventories
Trade and other receivables
Loans to associates and incorporated joint ventures
Financial assets at fair value through profit and loss 12(b)
Cash and cash equivalents

11
12(a)

TOTAL ASSETS

CURRENT LIABILITIES
Trade payables
Other payables and accruals
Provisions for other liabilities and charges
Loans from associates and incorporated joint ventures
Loan from Shareholder
Borrowings
Income tax payable

13
14

15
15

NON-CURRENT LIABILITIES
Deferred tax liability
Borrowings
Provisions for other liabilities and charges

4(c)
15
14

TOTAL LIABILITIES
NET ASSETS

24,200
510,937
43,412

578,549
75,365
653,914

24,200
412,653
15,504

452,357
62,851
515,208

24,200
(23,676)
43,412

43,936
-
43,936

24,200
(11,342)
15,504

28,362
-
28,362

938,709

786,510

36,166

38,983

28,445
17,183
-
984,337

50,334
200,633
1,907
45,107
1,653
299,634
1,283,971

57,820
75,102
22,066
7,769
18,460
48,697
53,531
283,445

7,664
330,391
8,557
346,612
630,057
653,914

15,416
17,183
9,282
828,391

54,462
182,225
1,290
52,583
3,644
294,204
1,122,595

56,220
70,117
20,538
18,302
6,522
50,625
50,732
273,056

-
326,389
7,942
334,331
607,387
515,208

63,342
-
1,604
101,112

-
351
24,671
-
-
25,022
126,134

-
565
-
81,319
-
-
314
82,198

-
-
-
-
82,198
43,936

42,142
-
1,511
82,636

-
1,562
21,854
-
-
23,416
106,052

-
-
-
77,481
-
-
209
77,690

-
-
-
-
77,690
28,362

These statements of financial position are to be read in conjunction with the accompanying notes.

For and on behalf of the Board: W. L. Rothery
30 March 2012

Chairman

D.H. Cox OL
Managing Director

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

S T A T E M E N T S O F C A S H F L O W S
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

Consolidated

Parent Entity

Dec 11

Dec 10

Dec 11

Dec 10

Note

K’000

CASH FLOWS FROM OPERATING ACTIVITIES
Receipt from customers
Payments to suppliers and employees
Interest received
Interest and other finance costs paid
Income tax paid
Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant & equipment
Proceeds from sales of property, plant & equipment
Payment for purchase of other financial asset
Loans made (to)/repaid by associated companies
Dividends received
Payment for acquisition of subsidiaries (net of cash acquired)
Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings
Repayments of borrowings
Dividends paid
Net cash used in financing activities

NET DECREASE IN CASH HELD
CASH AT BEGINNING OF THE YEAR
CASH AT END OF THE YEAR

CASH COMPRISES:
Cash and cash equivalents
Bank overdrafts

896,724
(564,302)
123
(31,272)
(48,764)
252,509

(231,302)
7,599
-
1,470
7,191
(1,200)
(216,242)

40,000
(35,998)
(40,332)
(36,330)

(63)
(46,981)
(47,044)

738,130
(516,219)
4,421
(28,059)
(38,533)
159,740

(190,439)
8,844
(11,827)
18,468
12,560
-
(162,394)

102,164
(69,600)
(46,401)
(13,837)

(16,491)
(30,490)
(46,981)

1,653
(48,697)
(47,044)

3,644
(50,625)
(46,981)

These statements of cash flows are to be read in conjunction with the accompanying notes.

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

9,366
(875)
-
-
(320)
8,171

(1,317)
39
-
1,021
23,094
-
22,837

-
-
(31,008)
(31,008)

-
-
-

4,247
(261)
-
-
(239)
3,747

(638)
6,898
-
(12,123)
44,287
-
38,424

-
-
(42,171)
(42,171)

-
-
-

N O T E S T O A N D F O R M I N G P A R T O F T H E A C C O U N T S
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

The Company is a company limited by shares and is
incorporated and domiciled in Papua New Guinea.

These Group consolidated financial statements were
authorised for issue by the Board of Directors on
30 March 2012.

The Board of Directors have the power to amend the
financial statements after its issue.

The financial statements have been prepared in
accordance with International Financial Reporting
Standards (“IFRS”).

Changes in accounting policy and disclosures

(i) Revised

standard, amendments and
interpretations to existing standards and
interpretations adopted by the Group

The following revised standard, amendments and
interpretations
and
interpretations as approved by the IASB which are
mandatory for annual periods beginning 1 January
2011:

standards

existing

•

removes

IAS 24 (Revised), Related Party Disclosures
(effective 1 January, 2011). The revised standard
clarifies and simplifies the definition of a related
for
party and
government-related entities to disclose details of
all transactions with the government and other
government-related entities. The Group has
applied the revised standard from 1 January,
2011.

requirement

the

The following are the relevant amendments to IFRS
which contains amendments that result in changes
in accounting, presentation,
recognition and
measurement. It also includes amendments that are
terminology or editorial changes only which have
either minimal or no effect on accounting. These
amendments are part of the
IASB’s annual
improvements project published in August 2009.
Unless otherwise stated, these improvements did
not have a significant impact on the Group’s financial
statements.

•

IFRS 7, Financial Instruments: Disclosures
(effective 1 January, 2011). The amendment
emphasises
between
quantitative and qualitative disclosures about
the nature and extent of risks associated with
financial instruments.

interaction

the

IAS 1, Presentation of Financial Statements
(effective 1 January, 2011). The amendment
clarifies that an entity may present an analysis of
other comprehensive
for each
component of equity, either in the statement of
changes in equity or in the notes to the financial
statements.

income

(ii) New

standards,

amendments

and
interpretations to existing standards that are not
yet effective and not early adopted by the Group
unless otherwise stated

•

IAS 1 (Amendment), Financial Statement
Presentation - Other Comprehensive Income
(effective 1 July 2012).

IAS 12 (Amendment), Income Taxes - Deferred
Tax(effective 1 January 2012).

IAS 27 (Revised), Separate Financial Statements
(effective 1 January 2013).

IAS 28 (Revised), Investments in Associates and
Joint Ventures (effective 1 January 2013). This
revised standard includes the requirements for
joint ventures, as well as associates, to be equity
accounted following the issue of IFRS 11. The
Group early applied the said standard but this
has no significant impact to the Group.

IFRS 1 (Amendment), First-time Adoption of IFRS
- Fixed Dates and Hyperinflation (effective 1July
2011).

IFRS 7 (Amendment), Financial Instruments:
Disclosures - Derecognition (effective 1 July
2011).

IFRS 9, Financial Instruments (effective 1 January
2015).

IFRS 10, Consolidated Financial Statements
(effective 1 January 2013). This new standard
builds on existing principles by identifying the

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

N O T E S T O A N D F O R M I N G P A R T O F T H E A C C O U N T S
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

concept of control as the determining factor in
whether an entity should be included within the
consolidated financial statements of the parent
company. The standard provides additional
guidance to assist in the determination of
control where this is difficult to assess. The Group
has opted to early adopt the standard with two
new entities being consolidated during the year.

IFRS 11, Joint Arrangements (effective 1 January
2013). This new standard is a more realistic
reflection of joint arrangements by focusing on
the rights and obligations of the arrangement
rather than its legal form. There are two types of
joint arrangement: joint operations and joint
ventures. Joint operations arise where a joint
operator has rights to the assets and obligations
relating to the arrangement and hence accounts
for its interest in assets, liabilities, revenue and
expenses. Joint ventures arise where the joint
operator has rights to the net assets of the
arrangement and hence equity accounts for its
interest. Proportional consolidation of joint
ventures is no longer allowed. The standard has
no significant impact to the Group as they do
not have any joint arrangements.

IFRS 12, Disclosures of Interests in Other Entities
(effective 1 January 2013).

IFRS 13, Fair Value Measurement (effective 1
January 2013).

•

(a) Basis of preparation

The accounts have been prepared under the
historical cost convention.

The preparation of financial statements in conformity
with
IFRS requires the use of certain critical
accounting estimates, refer to note 1(y). It also
requires management to exercise its judgement in
the process of applying the Company's accounting
policies.

(b) Foreign currency

The Company's functional and presentation currency
is the Papua New Guinea Kina. Transactions in
foreign currencies have been translated into the
functional currency at rates ruling at the date of the

transaction. Amounts payable to and by the Group
in foreign currencies have been translated to the
functional currency at rates of exchange ruling at the
year end. Gains and losses arising from movements
in
foreign exchange rates are recognised
in
determining operating profit when they arise.

The consolidated accounts incorporate the assets
and liabilities of all companies controlled by the
Group as at the end of the reporting period and the
results of all controlled companies for the year then
ended. All inter-group transactions and balances
have been eliminated. Non-controlling interests in
controlled companies are shown separately in the
consolidated statement of financial position and
statement of comprehensive income. Interests in
joint ventures and associates in which the Group
holds 20%-50% but not controlling of the issued
share capital, and hold significant influence are
accounted for under the equity method. Interests in
subsidiaries, joint ventures, and associates are carried
at cost by the parent entity.

