Ladies and gentlemen, thank you for standing by. I'm Hailey, your Chorus Call operator. Welcome, and thank you for joining the Wallenius Wilhelmsen second quarter results 2021. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question- and- answer session. If you would like to ask a question, you may press star followed by one on your touchtone telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Torbjørn Wist. Please go ahead.
Good morning, and welcome to all. This is Torbjørn Wist. I'm the CFO as well as acting CEO of the company. Trust that everyone had some well-deserved time off for rest and relaxation over the summer holiday, and I'm happy to be here to share our second quarter results. If we start with one of the highlights for the quarter, what is clear is that underlying results are back to pre-pandemic levels in all three segments. Shipping saw strong volumes and enhanced profitability from improved cargo and trade mix, just to mention a couple of key drivers. High & heavy volumes are the highest we've experienced since the third quarter of 2012, which was during the last commodity super cycle. This, of course, benefited both Shipping as well as the Logistics segment. The adjusted EBITDA was $205 million, up 56% quarter-on-quarter, and near the 2019 quarterly average.
As you will have noted, we've also taken the provision. The group has been part of the unfortunate antitrust process since 2012. I'm pleased to report that during the first half of 2021, proceedings with the final outstanding jurisdictions were resolved. The timeline for the resolution of the civil claims is a bit more uncertain, and in Q2, an updated assessment of these claims was made, following which an additional provision of $35 million was recognized as in OpEx. At present, we see no reason to anticipate any further adjustment to the provisions. This has been a difficult and costly case, and we very much look forward to the day when we can see this matter in the rearview mirror. Turning to our liquidity position, that is at $950 million and remains imminently comfortable. Moving on to the agenda for today.
We have, as usual, a lot going on that we want to share with you. We follow the usual structure, which will be at least familiar to our regular audience, including the review of our business performance, a market update, and a review of our financial performance. We will have a Q&A session at the end of the presentation, managed by a conference call host, and here we will also be joined by Anette Orsten, our Head of Treasury and IR. If you have any questions, please dial into the conference call numbers, where you will be able to ask the questions live.
Now, before we delve into the business highlights, I would like to mention that we're fortunate to be joined here today by the leaders of our two largest segments, Mike Hynekamp, COO of our Logistics segment based in New Jersey, U.S.A., and Erik Nøklebye, COO of our Shipping segment based in Seoul, Korea. They will together review the key business and market developments during the quarter. With that, I'll now hand over to Mike, who is joining us in the very early hours of the morning his time, for an update on the Logistics Services operation. Mike, please.
Good morning, everyone. Thank you, Torbjørn. I would like to take a step back briefly and reintroduce the core Logistics Services offering before updating on the Q2 logistics operations for everyone. Wallenius Wilhelmsen has a long legacy as a ship owner and ship operator, as everyone knows. For over one and a half decades, we have been heavily investing in growing globally in landbased Logistics Services. The Logistics segment itself, and its activities today are involved in the major share of our volumes in unit terms. We employ approximately 6,500 team members and serve essentially a similar customer base to that which we've developed in our Shipping business. Our landbased network has a global footprint, however, with its largest concentration today in North America.
We at Wallenius Wilhelmsen, we view logistics and Logistics Services as an extension of our value chain, and it's a key part of our evolution in differentiating Wallenius Wilhelmsen as an integrated finished goods logistics provider. Within the segment, there are many new and future innovations that will drive effectiveness, efficiency, and sustainability across the supply chain that Wallenius Wilhelmsen continues to capitalize on. As mentioned, the Logistics segment itself serves the customers of auto and light vehicles, high and heavy rolling equipment, and the break bulk industry across essentially three main service categories. Number one, technical services through vehicle and equipment processing centers. Number two, terminals at our ports. Number three, inland distribution and supply chain management.
Now, delving into the vehicle and equipment processing centers, these often act as an extension to our customers' operations and are a crucial link in the light vehicle and high & heavy supply chains that they serve. The centers are strategically placed around the world, on and off port, as well as embedded in OEM plants to ensure seamless, high-quality delivery to the eventual end consumer of these customers. Whether it's just basic quality checks or pre-delivery inspections or extensive customization work, we provide our customers with a cost-effective and efficient process, resulting in units reaching their final destination timely, and in perfect condition. Switching over to terminal services, I think everyone knows that terminal services is an integral part of the finished vehicle supply chain, as it's a bit of a middleware that connects Shipping Services, processing, and inland distribution.
