Financial statements

Independent auditors’ report

To Members of Hafnia Limited

Report on the audit of the financial statements

 

Opinion

We have audited the financial statements of Hafnia Limited (the “Company”) and its subsidiaries (the “Group”). The financial statements comprise:

  • The balance sheet of the Company as at 31 December 2021, the statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes to the financial statements, comprising significant accounting policies and other explanatory information; and
  • The consolidated balance sheet of the Group as at 31 December 2021, the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes to the consolidated financial statements comprising significant accounting policies and other explanatory information.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company and the Group as at 31 December 2021, and their financial performance, changes in equity and cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS).

 

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We are independent of the Company and the Group in accordance with the International Ethics Standards Board for Accountants, The International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), the Singapore Accounting and Corporate Regulatory Authority Code of Professional Conduct and Ethics for Public Accountants and Accounting Entities (ACRA Code), together with the ethical requirements that are relevant to our audit of the financial statements in Singapore, and we have fulfilled our other ethical responsibilities in accordance with these requirements, the IESBA Code and the ACRA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key Audit Matter

Impairment assessment of vessels and right-of-use assets (ROU assets)

Refer to Notes 1.2, 2.3(b) and 8 of the consolidated financial statements.

As at 31 December 2021, the carrying value of the Group’s vessels – owned and chartered-in (ROU assets), including dry docking, amounted to USD 2,084.5 million.

The Group has identified the relevant cash-generating units (“CGU”) for its fleet of vessels according to size, and mode of deployment in the generation of revenues; and performed its vessel impairment test according to its stated policy in Note 2.10. Vessels deployed in the three commercial pools – LR, MR and Handy constitute the Group’s most significant CGUs. Other CGUs refer to individual vessels on time-charter contracts.

As described in Note 8(a), management has concluded presence of impairment indicators in the tankers market.

The recoverable amounts of vessels by CGUs were assessed by management based on higher of fair value less costs of disposal and value in use. Key assumptions supporting the value in use calculation involve forecast freight rates, forecast operating costs and discount rate(s).

We identified impairment of the vessels’ CGUs as a key audit matter because of its significance to the consolidated financial statements and the inherent uncertainties involved in forecast cash flows.

How the matter was addressed in our audit

We have performed the following audit procedures:

  • We assessed the design and implementation of the Group’s key internal controls over the assessment of recoverable amounts of vessels’ CGUs;
  • We assessed the Group’s process for identifying the relevant CGUs for its vessels for impairment testing;
  • We challenged management’s assessment of indicators of impairment by reference to economic and financial performance of the Group and our outlook of the tanker market;
  • We evaluated the independence, competence and objectivity of the independent brokers engaged by the Group to appraise the market valuation of the vessels. We also benchmarked the valuations obtained with recent sale transactions of similar types of vessels;
  • We assessed the Group’s assumptions applied in arriving at the value in use for each vessel CGU;
  • We benchmarked the key assumptions – forecast freight rates and discount rate(s) with historical and market data and external analysts’ reports;
  • We involved our corporate finance specialists to evaluate the discount rate(s) applied;
  • We assessed the sensitivity of the outcome of recoverable amounts of vessels CGUs to changes in key assumptions, principally the forecast freight rates and discount rate(s) and considered whether there were indicators of management bias.

We found the recoverable amounts of the vessels CGUs using the value-in-use calculations, determined by management to be aligned with general market expectations.

Other Information

Management is responsible for the other information. Other information is defined as all information in the annual report, other than the financial statements and our auditors’ report thereon.

We have obtained all other information prior to the date of this auditors’ report.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

 

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s and the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s and the Group’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

  • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
  • Obtain an understanding of internal controls relevant to the audit 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 Company’s or the Group’s internal controls.
  • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
  • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s or the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company or the Group to cease to continue as a going concern.
  • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
  • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal controls that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

 

Report on Other Legal and Regulatory Requirements

Report on compliance with Regulation on European Single Electronic Format (ESEF)

Assurance Conclusion

We were engaged by the Board of Directors of Hafnia Limited to report on the “5493001KCFT0SCGJ2647-2021-12-31-en” (the “ESEF file”) in the form of an independent reasonable assurance conclusion about whether the ESEF file has been prepared in accordance with Section 5-5 of the Norwegian Securities Trading Act (Verdipapirhandelloven) and the accompanying Regulation on European Single Electronic Format (ESEF).

Our conclusion has been formed on the basis of, and is subject to, the matters outlined in this report. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion. Based on the procedures performed described in this report and evidence obtained, in our opinion, the ESEF file have been prepared, in all material respects, in accordance with the requirements of ESEF.

Management’s Responsibilities

Management is responsible for preparing, tagging and publishing the Group’s consolidated financial statements in the single electronic reporting format required in ESEF, that is free from material misstatement.

This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and presentation of the ESEF file that is free from material misstatement whether due to fraud or error and those internal controls relevant to the processes over the preparation, tagging and publication of the ESEF file. It also includes ensuring that the Group complies with the requirements of ESEF, selecting and applying appropriate policies and procedures in relation to the financial information; making judgements and estimates that are reasonable in the circumstances; and maintaining adequate records in relation to the ESEF file.

Our Responsibilities

Our responsibility is examine the ESEF file prepared by Management and to report thereon in the form of an independent reasonable assurance conclusion based on the evidence obtained. We conducted our work in accordance with the International Standard on Assurance Engagements (ISAE) 3000 – “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information”. The standard requires us to plan and perform procedures to obtain reasonable assurance about whether the Group’s consolidated financial statements have been prepared in accordance with the ESEF, in all material respects.

The firm applies International Standard on Quality Control 1 and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

We have complied with the independence and other ethical requirements of the IESBA Code and the ACRA Code, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

The procedures selected depend on our judgment. As part of our work, we performed procedures to obtain an understanding of the Group’s processes for preparing its consolidated financial statements in the ESEF. We evaluated the completeness and accuracy of the iXBRL tagging and assessed Management’s use of judgement. Our work comprised reconciliation of the consolidated financial statements tagged under the ESEF with the audited consolidated financial statements in human-readable format.

 

KPMG LLP

Public Accountants and
Chartered Accountants

Singapore

30 March 2022

Consolidated statements

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