The Group has early adopted IFRS 10 (Consolidated
Financial Statements) during the year. As a result the
Group has re-assessed whether control now exists
across its various subsidiaries and associates. Based
on this assessment, the Group has determined that
they now control New Britain Shipping Limited and
Middle Fly Shipping Limited which were previously
equity accounted investments.

The change in accounting policy has been treated
retrospectively and has resulted in K2,857,000
increase in net assets and minority interests.

(d) Business combinations

The acquisition method of accounting is used to
account for all business combinations, regardless of
whether equity instruments or other assets are
acquired. The consideration transferred for the
acquisition of a subsidiary comprises the fair values
of the assets transferred, the liabilities incurred and
the equity interests issued by the Group. The
consideration transferred also includes the fair value
of any asset or liability resulting from a contingent

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

N O T E S T O A N D F O R M I N G P A R T O F T H E A C C O U N T S
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

liabilities assumed

consideration arrangement and the fair value of any
pre-existing equity
in the subsidiary.
interest
Acquisition-related costs are expensed as incurred.
Identifiable assets acquired and
liabilities and
in a business
contingent
combination are, with limited exceptions, measured
initially at their fair values at the acquisition date. On
an acquisition-by-acquisition basis, the Group
recognises any non-controlling interest in the
acquire either at fair value or at the non-controlling
interest's proportionate share of the acquiree’s net
identifiable assets.

The excess of the consideration transferred, the
amount of any non-controlling interest in the
acquire and the acquisition-date fair value of any
previous equity interest in the acquiree over the fair
value of the Group's share of the net identifiable
assets acquired is recorded as goodwill. If those
amounts are less than the fair value of the net
identifiable assets of the subsidiary acquired and the
measurement of all amounts has been reviewed, the
difference is recognised directly in profit or loss as a
bargain purchase.

(e) Property, plant and equipment

All property, plant and equipment (including
investment properties) are initially recorded at cost.
Depreciation is calculated on the straight-line
method to write off the cost of each asset to their
residual values over their estimated useful life as
follows:

Properties

Ships

Plant and fittings

Motor vehicles

0 – 10%

5 - 10%

10 - 33%

20 - 33%

Where the carrying amount of an asset is greater
than its estimated recoverable amount, it is written
down immediately to its recoverable amount. Gains
and losses on disposal of property, plant and
equipment are determined by reference to their
carrying amount and are taken into account in
determining operating profit.

Subsequent costs are included in the asset’s carrying
amount or recognised as a separate asset, as
appropriate, only when it is probable that future

economic benefits associated with the item will flow
to the Group and the cost of the item can be
measured reliably. All other repairs and maintenance
are charged against income during the financial
period in which they are incurred.

(f)

Inventories

Inventories are valued at the lower of cost or net
realisable value. In general, cost is determined on the
weighted average basis and, where appropriate,
includes a proportion of variable overhead
expenditure. Net realisable value is the estimated
selling price in the ordinary course of business, less
applicable variable selling costs.

(g)

Income tax

The income tax expense or revenue for the period is
the tax payable on the current period's taxable
income based on the notional income tax rate
adjusted by changes in deferred tax assets and
liabilities attributable to temporary differences
between the tax bases of assets and liabilities and
their carrying amounts in the financial statements,
and to unused tax losses.

Deferred income tax is provided in full, using the
liability method, on temporary differences arising
between the tax bases of assets and liabilities and
their carrying amounts in the financial statements.
Currently enacted tax rates are used
in the
determination of deferred income tax. Deferred tax
assets are recognised to the extent that it is probable
that the future taxable profit will be available, against
which the temporary differences can be utilised.

(h) Provisions

Provisions are recognised when the Group has a
present legal or constructive obligation as a result of
past events; it is probable that an outflow of resource
embodying economic benefits will be required to
settle the obligation; and a reliable estimate of the
amount of the obligation can be made.

A liability for annual leave is recognised and
measured at the amount of unpaid leave at amounts
expected to be paid to settle the present
entitlements. A liability for long service leave is
recognised taking into consideration expected

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

N O T E S T O A N D F O R M I N G P A R T O F T H E A C C O U N T S
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

levels, experience of
future wage and salary
employee departures and periods of service,
discounted to present values.

A provision for estimated ship dry docking costs is
only recognised where the Group has a contractual
obligation under a long-term charter agreement to a
third party. Dry docking costs relating to ships not
under third party long term charter agreements are
only recognised as incurred, and are capitalised to
the extent that the previously assessed economic
benefits associated with the asset are restored.

(i) Goodwill

Goodwill represents the excess of the cost of an
acquisition over the fair value of the Group's share of
the net identifiable assets of the acquired business at
the date of acquisition.

is capitalised and

for
Goodwill
impairment annually or more frequently if events or
changes in circumstances indicate that it might be
impaired and is carried at cost less impairment losses.

is assessed

Gains and losses on the disposal of an entity include
the carrying amount of goodwill relating to the
entity sold. Goodwill is allocated to cash-generating
units for the purpose of impairment testing.

(j) Cash and cash equivalents

For the purpose of the statement of cash flows, cash
and cash equivalents includes cash on hand,
deposits held at call with banks and Treasury bills
with a maturity less than 90 days. Bank overdrafts are
shown in current liabilities in the statement of
financial position.

(k) Revenue recognition

The Group recognises revenue when the amount of
revenue can be reliably measured, it is probable that
future economic benefits will flow to the entity and
specific criteria have been met for each of the
Group’s activities as described below. The Group
bases its estimates on historical results, taking into
consideration the type of customer, the type of
transaction and the specifics of each arrangement.
Revenue is recognised for the major business
activities as follows:

Sale of goods - Revenue from the sale of goods is
recognised when the entity sells a product to the
customer and all significant risks and rewards have
been transferred.

Services - Service revenue is recognised when the
service has been rendered.

Interest income - Interest income is recognised using
the effective interest method.

Dividend income - Dividends are recognised as
revenue when the right to receive payment is
established.

(l) Receivables

Trade receivables are recognised initially at fair value
and subsequently measured at amortised cost using
the effective interest method, less provision for any
uncollectible debts. A provision
for doubtful
receivables is established when there is objective
evidence that the Group will not be able to collect all
amounts due according to the original terms of
receivables.

(m) Borrowings

Borrowings are recognised initially at fair value, net of
any transaction costs incurred, and are subsequently
measured at amortised cost using the effective
interest method. Borrowings are classified as current
liabilities unless the Group has an unconditional right
to defer settlement of the liability for at least 12
months after the end of reporting period.

(n) Changes in accounting policies and

comparatives

Where necessary, comparative figures have been
adjusted to conform with changes in presentation
in the current year.
and accounting policies
For details of the change in accounting policy, see
not 1(c).

(o)

Impairment of assets

Assets that have an indefinite useful life are not
subject to amortisation and are tested annually for
impairment. Assets that are subject to amortisation
are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

N O T E S T O A N D F O R M I N G P A R T O F T H E A C C O U N T S
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

amount may not be recoverable. An impairment loss
is recognised for the amount by which the asset's
carrying value exceeds its fair value less costs to sell.
For the purpose of assessing impairment, assets are
grouped at the lowest levels for which there are
separately identifiable cash flow (cash generating
units).

(p) Borrowing cost

Borrowing cost incurred for the construction of any
qualifying asset are capitalised during the period of
time that is required to complete and prepare the
asset for its intended use or sale. Other borrowing
costs are expensed.

The capitalisation rate used to determine the
amount of borrowing costs to be capitalised is the
weighted average interest rate applicable to the
entity's outstanding borrowings during the year, in
this case 7.5% (2010 - 7.25%).

(q) Segment reporting

Operating segments are reported in a manner
consistent with the internal reporting provided to
the chief operating decision maker. The chief
operating decision maker who is responsible for
allocating resources and assessing performance of
the operating segments, has been identified as the
strategic steering committee.

(r) Dividends

Provision is made for the amount of any dividend
declared on or before the end of the financial year
but not distributed at balance date. The Group
creates a separate category within equity to
recognise amounts set aside for payment of
dividends that are declared post-year end but before
the issue of the Annual Report.

(s) Earnings per share

Basic earnings per share is calculated by dividing the
profit attributable to equity holders of the Group, by
the weighted average number of ordinary shares
outstanding during the financial year. There are no
potential ordinary shares on issue and hence the
diluted earning per share is equal to the basic
earnings per share.

(t) Critical judgments in applying the entity's

accounting policies

Judgements are continually evaluated and are based
on historical experience and other factors, including
expectations of future events that are believed to be
reasonable under the circumstances.

(u) Trade and other payables

These amounts represent liabilities for goods and
services provided to the Group prior to the end of
financial year which are unpaid. The amounts are
unsecured and are usually paid within 30 days of
recognition.