With nine strategically positioned terminals in some of the largest RoRo ports in the world, we are able to offer cargo processing, handling, storage, cleaning and fumigation, as well as a host of customized services for the customers we serve, and finally, inland distribution and supply chain management services. These provide seamless transportation of vehicles and heavy equipment by sea, road, or rail, to the final point of sale in the most effective and efficient way possible. Our global network combines our digital capabilities with our own assets as well as those of trusted suppliers and partners to offer optimization as well as visibility services for the cargo that we're handling on their behalf. That's a bit of an update as to where we are as far as the portfolio that we represent today, and a small reminder.
I'm going to turn attention over to the actual developments in the quarter. While logistics and the segment of Logistics revenue was back to pre-pandemic levels as early as Q4 2020, and has been stable ever since, the segment itself did see a mixed development during Q2. Not surprisingly, auto volumes and logistics were negatively impacted as the semiconductor chip shortage continued to disrupt production globally. This especially hit our vehicle processing centers in Solutions Americas, and EMEA, and APAC, with also some small impact inside of our terminals.
Switching over to terminals, the business benefited from higher overall volumes from the Shipping segment, but with significant increases in break bulk volumes on some spillover effect from the lack of capacity in the container market, as well as increases that we were able to serve in value-added services such as washing and storage for the overall increased volumes. There's been seasonality effects in the quarter, for unique activities such as fumigation relating to the infamous brown marmorated stink bug, or BMSB. These sell off as expected quarter-on-quarter as April marked the end of the season itself, thus impacting terminals and EMEA APAC revenues as well. Just as a reference note, the season for BMSB begins again in September. Finally, I just wanted to touch upon high & heavy inland transportation activity, which increased inside of Solutions Americas, with a strong seasonal effect.
It was also heavily helped by the general surge that we saw overall in our group with high & heavy on the back of strong commodity markets and the OEMs that we serve in those. As you see, the segment itself did see mixed development, but the mix, in terms of our portfolio, generally allowed for us to have stable results quarter- on- quarter. With that, I'd like to now hand over to my colleague, Erik Nøklebye, for an update on the Shipping Services area, and the operations there, as well as a general market update. Erik?
Thank you, Mike. Then let me start off with the Shipping segment update. We have seen the volume increase with a healthy 12% quarter-on-quarter, and they are now back at what we consider to be pre-pandemic levels. The high & heavy portion ended at a strong 32.2%, and this is largely due to the larger volume increase for high & heavy versus the auto volumes during the quarter. As was mentioned before, they are now at the highest level we have seen since the third quarter of 2012. When we look at the trading patterns, they remain imbalanced. More than half of the volume increase quarter-on-quarter is driven by the continued strong market exposure for exports from Asia. We see the European volumes are not yet back at the pre-pandemic levels for export.
We saw strong demands in all main export trades from Asia. I can mention in particular, Asia to South America, for both new and used cargo segments. The oceanic trades also experienced a solid development, which we are very happy about, and we are also here closing in on pre-pandemic volume levels. The volume development, however, from Europe to North America and Asia continue to be muted, especially due to the semiconductor shortage for the auto manufacturers in particular. For Shipping business, when it comes to the automotive and high & heavy clients, we largely categorize the contracting with them via one to two-year contract periods. Then of course, we have pre-agreed pricing and fuel adjustment clauses as well.
This means that we do not see the same fluctuations in rates when the supply-demand analysis changes, neither up nor down as experienced by, for example, the container lines. Only a smaller share of our total volume are generated on a spot basis. In Q2, we did see a solid demand for spot volumes for used vehicles in particular, as well as from break- bulk customers. We also had a more active vessel base available to lift that spot volume than in Q1. Of course, not to the extent that we would have liked to. The increase in break- bulk demand is partially driven also by the spillover from the shortage in the container market as well. We have been able to translate some of that into interest into our service, and then also some firm contracts and project shipments.
During the first half, we also renewed contracts, as well as we had some additional new business development. Most of the signed contracts commenced in Q2 and early Q3. We have seen some of the recent signings, they have done with some modest, but positive rate impacts. For the remainder of the year, and in addition to the new business, our contracting activity is focusing on the renewal of contracts that's commencing in 2022. This activity is then not expected to impact rates obviously so significantly for the second half, as we maybe have seen from the first half of this year. If I then move on to talk a little bit about the fleet.