(v) Goods and services tax (GST)

Revenues, expenses and assets are recognised net of
the amount of associated GST. Receivables and
payables are stated inclusive of GST. The amount of
GST recoverable from, or payable to, the Taxation
Authority is included with other receivables or
payables in the balance sheet.

(w) Financial assets

Classification

The Group classifies its financial assets in the
following categories: at fair value through profit or
loss and loans and receivables. The Group does not
hold any held to maturity investments or available for
sale financial assets. The classification depends on
the purpose for which the financial assets were
acquired. Management determines the classification
of its financial assets at initial recognition.

(i)

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or
loss are financial assets held for trading. A
financial asset is classified in this category if
acquired principally for the purpose of selling in
the short-term. Derivatives are also categorised
as held for trading unless they are designated as
hedges. Assets in this category are classified as
current assets.

(ii) Loans and receivables

receivables are non-derivative
Loans and
financial assets with fixed or determinable
payments that are not quoted in an active

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

N O T E S T O A N D F O R M I N G P A R T O F T H E A C C O U N T S
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

market. They are included in current assets,
except for maturities greater than 12 months
after the balance sheet date. These are classified
as non-current assets. The Group's loans and
and other
receivables
receivables' and cash and cash equivalents in the
balance sheet.

comprise

'trade

Recognition and measurement

Regular purchases and sales of financial assets are
recognised on the trade date - the date on which the
Group commits to purchase or sell the asset.

Financial assets carried at fair value through profit or
loss are initially recognised at fair value, and
transaction costs are expensed in determining
operating profit. Financial assets are derecognised
when the rights to receive cash flows from the
investments have expired or have been transferred
and the Group has transferred substantially all risks
and rewards of ownership. Loans and receivables are
carried at amortised cost using the effective interest
method.

Gains or losses arising from changes in the fair value
of the 'financial assets at fair value through ‘profit or
loss’ category are included within other income or
operating expenses in the period in which they arise.
Dividend income from financial assets at fair value
through profit or loss is recognised in the income
statement as part of other income when the Group's
right to receive payments is established.

The Group assesses at each balance sheet date
whether there is objective evidence that a financial
asset or a group of financial assets is impaired.
Impairment testing of trade receivables is described
in note 1(o).

have a significant risk of causing a material
adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed
below.

(i)

Estimated impairment of goodwill

The Group tests annually whether goodwill has
impairment. The recoverable
suffered any
amounts of cash-generating units have been
determined based on value-in-use calculations.

(ii) Estimated fair values of investments

The Group carries an indirect investment in
Bemobile Ltd at fair value with changes in the
fair values recognised in profit or loss. At the end
of each reporting period, a future maintainable
earnings calculation is performed to determine
the appropriate fair value of the investment.

(iii) Provision for dry docking

For vessels on long term charter contracts, the
cost of future dry docking is provided. The cost
of dry docking is not accurately known until the
vessels are surveyed and assessed at the
commencement of docking. Management has
made estimates based on the dry docking
interval (ie Special or Interim), repairs identified
at balance, its age, and docking history.

Docking intervals are assumed to be 30 month
periods.

Docking costs are often incurred in either AUD,
USD or SGD currencies. The costings are updated
monthly for the foreign exchange rate.

(x) Rounding of amounts

(z) Correction of error

Amounts in the financial statements have been
rounded off to the nearest thousand Kina.

(y) Critical accounting estimates and assumptions

The Group makes estimates and assumptions
concerning the future. The resulting accounting
estimates will, by definition, seldom equal the related
actual results. The estimates and assumptions that

In 2010 there was an error in accounting for the share
of profits from Associates and consequently the
investment in associates. This was due to changes in
the associates final audited accounts that occurred
after the Group accounts were issued. The effect was
a decrease in retained earnings of K1,061,000 and a
decrease in the investment in associates balance on
the Statement of financial position.

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

N O T E S T O A N D F O R M I N G P A R T O F T H E A C C O U N T S
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

FINANCIAL RISK MANAGEMENT

The Group's activities expose it to a variety of
financial risks including market risk (including
currency, and interest rate risk), credit risk, liquidity
risk and capital risk. The Group's overall risk
management
the
unpredictability of financial markets and seeks to
minimise potential adverse effects on the financial
performance of the Group. Risk management is
carried out under policies approved by the Board of
Directors.

program

focuses

(a) Market risk

(i)

Foreign exchange risk

The Group engages in international purchase
transactions and is exposed to foreign exchange
risk arising from various currency exposures,
primarily with respect to the Australian dollar.
Foreign exchange risk arises from recognised
assets and liabilities.

The Group's foreign currency purchases do not
represent a significant proportion of the Group's
costs and as such exposure to foreign currency
risk is minimal. It is not the Group's policy to
hedge foreign currency risk. As the foreign
currency exposure is minimal no sensitivity
analysis is provided.

(ii) Price risk

The Group is not significantly exposed to equity
securities or commodities price risk.

(iii) Cash flow interest rate risk

The Group's interest rate risk arises from long-
term borrowings. Borrowings issued at variable
rates expose the Group to cash flow and fair
value interest rate risk. Borrowings issued at
fixed rates expose the Group to fair value interest
rate risk. Long term borrowings are at a fixed
rate of interest. It is not the Group's policy to
hedge cash flow and interest rate risk.

At 31 December 2011, if interest rates on PNG Kina-
denominated borrowings had been
1.0%
higher/lower with all other variables held constant,
post-tax profit for the year would have been seven
hundred and seventeen thousand Kina (2010: five
hundred and six thousand Kina) lower/higher, mainly
as a result of higher/lower interest expense on
floating rate borrowings.

(b) Credit risk

The Group has no significant concentration of credit
risk and it is not the Group's policy to hedge credit
risk. The Group has policies in place to ensure that
sales of products and services are made to customers
with an appropriate credit history and has policies
that limit the amount of credit exposure to any one
customer. No credit limits were exceeded during the
reporting period and management does not expect
any losses from non-performance by counterparties.

liquidity

risk management

Prudent
implies
maintaining sufficient cash and the availability of
funding through an adequate amount of committed
credit facilities. The Group manages liquidity risk by
maintaining sufficient bank balances to fund its
operations and the availability of funding through
committed credit facilities.

Management monitors rolling forecasts of the
Group's liquidity reserve on the basis of expected
cash flows.

Undrawn finance facilities as of 31 December 2011 is
as follows:

2011

2010

K’000

Undrawn Facilities

119,757

182,944

The table below analyses the Group's financial
liabilities which will be settled on a net basis into
relevant maturity groupings based on the remaining
period at the balance sheet date to the contractual
maturity date. The amounts disclosed in the table are
the contractual undiscounted cash flows.

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

N O T E S T O A N D F O R M I N G P A R T O F T H E A C C O U N T S
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

Less than Between 1 Between 2 Over 5
years

and 5 years

& 2 years

1 year

K’000

At 31 December 2011

Borrowings

(78,299)

(290,541)

(40,935)

(29,193)

Trade & other
payables

Income tax
payable

(132,922)

(53,531)

At 31 December 2010

The gearing ratios at each balance date were as
follows:

2011

2010

K’000

Total external borrowing
& unsecured loans

397,548

383,536

Less: Cash & Cash
equivalents

Net debt

Total equity

1,653

3,644

395,895

379,892

578,549

452,357

Borrowings

(75,254)

(29,595) (266,895) (111,389)

Total share capital

24,200

Trade & other
payables

Income tax
payable

(126,337)

(50,732)

Gearing ratio

68%

84%

The lower gearing ratio in 2011 resulted primarily
from the increase in profit .

The Group does not hold derivative financial instruments.

(e) Fair value estimation

(d) Capital risk management

The Group's objectives when managing capital are to
safeguard the Group's ability to continue as a going
concern in order to provide returns to shareholders
and benefits for other stakeholders and to maintain
an optimal capital structure to reduce the cost of
capital.

In order to maintain or adjust the capital structure,
the Group may adjust the amount of dividends paid
to shareholders, return capital to shareholders, issue
new shares or sell assets to reduce debt.

The Group monitors capital on the basis of the
gearing ratio. This ratio is calculated as net debt
divided by total capital. Net debt is calculated as
external borrowings and unsecured loans less cash
and cash equivalents net of bank overdrafts. Total
capital is calculated as “equity” as shown in the
balance sheet plus net debt.

IFRS 7 ”Financial Instruments: Disclosures” requires
disclosure of fair value measurements by level of the
following fair value measurement hierarchy:

Quoted prices (unadjusted) in active markets for
identical assets or liabilities (level 1).

Inputs other than quoted prices included within
level 1 that are observable for the asset or liability,
either directly (that is, as prices) or indirectly (that is,
derived from prices) (level 2).

Inputs for the asset or liability that are not based on
observable market data (that is, unobservable
inputs) (level 3).

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

N O T E S T O A N D F O R M I N G P A R T O F T H E A C C O U N T S
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

The following table presents the Group's assets and
liabilities that are measured at fair value.

The following table presents the change in level 3
instruments for the year ended 31 December 2011.

Level 1

Level 2

Level 3

Consolidated

K’000

Financial asset at fair
value through profit
and loss

2011

2010

K’000

Opening balance

52,583

48,822

Additions

11,827

Losses recognised in
profit and loss

(7,476)

(8,066)

Closing Balance

45,107

52,583

Total losses for the
period included in other
operating expenses that
relate to assets held at the
end of the reporting period

7,476

8,066

The parent entity does not hold any financial assets.

at 31 December 2011

Assets
Financial assets at fair
value through
profit & loss:

Total Assets:

at 31 December 2010

Assets

Financial assets at fair
value through
profit & loss:

Total Assets:

45,107

52,583

If one or more of the significant inputs is not based
on observable market data, the instrument is
included in level 3.

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

N O T E S T O A N D F O R M I N G P A R T O F T H E A C C O U N T S
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

Consolidated

Parent Entity

Dec 11

Dec 10

Dec 11

Dec 10

K’000

3. OPERATING RESULTS

(a) Revenue comprises:

Revenue from sale of goods
Revenue from provision of service
Dividend income
Other income
Total Revenue

(b) Operating expenses comprise:

Cost of sales
Staff costs
Depreciation and amortisation
Electricity and fuel
Freight
Insurance
Motor vehicle expenses
Shipping and survey costs
Stevedoring
Telecommunication
Repairs & maintenance
Other operating expenses
Total operating expenses

arrived at after charging and crediting the
following specific items:-
Charges:

Audit fees
Fees for non-audit services to Auditors
Bad and doubtful debts
Donations
Fair value decrement on financial assets

Credits:

Subsidiary companies’ dividends
Net foreign exchange transaction gains
Profit (loss) on sale of properties

(d) Finance costs – net
Interest expense
Interest income
Net finance costs

(e) Staff costs:

Wages and salaries
Retirement benefit contributions
Accommodation and other benefits

174,867
745,490
-
14,360
934,717

217,878
155,592
77,967
61,582
6,614
20,292
12,399
12,411
23,548
16,781
31,001
33,536
669,601

875
408
944
1,921
7,476

-
3,081
5,401

31,272
(123)
31,149

108,559
8,694
38,339
155,592

198,436
591,482
-
10,415
800,333

200,554
137,993
66,669
52,954
6,198
17,305
6,536
6,114
19,419
13,558
33,366
35,195
595,861

844
461
721
1,262
8,066

-
3,307
5,689

28,059
(4,421)
23,638

94,625
7,384
35,984
137,993

Number of staff employed by the Group at year end.
Full time

3,297

3,064

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

-
-
23,094
28,792
51,886

-
-
4,095
-
-
-
-
-
-
-
-
876
4,971

10
-
-
-
-

-
-
48,938
-
48,938

-
-
4,247
-
-
-
-
-
-
-
-
261
4,508

10
-
-
-
-

23,094
-
-

44,287
-
-

-
-
-

-
-
-
-

-
-
-

-
-
-
-

N O T E S T O A N D F O R M I N G P A R T O F T H E A C C O U N T S
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

Consolidated

Parent Entity

Dec 11

Dec 10

Dec 11

Dec 10

K’000

(f) Earnings per share

Basic earnings per share is calculated by dividing the net profit attributable to shareholders by the
weighted average number of ordinary shares on issue during the year. There is no difference
between the basic and diluted earnings per share.

Net profit attributable to shareholders
Weighted average number of ordinary shares
on issue (thousands)
Basic earnings per share
Split between:
Continuing operations
Discontinued operations

158,261

116,445

31,008
510t

31,008
376t

510t
-

376t
-

-
-

INCOME TAX

(a) Current tax
Deferred tax

50,781
16,946
67,727

49,431
4,504
53,935

332
-
332

-
-

35
-
35

(b) The income tax expense is determined in accordance with the policy set out in note 1(g).

The effective rate of tax charged differs from the statutory rate of 30% for the following reasons.

Prima facie tax payable on operating profit
Tax effect of rebateable dividends
Expenses not deductible for tax
Deductible expenses not recognised for accounting purposes
Income not assessable for tax
Prior year over/under provisions

Provisions
Prepayments
Property, plant and equipment

70,190
-
5,882
(428)
(7,285)
(632)
67,727

8,788
(3,472)
(12,980)
(7,664)

54,250
-
1,215
(208)
(1,322)
-
53,935

9,907
(2,378)
1,753
9,282

14,075
(6,928)
-
-
(7,285)
470
332

13,329
(13,286)
-
-
-
(8)
35

(87)
-
1,691
1,604

(220)
-
1,731
1,511

Unused tax losses for which no deferred tax asset has been recognised total K1,318,367 (2010: K1,598,502) in a
subsidiary company.

(d) The gross movement on the deferred income tax account is as follows:

At January 1
Acquisition of subsidiary
Charged to profit and loss
At December 31

9,282
27
(16,973)
(7,664)

7,305
-
1,977
9,282

1,511
-
93
1,604

1,238
-
273
1,511

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

N O T E S T O A N D F O R M I N G P A R T O F T H E A C C O U N T S
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

SEGMENTAL REPORTING

(a) Description of segments

The Strategic Steering Committee considers the business from both a product and a geographic perspective and
has identified four reportable segments. A brief description of each segment is outlined below:
•

Commercial - consists of the retail arm and is involved in the manufacture and distribution of food
products and general IT retail sales.
Hotels and Property - consists of the hotels owned and operated and also its property leasing division.
The assets are stated at book value.
Logistics- consists of shipping and land based freight transport divisions.
Finance and Investment - consists of the head office administration function and internal property
development projects prior to the transfer to the Hotel and Property segment.

•

•
•

(b) Segment information

The segment information provided to the Strategic Steering Committee for the reportable segments for the year
ended 31 December 2011 is as follows:

Hotels &
Commercial Property

K'000

Logistics
K'000

Finance &
Investment
K'000

2011
External revenue
Intersegmental revenue
Interest revenue
Interest expense
Fair value loss on financial asset
Segment results
Share of associate profit
Total tax expense
Profit from continuing operations
Segment assets
Segment liabilities
Net assets
Total assets includes investment in associates of

Capital expenditure
Depreciation and amortisation

2010
External revenue
Intersegmental revenue
Interest revenue
Interest expense
Fair value loss on financial asset
Segment results
Share of associate profit
Total tax expense
Profit from continuing operations
Segment assets
Segment liabilities
Net assets
Total assets includes investment in associates of

Capital expenditure
Depreciation and amortisation

246,336
881
72
(38)
-
19,825
3,079
(5,948)
16,956
122,448
22,152
100,296
6,470

8,066
8,007

227,426
4,837
72
(381)
-
16,549
2,281
(4,965)
13,865
130,350
32,612
97,738
5,490

10,176
7,974

221,980
31,556
-
(4,186)
-
120,863
-
(36,259)
84,604
573,285
7,130
566,155
-

164,003
25,572

175,155
18,803
-
(20)
-
80,860
-
(23,953)
56,907
497,424
343,369
154,055
-

128,479
20,322

461,343
12,031
51
(8,836)
-
95,202
10,780
(28,585)
77,397
428,270
168,025
260,245
14,116

57,324
42,336

397,752
7,813
39
(11,357)
-
88,047
9,135
(26,404)
70,778
391,377
164,417
226,960
9,926

50,195
38,122

5,058
-
-
(18,212)
(7,476)
(1,923)
-
3,065
1,142
159,968
432,750
(272,782)
7,859

1,909
2,052

-
-
4,310
(16,301)
(8,066)
(4,622)
-
1,387
(3,235)
103,444
66,989
36,455
-

1,589
251

Total
K'000

934,717
44,468
123
(31,272)
(7,476)
233,967
13,859
(67,727)
180,099
1,283,971
630,057
653,914
28,445

231,302
77,967

800,333
31,453
4,421
(28,059)
(8,066)
180,834
11,416
(53,935)
138,315
1,122,595
607,387
515,208
15,416

190,439
66,669

These figures include non-controlling interests share of operating profit and assets.
(c) Geography

The Group operates wholly in Papua New Guinea. It is not practical to provide a segment analysis by
geographical region within Papua New Guinea.

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

N O T E S T O A N D F O R M I N G P A R T O F T H E A C C O U N T S
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

6. RELATED PARTY DISCLOSURES

The Group is controlled by John Swire & Sons (PNG) Limited, which owns 72.12% of the Company's shares. Related
parties comprise other companies within the John Swire & Sons (PNG) Group, including Collins & Leahy Holdings
Limited, together with associate and joint venture entities.