The increase in shipping volumes meant that fleet capacity remained tight in Q2, and it's further exacerbated by trade route imbalances and also obviously operational impacts that we still have from the COVID-19 related restrictions and also virus outbreaks. Thankfully though, the pressure from congestion in global ports and canals has decreased somewhat since the first quarter of the year. The core fleet, which includes short-term TC, stood at 119 vessels at the end of Q2, and that accounts for about 20% of the global car carrier fleet. The core fleet obviously consists of vessels on long-term charter as well as owned. The total number includes vessels also in cold lay-up. The core fleet increased by two vessels in the second quarter as we secured two short-term charter vessels on longer term contracts.
We were also able to increase the fleet capacity measured in active vessel days with 3% compared to Q1, which together with improved efficiency overall, allowed us to lift that higher volume. This was achieved thanks to reactivation of vessels and also increased operational efficiency, despite the decreasing availability in the short-term charter markets. We believe that we will continue to increase the long-term fleet capacity during the second half of the year. We activated five further vessels from cold lay-up, which will only have their first full quarter operation in Q3. Of the three vessels that remained in lay-up at the end of Q2, two have now since been reactivated, and the final vessel will be reactivated in the second half of the year. In Q2, we also decided to cancel the planned earlier recycling for one vessel, which continue in normal service.
This vessel was one of four recycling candidates identified in the first quarter of 2020. The three other vessels were recycled during the last 12 months. Finally, the delivery of the last new building that we have on order, the post-Panamax vessel HERO 04, is scheduled for delivery in late third quarter. I'll move on to the market update. I'll start off with the light vehicle market segment. We saw high sales volume growth of 36% year-over-year, obviously affected by the relatively lower sale during the early stages of the pandemic, with peak lockdowns, et cetera. On a quarter-on-quarter basis, we see sales growing with 1.6%. The year-over-year light vehicle sales growth have some clear positive drivers. Markets are coming back, and it looks strong.
We also see that combined with a low interest rate environment, both are obviously leading to stronger consumer confidence and also purchasing power. We see that all major regions continue to have incentives, where Europe and China focus on lower emission vehicles and U.S. economy is fueled by fiscal stimulus via the $2 trillion package. We also see that there is still a pent-up demand after the lockdown periods. On a slightly more negative side, we do see the tight supply chains, including semiconductor shortage and also low inventories. The high commodity prices might lead to cost pressure for OEMs as well. The steel price, as an example, have increased with four times in some parts of the world during the last 12 months.
We also see lack of workers in manufacturing and also rising labor costs, that's influencing the light vehicle production, and particularly in North America. Light vehicle sales development, it's lower than the growth for the light vehicle deepsea volumes, as we saw deepsea volumes drop more in the second quarter of 2020 than original sales. For the rest of the year, we do expect the recovery to continue as vaccinations rollout continues and OEMs ensure sufficient inventories as well. Just some comments on the regional sales development in those markets. For North America We see good job figures, low interest rates, and fiscal stimuli that contributes to the rising sales. Inventories that, of course, should lack certain models and trims, and OEMs do prioritize the most profitable models as well. We see the record high average retail prices.
Now support their profit as well, which is eventually also good for the whole business. Increased focus, of course, on the lower emission vehicles, including the current administration's binding goal for a 50% increase in EV sales by 2030. In Europe, the light vehicle sales see a positive trend. Nevertheless, it's a bit soft due to continued COVID related lockdowns and slightly less incentives. Most incentives, they do continue, and though, are still related to low emission vehicles supporting the E.U.'s Fit for 55 package that's now coming, and wherein new sold vehicles will have a significantly less emissions. That's the target. For China, there are still solid sales of light vehicles. Here also we see new energy vehicles continue to gain ground there. Overall, pent-up demand and stimulus then fueled sales.
The strong underlying demand has not shown its full potential yet, we believe, in the actual production and sales as the semiconductor shortage continues to interrupt some of the production. We do expect the situation to continue to stabilize into 2022. If we then move on to the high & heavy side. The strong recovery in the high and heavy markets continued in the quarter, with demand rebounding from the trough last year in all three segments. Global machinery trades not only surpassed the same pre-pandemic period in 2019, but volumes in the period were the highest since 2012. We still anticipate strong momentum in the near term, although we acknowledge that the supply side challenges have only intensified in the last quarter. Specifically, on the construction equipment side, we continue to experience unsynchronized building activity around the world.
We also see that the residential building leads the recovery, while the non-residential construction sector still faces a number of uncertainties brought on by the pandemic. For mining and also agriculture, these are sectors that we continue to view the fundamentals strong within. For mining, the metal prices have not been higher in the last 10 years, despite the recent pullback in some other commodities, such as iron ore and copper. While miners are expected to show further capital discipline in the years ahead, we do view additional spending on machinery as inevitable, given the age of some of the machines that are out there. Agriculture, food prices have also not been this high for almost a decade. Farmers are making good money, and that generally bodes well for machinery demand and replacement.