(a) Material transactions:

Sales of goods and services:

Associates & Joint Ventures
Shareholders of Associated Companies

Lease and rental income

Associates & Joint Ventures

Dividends received

Associates & Joint Ventures

Management fees received

Associates & Joint Ventures

Royalty/License Income

Associates & Joint Ventures
Purchase of goods and services
Associates & Joint Ventures
Other Shareholders
Shareholders of Associated Companies

Management fees paid

Other Shareholders
Container/Charter hire fees
Other Shareholders

Interest paid

Other Shareholders

Dividends paid

Other Shareholders
Shareholders of Associated Companies

Intercompany Loan Transactions

Equity instrument in associate
Associates & Joint Ventures
Additional investment in Associate
Other Shareholders
Shareholders of Associated Companies

Consolidated

Parent Entity

Dec 11

Dec 10

Dec 11

Dec 10

K’000

4,335
6,417

302

3,972
7,844

176

-
-

7,191

12,560

23,094

44,287

180

1,342

(26,329)
(2,014)
(291)

180

1,177

(30,116)
(1,437)
(580)

(226)

(418)

(8,808)

(10,194)

(803)

(808)

(2,809)
(22,363)

-
(10,533)
(7,858)
-
11,938

(985)
(30,413)

(11,827)

20,357
(52,500)
-

-
-

-
-
-

-
-

-
-
-

All transactions with related parties are made on normal commercial terms and conditions.

(b) Directors:

G.J. Dunlop and W.L.Rothery are directors of John Swire & Sons (PNG) Limited and Collins & Leahy Holdings
Limited. E.H. Ruha is a Director of John Swire & Sons (PNG) Limited.
Dividends were received by those Directors holding an interest in the Company as set out in the Directors'
Report.

with the management of the Group companies is shown in the report of the Directors. The Group paid
K4,748,493 (2010: K7,844,465 ) to SCL Nominees Limited for management services.

(d) Interest in subsidiaries, associates and joint ventures: These are set out in note 9 and 20.
(e) Holding company: The ultimate Holding Company is John Swire & Sons Limited, incorporated in England.

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

N O T E S T O A N D F O R M I N G P A R T O F T H E A C C O U N T S
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

7. CAPITAL

Consolidated

Parent Entity

Dec 11

Dec 10

Dec 11

Dec 10

Issued and fully paid: 31,008,237 shares

24,200

K’000

24,200

In accordance with the Papua New Guinea Companies Act 1997 the Group has no authorised share capital and
shares of no par value.

PROPERTY, PLANT & EQUIPMENT

Property
Opening net book amount
Building construction costs
Additions
Business combinations
Disposals cost
Disposals accumulated depreciation
Depreciation charge
Closing net book amount

Cost or valuation
Accumulated depreciation
Net book amount

Ships
Opening net book amount
Additions
Disposals - Cost
Disposals - Accumulated depreciation
Depreciation charge
Closing net book amount

Cost or valuation
Accumulated depreciation
Net book amount

Plant & Vehicles
Opening net book amount
Additions
Business combinations
Disposals - Cost
Disposals - Accumulated depreciation
Depreciation charge
Closing net book amount

Cost or valuation
Accumulated depreciation
Net book amount

450,488
63,203
71,688
173
-
-
(18,980)
566,572

692,448
(125,876)
566,572

186,442
11,568
-
-
(22,361)
175,649

302,892
(127,243)
175,649

149,580
84,843
889
(6,867)
4,669
(36,626)
196,488

382,639
(186,151)
196,488

350,001
107,879
8,302
-
(2,492)
2,228
(15,430)
450,488

557,384
(106,896)
450,488

187,048
19,420
(3,466)
3,466
(20,026)
186,442

291,324
(104,882)
186,442

128,847
54,838
-
(9,078)
6,186
(31,213)
149,580

303,774
(154,194)
149,580

37,211
-
912
-
-
-
(3,598)
34,525

76,835
(42,310)
34,525

-
-
-
-
-
-

6,474
(6,474)
-

1,772
405
-
(134)
95
(497)
1,641

4,705
(3,064)
1,641

40,478
-
638
-
(2,468)
2,228
(3,665)
37,211

75,923
(38,712)
37,211

-
-
-
-
-
-

6,474
(6,474)
-

2,505
-
-
(347)
196
(582)
1,772

4,434
(2,662)
1,772

Total property, plant and equipment

938,709

786,510

36,166

38,983

Included in the 'Property' classification at 31 December 2011 are buildings under construction of K80.3M (2010:
K211.2M).The cost of additions in 2011 includes capitalised borrowing costs of K3.9M (2010: K7.9) in relation to
qualifying assets.

There are no conditions that indicate impairment of property, plant and equipment as at 31 December 2011 and
31 December 2010.

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

N O T E S T O A N D F O R M I N G P A R T O F T H E A C C O U N T S
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

PROPERTY, PLANT & EQUIPMENT (continued)

Properties include commercial properties occupied by Group businesses together with commercial and residential
investment properties which are available for external lease. An analysis of the carrying amount and estimated range
of fair values for each category of property is shown below. Fair values have been estimated internally, based on
market evidence of property values, supported by independent professional valuations as at December 2011 for a
selected sample of representative properties.

Included in Properties are the following:

Commercial Internal
Commercial External
Residential
Total

NBV

Valuation
Lower

Range
Higher

K’000

28,658
464,017
73,897
566,572

118,230
1,203,570
243,440
1,565,240

130,594
1,343,941
256,684
1,731,219

The independent valuer utilised certain historical facts and relevant market data available up to the date of
valuation in reaching their opinion to the valuation of the properties.

INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

(a) Investments are accounted for in accordance

with the policy set out in Note 1(b) and relate to:

Investments in subsidiary companies
Investments in associates and joint ventures

(b) Movement in carrying amounts

Carrying amount at the beginning of the year
Share of profits
Income tax expense
Dividends received/receivable
Transfers/sales
Carrying amount at the end of the year

Consolidated

Parent Entity

Dec 11

Dec 10

Dec 11

Dec 10

K’000

-
28,445
28,445

15,416
19,508
(5,649)
(7,191)
6,361
28,445

-
15,416
15,416

17,939
16,293
(4,877)
(12,560)
(1,379)
15,416

43,203
20,139
63,342

42,142
-
-
-
21,200
63,342

42,003
139
42,142

42,142
-
-
-
-
42,142

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

N O T E S T O A N D F O R M I N G P A R T O F T H E A C C O U N T S
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES (continued)

The Group’s share of the results of its principal associates and their aggregated assets (including goodwill) and
liabilities are as follows:

2011
Pacific Towing
Kiunga Stevedoring*
Colgate
Harbourside Development
Makerio Stevedoring
Nikana Stevedoring
Riback Stevedoring
United Stevedoring

2010
Pacific Towing
Kiunga Stevedoring
Colgate
Makerio Stevedoring
Nikana Stevedoring
Riback Stevedoring
United Stevedoring

Ownerships
Interest

Assets

Liabilities

Carrying
Value

Revenue

Profit

K’000

50.00
100.00
50.00
50.00
23.00
23.00
25.00
12.00

12,033
-
9,632
7,859
634
934
6,298
305
37,695

4,822
-
3,162
-
145
180
681
260
9,250

7,211
-
6,470
7,859
489
754
5,617
45
28,445

9,552
-
13,425
-
218
211
3,267
501
27,174

7,395
-
3,078
-
214
279
2,881
12
13,859

Ownerships
Interest

Assets

Liabilities

Carrying
Value

Revenue

Profit

K’000

50.00
24.50
50.00
23.00
23.00
25.00
12.00

17,663
588
10,833
442
736
5,311
273
35,846

12,846
103
5,343
90
261
1,564
223
20,430

4,817
485
5,490
352
475
3,747
50
15,416

8,265
245
11,774
167
207
2,456
462
23,576

6,698
333
2,280
151
308
1,637
9
11,416

*Kiunga Stevedoring went from being an associate to a subsidiary during the 2011year.

(d) Within the parent company, shares in subsidiary companies have been stated at cost or valuation less

dividends received from pre-acquisition profits. Subsidiary companies are shown in note 20.

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

N O T E S T O A N D F O R M I N G P A R T O F T H E A C C O U N T S
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

10. GOODWILL

Opening net book amount
Additions
Impairment
Closing net book amount

Impairment tests for goodwill

Consolidated

Parent Entity

Dec 11

Dec 10

Dec 11

Dec 10

K’000

17,183
-
-
17,183

-
-
-
-

Goodwill is allocated to the Group's cash-generating units (CGUs) identified according to operating segment. The
goodwill balance of K17.2M (2010: K17.2M) is attributable to Datec (K 9.1m), Consort (K 0.5m) and the Manufacturing
division (K 7.5m). The recoverable amount of a CGU is determined based on value-in-use calculations. These
calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-
year period. Growth beyond year five for the purpose of the impairment testing is set at 0%. A pre-tax discount rate
of 12.8% has been used and reflects specific risks relating to the operating segment. No goodwill is considered to be
impaired as at 31 December 2011.

11.

INVENTORIES

Raw materials
Work in progress
Finished goods
Provision for obsolescence

Consolidated

Parent Entity

Dec 11

Dec 10

Dec 11

Dec 10

K’000

2,497
1,226
49,457
(2,846)
50,334

28,286
542
28,999
(3,365)
54,462

-
-
-
-
-

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

N O T E S T O A N D F O R M I N G P A R T O F T H E A C C O U N T S
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

12 (A). TRADE AND OTHER RECEIVABLES

Consolidated

Parent Entity

Dec 11

Dec 10

Dec 11

Dec 10

K’000

133,459
(4,186)
129,273
71,360
-
200,633

112,837
(3,685)
109,152
73,073
-
182,225

-
-
-
351
-
351

-
-
-
1,562
-
1,562

Trade receivables
Provision for impairment

Other receivables & prepayments
External loans

(i)

Impaired trade receivables

As at 31 December 2011, trade receivables of K4.2 million (2010: K3.7 million) relating to trade debtors were
considered impaired and were provided for by management. The ageing of these receivables is as follows:

3 to 6 months
Over 6 months

1,200
2,986
4,186

Movement in the provision for impairment of trade receivables is as follows:

Opening balance
Provision for receivables impaired
Provision written off
Total

3,685
944
(443)
4,186

1,614
2,071
3,685

2,878
807
-
3,685

-
-
-

-
-
-
-

The creating and releasing of provision for impaired receivables is included in administration costs in determining
operating profit. Amounts charged to the allowance account are generally written off when there is no
expectation of recovering additional cash.

(ii) Past due but not impaired

As at 31 December 2011, trade receivables of K3.4 million (2010: K7.1 million) were past due but not impaired.
These relate to a number of independent customers for whom there is no recent history of default. The ageing
analysis of these trade receivables are as follows:

3 to 6 months
Over 6 months

3,414
-
3,414

7,062
-
7,062

-
-
-

The other classes within trade and other receivables do not contain impaired assets. The maximum exposure to
credit risk at the reporting date is the fair value of each class of receivable mentioned above. The Group does not
hold any collateral as security.

12 (B). FINANCIAL ASSET HELD AT FAIR VALUE THROUGH THE PROFIT AND LOSS

Opening balance
Additional investment
Fair value loss recorded in the profit and loss
Closing Balance

52,583
-
(7,476)
45,107

48,822
11,827
(8,066)
52,583

-
-
-
-

The financial asset is a convertible note in GEMS PNG Limited which holds an investment in Bemobile Ltd.

-
-
-

-
-
-
-

-
-
-

-
-
-
-

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

N O T E S T O A N D F O R M I N G P A R T O F T H E A C C O U N T S
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

13. OTHER PAYABLES AND ACCRUALS

Consolidated

Parent Entity

Dec 11

Dec 10

Dec 11

Dec 10

K’000

44,183
30,919
75,102

41,826
28,291
70,117

-
565
565

-
-
-

Accruals
Other payables

14. PROVISIONS FOR OTHER LIABILITIES AND CHARGES

At 31 December 2010
Charged to profit & loss
Utilised during year

Short-term provisions at 31 December 2011
Long-term provisions at 31 December 2011

Employee

Dry Dock

Other

2011
Total

2010

K’000

16,773
7,948
(8,973)
15,748
7,191
8,557
15,748

11,233
12,411
(9,055)
14,589
14,589
-
14,589

474
62
(250)
286
286
-
286

28,480
20,421
(18,278)
30,623
22,066
8,557
30,623

25,528
11,719
(8,767)
28,480
20,538
7,942
28,480

A brief description of employee and dry dock provisions is disclosed in note 1h.

Other provisions comprise benefits under the home ownership scheme, and provisions for cargo claims.

15. BORROWINGS

Current:
Bank overdrafts (secured)
Other loans (unsecured)

Non-current:
Bank loans (secured)
Total Borrowings

Consolidated

Parent Entity

Dec 11

Dec 10

Dec 11

Dec 10

K’000

48,697
18,460
67,157

50,625
6,522
57,147

330,391
397,548

326,389
383,536

-
-
-

-
-

-
-
-

-
-

Mortgages over certain of the Group's properties and a registered equitable mortgage over the remainder of the
Group's assets, undertakings and uncalled capital are held by the Group's bankers as security for the bank overdrafts
and secured loans.

Interest is paid on all loans at fixed commercial rates at a discount to ILR. The effective interest rate on bank facilities
at the balance sheet date was 7.5% (2010: 7.75%). Bank overdrafts are interest-only with no agreed repayment
schedule. Bank loans are secured loans with a one to five year term.

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

N O T E S T O A N D F O R M I N G P A R T O F T H E A C C O U N T S
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

16. CAPITAL EXPENDITURE COMMITMENTS

Contracts outstanding for capital expenditure:

- less than 12 months
- 1-5 years

Consolidated

Parent Entity

Dec 11

Dec 10

Dec 11

Dec 10

K’000

132,120
5,376
137,496

127,436
29,283
156,719

-
-
-

17. RECONCILIATION OF PROFIT AFTER INCOME TAX

TO NET CASH INFLOW FROM OPERATING ACTIVITIES

Profit for the year

Depreciation and amortisation

Dividend and Interest income

Net gain on sale of non-current asset

Gain on sale of land & acquisition of subsidary

Fair value adjustment on financial assets

180,099

77,967

(5,401)

(12,432)

7,476

138,315

66,669

(5,689)

8,066

Share of profit after tax of associates

(13,859)

(11,416)

Change in operating assets and liabilities, net of
effects from purchase of controlled entity

(Increase)/Decrease in trade debtors

(Increase)/Decrease in inventory

(Increase)/Decrease in deferred tax asset

Decrease/(Increase) in other operating assets

Increase in trade creditors

Increase in other operating liabilities

Increase in provision for income tax payable

Increase/(Decrease) in deferred tax liability

(18,821)

4,139

9,309

5,120

1,550

6,899

2,799

7,664

(39,026)

(20,211)

(1,484)

(25,998)

22,541

9,558

18,738

(323)

46,583

4,095

(23,094)

(24,284)

44,395

4,247

(44,287)

(6,507)

1,211

(93)

(235)

(273)

3,648

6,338

105

Net cash inflow from operating activities

252,509

159,740

8,171

3,747

18. RETIREMENT BENEFIT PLANS

The total cost of retirement benefits of the Group in 2011, was K8,694,000 (2010: K7,384,000). The Group participates
in the National Superannuation Fund of Papua New Guinea, a multi-employer defined contribution fund, on behalf
of all citizen employees with minimum employer and employee contribution rates established by legislation. The
Group also contributes to a defined contribution superannuation plan on behalf of senior management. The defined
contribution superannuation plan was established in 2002.

The parent entity does not employ staff directly; consequently there was no charge during the year.

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

N O T E S T O A N D F O R M I N G P A R T O F T H E A C C O U N T S
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

19. CONTINGENT ASSETS AND LIABILITIES

Contingent Liabilities

There were contingent liabilities at the Balance Sheet date as follows:

(a) The parent company has given a secured guarantee in respect of the bank overdrafts of certain subsidiaries.

(b The parent company has given letters of continuing financial support in respect of certain subsidiaries, associates

and joint ventures.

No losses are anticipated in respect of these guarantees.

20. SUBSIDIARY COMPANIES

The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in Note 1(c):

Name of Entity

Country of
Incorporation

Class of
Shares

Equity

Holdings* Holdings*

2011

2010

Consort Express Lines Limited

Datec (PNG) Limited

Kavieng Port Services Limited

Papua New Guinea

Kiunga Stevedoring Company Limited

Papua New Guinea

Lae Port Services Limited

Laga Industries Services Limited

Madang Port Services Limited

Middle Fly Shipping Limited **

New Britain Shipping Limited **

Oro Agencies Limited

Pacific Rumana Limited ***

Papua New Guinea

Pacific Rumana Mobile Investments Limited

Papua New Guinea

PNG Link Limited

Port Services PNG Limited

Progressive Traders Limited

Steamships Limited

Tanubada Food Processors Limited

Windward Apartments Limited

Papua New Guinea

Ordinary

100

24.5

100

*The portion of ownership is equal to the proportion of voting power held.

** In light of the amendment of IFRS 10, the Group has re-assessed that they now control these subsidiaries.

*** Consistent from prior year, the group has accessed that they control this subsidiary because of various

agreements.

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

N O T E S T O A N D F O R M I N G P A R T O F T H E A C C O U N T S
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

21. BUSINESS COMBINATIONS

2011

(a) Summary of acquisitions

On 1st January 2011, the Group concluded a share purchase transaction that saw the Company attain 100% control
of the share capital of Kiunga Stevedoring Company Limited (previously 24.5%). The total purchase price of
K1,200,000 was settled in cash on acquisition. Total gain from the share purchase transaction was K290,000.

Kiunga Stevedoring Company Limited contributed revenues of K6,343,625 and net profit before tax of K3,592,021 to
the Group for the year.

The fair value of the assets and liabilities acquired are based on the carrying values at the time of acquisition.

There were no business combinations in 2010.