We are keeping an eye on the sentiment around the world that have become more unsynchronized over the course of the quarter, and how this might also lead then to a higher imbalance in overall trading. If I then end the market update with a look at the overall global tonnage and fleet situation. The solid demand recovery has contributed to the tight tonnage situation, obviously, and the situation is mirrored in the global fleet figures where we saw no recycling and only one delivery in Q2. There are still a substantial number of recycling candidates, and the order book is increasing and now stand at 16 vessels, up from 10 last quarter, but it's still at a very low level. This contributes then to an expectation of a continued tight supply and demand balance.
The new orders currently have a lead time of three to four years, up from the average 1.5 to two years. Easing occurrence of supply chain inefficiencies like port congestions, volume spikes, and other COVID activities will eventually add capacity. We now see, for example, that China has introduced tougher measures again in their ports, so this will probably continue for a while in terms of congestions, negatively affecting our capacity. Markets are forecasted to be tight with utilization rate of 89% next year, and that is considered to be a full utilized fleet when it comes to first 90%. Continued media reports on even more activity in the ordering markets. However, these are still not firm and signed orders, and they are not accounted for in numbers that you do see here.
The delivery of these will be a few years out anyway, so likely not to affect the short-term outlook. Okay, this concludes the market update. I would like to hand back to Torbjørn for the financial performance section.
Thank you, Erik. Let me start as usual with some of the key financial highlights. If we start on the left side of the chart, you can see that the total revenue was $978 million, which is up 17% quarter-on-quarter and 62% up year-over-year since Q2 last year was heavily affected by COVID-19. The Shipping Services revenue increased 22% over Q1 on higher volumes. Fuel surcharges has an improved net rate with the net freight rate, which was up from $41.1 to $42.7 per cu m . Since first quarter, revenues were flat in Logistics and up 14% in Government Services.
As mentioned previously, the adjusted EBITDA was $205 million, up 56% quarter-on-quarter. Turning our eyes to the middle section. In Q2, the group posted a net profit of $17 million. The adjusted EBITDA margins increased to 20.9%, and we'll get into some of the key drivers behind the margins on the next slide. The cash remains solid at $566 million, and net debt has decreased somewhat to $3.49 billion. On the right side of the chart, the annualized return on capital employed was 3.8%, up since the first quarter, on the increased EBITDA generation, as well as on a $14 million reversal of impairment related to the vessel reclassified as a tangible asset, which is now taken from asset held for sale as it is no longer intended for early recycling. The equity ratio is up to 34.5% on the back of the net profit.
Net debt to EBITDA improved to 5.5, down from 6.5 in Q1 as the LTM EBITDA carries one less COVID-19 impacted quarter. Moving on to the next page. In Q2, all segments were back to pre-pandemic activity, as well as the adjusted EBITDA. The Shipping segment increased the adjusted EBITDA margin, up from 16% in Q1 to 21.5%. Strong volumes enhanced profitability from improved cargo and trade route mix, combined with increased fuel surcharges, contributed to the significant strengthening in this quarter. It is important to note that while we expect favorable market conditions to continue, there are risks as highlighted in the prospect statement that may lead to volatility in margins going forward. The Logistics segment margin increased in Q2, although it develops flat when adjusting for one-offs relating to the adjusted EBITDA margin is still satisfactory as Logistics recovered activity.
If we move on to the Government Services, the margin increased somewhat in Q2 on higher U.S. flag cargo activity compared to Q1. We will now look further into the Q-on-Q revenue and EBITDA development on the next slide. Adjusted EBITDA was $205 million, and close to the 2019 quarterly average, while reported EBITDA ended at $170 million, which is a 29% improvement quarter-on-quarter, taking into account the $35 million increase in provision. To explain the key drivers behind the improvement in adjusted EBITDA, we will first look at how the group revenue improved 17% to $978 million compared to Q1. Volume effect is the largest contributor as shipping volumes grew 12%. Logistics saw some negative volume effects due to the impact on auto volumes from semiconductor chip shortages. The revenue per cubic meter increased in all segments.