22. SUBSEQUENT EVENTS

On 23 February 2012 the Directors declared a final dividend of 140 toea per share to be payable immediately after
the Annual General Meeting on 15 May 2012. The gross dividend of K43.4M has been recognised as a separate
component of equity at 31 December 2011.

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

I N D E P E N D E N T A U D I T O R ’ S R E P O R T T O T H E
S H A R E H O L D E R S O F

S T E A M S H I P S T R A D I N G C O M P A N Y L I M I T E D

Report on the financial statements

We have audited the accompanying financial statements of Steamships Trading Company Limited (the Company), which
comprise the statements of financial position as at 31 December 2011, the statements of comprehensive income,
statement of changes in equity and statements of cash flows for the year ended on that date, a summary of significant
accounting policies, and other explanatory notes for both Steamships Trading Company Limited and the Steamships
Group (the consolidated entity). The consolidated entity comprises the Company and the entities it controlled at the year
end or from time to time during the financial year.

Directors’ responsibility for the financial statements

The Directors of the Company are responsible for the preparation and fair presentation of the financial statements in
accordance with Generally Accepted Accounting Practice in Papua New Guinea and the Companies Act 1997 and for such
internal controls as the Directors determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in
accordance with International Standards on Auditing. These auditing standards require that we comply with relevant
ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance
whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial statements.

Our procedures include reading the other information in the Annual Report to determine whether it contains any material
inconsistencies with the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

I N D E P E N D E N T A U D I T O R ’ S R E P O R T T O T H E
S H A R E H O L D E R S O F

S T E A M S H I P S T R A D I N G C O M P A N Y L I M I T E D

Auditor’s opinion

In our opinion the financial statements of Steamships Trading Company Limited are in accordance with the Companies
Act 1997, including giving a true and fair view of the Company’s and consolidated entity’s financial position as at 31
December 2011 and of their performance for the year ended on that date; and complying with International Financial
Reporting Standards and other generally accepted accounting practice in Papua New Guinea.

Report on other legal and regulatory requirements

The Companies Act 1997 requires that in carrying out our audit we consider and report to you on the following matters.
We confirm that:

in our opinion proper accounting records have been kept by the Company, so far as appears from our examination
of those records;

2. we have obtained all the information and explanations we have required; and

in conducting our audit we followed applicable independence requirements of Certified Practising Accountants
Papua New Guinea.

Other matters

This report, including the opinion, has been prepared for and only for the Company’s shareholders as a body in accordance
with the Companies Act 1997 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility
for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.

PricewaterhouseCoopers

By: Brett Entwistle
Partner
Registered under the Accountants Act 1996

Port Moresby
30 March 2012

Grant Burns
Engagement Leader

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

D I R E C T O R S ' R E P O R T
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

Steamships Trading Company Limited and Subsidiary Companies

The Directors submit their Annual Report for the year ended 31 December 2011 for the Company and its subsidiaries.

Principal Activities and Review of Operations

Full details of the Group's activities are given in the Directors' Review on page 13. The Group continues to operate in the
segments of Commercial, Hotels and Property and Logistics.

The Directors believe that there will be no significant changes in the Group's activities for the foreseeable future.

Changes in Accounting Policies

Due to the change in the definition of control per IFRS 10 which has been early adopted by the Company, the Group has
consolidated its previously held investment in associates (New Britain Shipping Limited and Middle Fly Shipping Limited)
during the year. Such change has been accounted for retrospectively.

Result

The Group operating profit for the year attributable to shareholders was K158,261,000 (2010: K116,445,000).

Dividend

The Directors advise that a final dividend of 140 toea per share will be paid immediately after the Annual General Meeting
on 15th May 2012. The exchange rate Kina to Australian Dollar applying on 1st May 2012 will be used to calculate the
dividends to shareholders resident outside Papua New Guinea.

Rounding Off

Amounts in the Directors' Report and accounts have been rounded off to the nearest thousand Kina.

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

D I R E C T O R S ' R E P O R T
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

Interests Register

Directors have disclosed the following interests in shares in the Company and provided general disclosure of companies
in which the Director is to be regarded as interested as set out below:

Particulars of Directors

Relevant Interests

Beneficial
Shares Held

W.L. Rothery
Member of the Remuneration Committee
Member of the Strategic Planning Committee
Director since 1997
Chairman since 2006

D.H. Cox OL
Member of the Remuneration Committee
Managing Director 2004
Director since 2003

E. H. Ruha
Finance Director &
Company Secretary since 2008

G. Aopi, CBE
Director since 1997

Executive and Director, John Swire & Sons Pty Ltd
and group companies, Director, John Swire & Sons
(PNG) Ltd and group companies.

Director: Bemobile Ltd, Capital Way PNG Ltd
and GEMS PNG Ltd.

Director, John Swire & Sons (PNG) Ltd and group
companies

Oil Search Ltd; Bank of South Pacific; BSP Capital Ltd;
Marsh Ltd, PomSoX Ltd, CDI Foundation
and various other private companies.

T.J. Blackburn
Director appointed August 2011

Director: The China Navigation Company Ltd:
and various other companies in the Swire Group

Sir Michael Bromley, KBE
Member of the Audit and Risk Committee
Member of the Remuneration Committee
Member of the Strategic Planning Committee
Director, 1986 to 1996
Director since 2000

Chairman Heli Niugini Ltd; Chairman New Guinea
Energy Ltd; Director, Chemica Ltd; Maps Tuna Ltd;
Sonway Ltd and various other private companies.

Nil

G.J. Dunlop
Member of the Audit and Risk Committee
Member of the Strategic Planning Committee
Managing Director 2000 to 2003
Director since 1995

Director, John Swire & Sons (PNG) Ltd and group companies. Nil
Director John Swire & Sons Pty Ltd; City Pharmacy Group
Ltd; Hardware Haus Pty Ltd; Credit Corporation (PNG) Limited;
Mainland Holdings Ltd
Company Secretary 1987 to 2003

J. W. J Hughes- Hallett
Director since 2010

Director: Swire Pacific Ltd, Cathay Pacific Airways Ltd,
HSBC Holdings Ltd

Lady W.T. Kamit, CBE
Chairperson of the Audit and Risk Committee
Director since 2005

Director & Secretary; Bunowen Services Ltd,
Gadens Administration Services Ltd, Senior Partner Gadens
Lawyers, Director; South Pacific Post Ltd, Post Courier
Ltd, Allied Press Ltd, Nautilus Minerals Niugini Limited,
Newcrest Mining Ltd, Kamchild Ltd

Nil

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

D I R E C T O R S ' R E P O R T
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

Remuneration of Directors
Directors' remuneration received or receivable from the Company during the year, is as follows:

W.L. Rothery
D.H. Cox OL*
E. H. Ruha*
G. Aopi, CBE
T.J. Blackburn (appointed 19 August 2011)
Sir Michael Bromley, KBE
G.J. Dunlop
J. W. J Hughes- Hallett
Lady W. T. Kamit, CBE
C.R. Kendall (resigned 25 May 2011)

Remuneration of Employees

2011

K’000

2010

K’000

70
-
-
42
21
90
84
42
82
21

62
-
-
40
-
76
76
-
75
40

The number of employees other than Directors, whose remuneration and other benefits was within the specified bands
are as follows:

Remuneration Dec 11 Dec 10
K’000

No.

100-110
-
110-120
1
120-130
-
130-140
4
140-150
4
150-160
1
160-170
3
3
170-180
180-190 8
190-200
4
200-210 6
210-220 4
-
220-230
2
230-240
6
240-250
3
250-260
5
260-270
4
270-280
1
280-290
1
290-300
1
300-310
2
310-320
-
320-330

4
4
4
5
2
3
4
8
2
3
2
1
1
6
3
2
1
2
2
-
-
1
2

Remuneration Dec 11 Dec 10

K’000

350-360
360-370
370-380
380-390
390-400
400-410
410-420
420-430
430-440
440-450
450-460
460-470
470-480
480-490
490-500
500-510
510-520
520-530
540-550
550-560
560-570
570-580
590-600

No.

1
4
-
1
1
2
1
3
-
1
-
2
2
2
1
-
2
1
2
1
1
1
-

2
-
1
1
1
-
2
2
1
1
2
-
1
1
-
1
1
-
2
1
-
1
1

Remuneration
K’000

Dec 11 Dec 10

No.

600-610
630-640
650-660
670-680
690-700
700-710
710-720
730-740
750-760
780-790
840-850
860-870
880-890
900-910
970-980
980-990
990-1,000
1,000-1,010
1,010-1,020
1,150-1,160
1,180-1,190
1,340-1,350
1,370-1,380

-
1
1
1
-
-
1
-
1
2
1
-
1
1
-
1
-
-
1
1
1
1
-

1
-
-
1
1
1
2
1
-
-
-
1
1
1
1
-
1
1
-
-
-
-
1

In addition, an amount of K4,748,493 (2010: K7,844,465) was paid to SCL Nominees Limited for management services.
Details of auditors' remuneration and donations are shown in Note 3 to the accounts.