For Shipping, net freight rate per CBM increased on the strong cargo mix, beneficial trade route mix, as well as some rate improvements on contracted and spot volumes. For Logistics, revenue per unit increased on higher level of value-added services and cargo mix in terminals. For Government, the higher activity led to higher revenue per unit. Fuel surcharges earned on the fuel adjustment clauses in Shipping contracts increased by $27 million from first quarter, reflecting the increase in fuel prices over the previous period. Charter income increased $4 million for Shipping i n Q2, reflecting normal vessel swap activities with other liners, and also reduction in fleet capacity. Looking at the $73 million improvement in adjusted EBITDA compared to Q1, the key impacts behind the $140 million revenue increase can mainly be categorized as follows. Cargo voyage costs.
The volume and revenue growth in Shipping was profitable in Q2 as the cargo and voyage costs only increased by $19 million, while revenue increased by a much larger amount. Fuel costs increased by $40 million for Shipping due to the continued increase in fuel prices in the quarter, and a 5% increase in fuel consumption for Shipping due to higher volumes and more active vessel days. Fuel costs for Government increased by $1 million, reflecting price increase. Vessel OpEx increased by $11 million due to the reactivation cost of $3 million, increased crew expenses, and higher costs on normal maintenance repair activity. SG&A improvements include a $5 million gain in Logistics on an adjustment on medical insurance provisions. Turning to our liquidity development.
In the quarter, total liquidity reduced by $17 million to $950 million, where cash decreased by $33 million to $566 million, and unutilized credit facilities are up $50 million to $349 million due to the increased availability on the Logistics RCF following the end of the covenant waiver period agreed during the early pandemic impact in 2020. The key reasons for the reduction in cash is a significant increase in working capital, reflecting the positive underlying business trend. Number two, increased CapEx, mainly related to dry docking of vessels and other maintenance CapEx. Number three, higher net debt repayment than last quarter. When looking into further detail at the cash flow in the quarter, the cash flow from operations at $145 million is explained by adjusted EBITDA of $205 million, offset by a negative change in working capital of some $57 million quarter-on-quarter.
The higher level of working capital can be mainly explained by the increased business activity, which has led to higher inventories and accounts receivables. The investment cash flow of $28 million mainly consists of $29 million in CapEx, which mainly consists of $23 million in Shipping for dry docking and installation of ballast water treatment systems and some Logistics maintenance CapEx, be offset by some interest received. On financing, we had net debt repayment of $150 million. Here we have net effect of $4 million of a positive $4 million effect of a $21 million refinancing of one vessel. We have regular bank debt installments of $65 million, regular lease payments of $47 million, and interest paid of some $41 million, just to mention a few.
All in all, cash flow from operations in Q2 was sufficient to cover financing items and CapEx items, despite the increase in working capital on the back of increased business activity. On the balance sheet, we maintain a solid balance sheet and a comfortable liquidity position at the end of Q2. Total assets are stable at $7.6 billion. Equity is at $2.6 billion, increasing by some $19 million in Q1, mainly thanks to the $17 million net profit and some currency effects. Net debt decreased $14 million to just below $3.5 billion. This slight decrease is mainly because the large net debt reduction has been partially offset by a reduction in the cash position. $21 million in vessel refinancing were concluded in Q2.
The group has cash on hand available to cover the $63 million in maturing debt for the remainder of 2021, $56 million related to the bond maturity in September, and $7 million related to a small balloon on the vessel financing later in the year. Remaining maturities through the year consist of regular installments on leases and bank loans, and it's expected to be covered by cash flow from operation. You will have noticed perhaps that we sent out a press release this morning about potential bond issue, that we're contemplating that. Danske Bank, DNB, Nordea, SEB and Swedbank are mandated as joint lead managers to arrange a series of fixed income investor calls. A NOK-denominated senior unsecured floating rate transaction may follow, subject to market conditions.
If we go through with this issue, the net proceeds will be used for partial refinancing of outstanding bonds and general corporate purposes. Now turning to the prospects. We expect the Shipping supply-demand balance to remain favorable in the midterm. Clearly, for Logistics, volumes will benefit from stabilizing semiconductor chip supplies. Potential risks going forward include fleet capacity constraints, increase in virus intensity with related impact on operations, and of course, further disruption of global supply chains, where continued stabilization of market conditions will provide more financial flexibility and help drive shareholder value in the future. This concludes the presentation, and we will now open up for Q&A via the conference call functionality. Thank you.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you are using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. Final reminder, to ask a question, please press star followed by one. There are currently no questions at this time. I would like to hand back to Torbjørn Wist for closing comments.
Okay. Thank you. If there are no questions here now, I guess we shall just conclude the call and, of course, feel free to reach out if there are any questions after the fact through our IR department. I guess with that, I thank you all for tuning in to our second quarter presentation this morning, and look forward to speaking to you guys in the future. Thank you.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.