For and on behalf of the Board:
Port Moresby
30 March 2012

W. L Rothery
Chairman

D.H. Cox OL
Managing Director

* Managing Director and Finance Director receive no fees for their service as Directors during the year.

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

T A B L E O F C O M P A R I S O N S
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

2011
K’000

2010
K’000

2009
K’000

2008
K’000

2007
K’000

2006
K’000

2005
K’000

2004
K’000

Balance Sheet
Paid up capital
Reserves
Shareholders’ funds
Minority shareholders’ interest

24,200
554,349
578,549
75,365
653,914

938,709
Fixed assets
28,445
Investments
-
Future deferred tax asset
17,183
Goodwill
Current assets
299,634
Total assets of the Group 1,283,971
283,445
Current liabilities
346,612
Non-current liabilities
630,057
Total liabilities of the Group
653,914
Net assets

24,200
428,157
452,357
62,851
515,208

786,510
15,416
9,282
17,183
294,204
1,122,595
273,056
334,331
607,387
515,208

24,200
353,883
378,083
43,854
421,937

664,196
17,939
7,305
17,183
203,480
910,103
236,847
251,319
488,166
421,937

24,200
302,595
326,795
18,336
345,131

353,261
33,337
4,150
7,578
154,508
552,834
122,562
85,141
207,703
345,131

24,200
254,230
278,430
13,684
292,114

263,276
22,225
5,358
3,568
137,623
432,050
134,941
4,995
139,936
292,114

24,200
218,833
243,033
11,094
254,127

227,773
16,839
12,944
3,568
98,006
359,130
98,517
6,486
105,003
254,127

24,200
196,161
220,361
10,056
230,417

193,639
10,572
24,207
3,068
98,588
330,074
90,867
8,790
99,657
230,417

24,200
162,157
186,357
6,431
192,788

173,858
11,181
9,885
-
95,308
290,232
90,786
6,658
97,444
192,788

934,717

Income statement
Revenue
Operating profit before
income tax and abnormals 233,967
13,859
Share of associates’ profit
(67,727)
Income tax expense
Minority interests
(21,838)
Net profitable attributable
to shareholders
Prior year adjustment
Depreciation transfer
Dividends paid or provided
Earnings retained this year

158,261
(1,061)
-
(58,916)
98,284

800,333

499,415

465,750

406,757

336,302

370,037

328,880

180,834
11,416
(53,935)
(21,870)

116,445
-
-
(31,008)
85,437

120,602
16,732
(34,637)
(6,137)

96,560
-
-
(45,272)
51,288

111,615
11,758
(27,729)
(5,418)

90,226
-
159
(45,272)
45,113

91,208
10,756
(23,596)
(4,211)

74,157
-
1,467
(38,760)
36,864

53,502
10,937
(14,179)
(2,781)

47,479
-
1,467
(31,008)
17,938

45,434
9,398
(12,598)
(2,026)

40,208
-
1,467
(20,157)
21,518

13,590
7,925
(3,776)
(3,036)

14,703
-
1,467
(5,583)
10,587

Ratios
Current assets to current
liabilities
Borrowings to shareholders’
funds (%)
Net tangible asset backing
per share (toea)
Net profit to revenue %
Net profit to shareholders’
funds %
Net profit per share (toea)
Dividends paid (toea)
Earnings Per Shares
Earnings retained in relation
to total earnings %

1.06

1.08

0.86

1.26

1.02

0.99

1.09

1.05

65.52

83.34

73.32

34.17

13.28

10.13

12.97

15.39

20.53
16.93

27.35
510.39
190
510t

16.06
14.55

25.74
375.53
100
376t

13.05
19.33

25.54
311.40
146
311t

11.13
19.37

27.61
290.98
146
291t

9.42
18.23

26.63
239.15
125
239t

8.20
14.12

19.54
153.12
100
153t

7.43
10.87

18.25
129.67
65
130t

6.22
4.47

7.89
47.42
18
47t

62.10

73.37

53.11

53.78

49.71

37.78

53.52

72.01

2009 and prior years have not been retrospectively adjusted for the change in accounting policy which resulted in the
consolidation of New Britain Shipping Limited and Middle Fly Shipping Limited.

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

S T O C K E X C H A N G E I N F O R M A T I O N
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

Shares are listed on the Australian Stock Exchange and the Port Moresby Stock Exchange.

All shares carry equal voting rights.

SHAREHOLDINGS

At 16 February 2012, there were 374 shareholders.

264

Holding 1

Holding 1,001

Holding 5,001

Holding 10,001

1,000 units

5,000 units

10,000 units

and over

6 shareholders held less than a marketable parcel.

The 20 largest shareholders were:

John Swire & Sons (PNG) Limited

Bell Potter Nominees Ltd

National Superannuation Fund Ltd

John E Gill Operations Pty Ltd

Kelvinside Pty Ltd

Malcolm Burns Reid

Mr Ramesh Mahtani

Hylec Investments Pty Ltd

Intercontinental Assets Pty Ltd

Capital Nominees Limited

Engoordina Pty Ltd

Derrick Charles Whitaker

Jennifer May Forbes

Miss Shirin Moayyad

Custodial Services Limited

Mary Patricia Haughton

Mrs Judith Scottholland

Bryce Family Super Fund

Mr David Mitchell Odlin

Makana Holdings Pty Ltd

22,362,651

6,199,399

1,859,446

54,727

25,000

22,405

21,700

20,494

15,000

12,767

11,078

10,348

10,000

8,178

8,161

8,143

7,934

7,850

72.12

19.99

6.00

0.18

0.08

0.07

0.05

0.04

0.03

0.02

30,683,442

98.95

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

S T O C K E X C H A N G E I N F O R M A T I O N
S t e a m s h i p s T r a d i n g C o m p a n y L i m i t e d a n d S u b s i d i a r y C o m p a n i e s

APPLICABLE LEGISLATION

The Company is incorporated in Papua New Guinea and is not generally subject to Australian Corporations Law including,
in particular, Chapter 6 of the Australian Corporations Law dealing with the acquisition of shares (including substantial
shareholdings and take-overs). The Company is subject to the requirements of the Papua New Guinea Companies Act
1997, Securities Act 1997 and the Takeovers Code. The Companies Act and the Securities Act regulate the issue and buy-
back of shares and contain provisions as to the trading in securities, provisions as to financial benefits to related parties,
substantial shareholders provisions, remedies in cases of oppression or injustice and actions by, and access to, records by
shareholders.

The Takeovers Code regulates offers where a person already holds more than 20% of the voting rights in a company or
where a person becomes the holder of more than 20% of the voting rights in a manner permitted by the Code.

A code offer, which can either be a full offer or a partial offer, must be extended to all holders of voting securities in the
Company. The Code also contains compulsory purchase and sale provisions if more than 90% of the shares are acquired
under an offer.

S T E A M S H I P S I A N N U A L R E P O R T 2 0 1 1

C O M P A N Y D I R E C T O R Y

Chairman
W. L. Rothery §&
Chairman

Executive Directors
D. H. Cox, OL §
Managing Director

E. H. Ruha
Finance Director

Non-Executive Directors
G. Aopi, CBE
T.J. Blackburn
Sir Michael Bromley, KBE §+&
G. J. Dunlop +&
J. W. J. Hughes-Hallett
Lady W. T. Kamit, CBE +

+ Member of the Audit and Risk Committee
§ Member of the Remuneration Committee
& Member of the Strategic Planning Committee

Secretary
E. H. Ruha

Registered Office
Champion Parade
P.O. Box 1
Port Moresby
Papua New Guinea

Auditors
PricewaterhouseCoopers
P.O. Box 484
Port Moresby
Papua New Guinea

Share Registrars
Corporate Registry Services Pty Limited
Level 3
60 Carrington Street
Sydney, NSW 2000
Telephone (within Australia) 1300 855 080
Telephone from overseas +61 3 9615 5970
Fax +61 3 9611 5710

Stock Exchange
Shares are listed on both the Port Moresby Stock
Exchange Limited and the Australian Stock Exchange
Limited.

A. R. B. N.
055 836 952

Telephone: +675 322 0222

~ Pioneering Sustainable Progress ~

S T E A M S H I P S

I A N N U A L R E P O R T 2 0 1 1

L815 - ACA Steamships AR 2011 Covers 25/4/12 10:16 AM Page 2

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PIONEERING SUSTAINABLE PROGRESS

That tradition continues today.

Committed to our people, the sustainability of our operations, and the future of Papua New Guinea,
Steamships Trading Company is pioneering sustainable progress in PNG into the twenty-first century.

WEWAK

MADANG

MT HAGEN

GOROKA

KIUNGA

KAVIENG

RABAUL

BUKA

KIMBE

KIETA

LAE

POPONDETTA

ORO BAY

PORT MORESBY

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L815 - ACA Steamships AR 2011 Covers 25/4/12 10:16 AM Page 1

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A n n u a l R e p o r t 2 0 1 1