First quarter report 2014

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| Source: TORM A/S
multilang-release

 

“The first quarter is usually a strong period for product tankers, but this year freight rate improvements were partly offset by limited arbitrage trades and continued low European demand,” says CEO Jacob Meldgaard, and adds: “TORM incurred a non-cash impairment charge of USD 195m and now has negative equity. I am pleased that TORM’s operational platform continues to deliver competitive results, which is the foundation for a recapitalization of the Company”.
In the first quarter of 2014, TORM realized a positive EBITDA of USD 21m and a loss before tax of USD 222m including an impairment charge of USD 195m.
 
  • EBITDA for the first quarter of 2014 was a gain of USD 21m (Q1 2013: USD 36m). Following an agreement to sell 13 vessels and updated freight rate forecasts, TORM made a non-cash impairment charge of USD 195m in the first quarter of 2014 (USD 0m). The result before tax for the first quarter of 2014 was a loss of USD 222m (USD -16m). Cash flow from operating activities after full interest payments was positive with USD 10m in the first quarter of 2014 (USD 11m).
     
  • The first quarter of the year is usually a strong period for product tankers, but the improvements in freight rates were partly offset by low European demand and limited arbitrage trades. TORM’s largest segment, MRs, achieved spot rates of USD/day 15,207 in the first quarter of 2014, which is down 14% year-on-year. The Tanker Division reported an EBITDA of USD 20m in the first quarter of 2014 (USD 46m).
     
  • The freight rates for the relevant bulk segments were volatile, but with a downward trend throughout the first quarter of 2014. TORM’s largest segment, Panamax, achieved freight rates of USD/day 12,147, which is up 98% compared to the first quarter of 2013. The Bulk Division reported an EBITDA in the first quarter of 2014 of USD 0m (USD -11m).
     
  • The Restructuring Agreement included certain option rights, which in the first quarter of 2014 triggered TORM to sell 13 product tankers to entities controlled by Oaktree (cf. announcement no. 4 dated 7 March 2014). According to the agreement, Oaktree will place the 13 vessels under TORM’s commercial management and utilize TORM’s integrated operating platform for technical management. Upon completion of the transaction in the second quarter of 2014, the associated vessel financing will be fully repaid, thereby reducing the Company’s debt by USD 223m. The vessels are treated as assets held for sale as of 31 March 2014.
     
  • The book value of the fleet excl. assets held for sale was USD 1,258m as of 31 March 2014. Based on broker valuations, TORM’s fleet excl. assets held for sale had a market value of USD 943m as of 31 March 2014. In accordance with IFRS, TORM estimates the product tanker fleet’s total long-term earning potential each quarter based on discounted future cash flow. Following the impairment in the first quarter of 2014, the estimated value of the fleet as of 31 March 2014 supports the carrying amount.
     
  • Net interest-bearing debt amounted to USD 1,662m as at 31 March 2014, compared to USD 1,718m as at 31 December 2013. The decrease in the first quarter of 2014 is primarily a result of repayment of debt in connection with the delivery of vessels held for sale.
     
  • As of 31 March 2014, TORM’s available liquidity was USD 106m consisting of USD 18m in cash and USD 88m in undrawn credit facilities. There are no newbuildings on order or CAPEX commitments related hereto.
     
  • Following the impairment charge of USD 195m and the operational results in the first quarter of 2014, the equity is negative with USD 103m as at 31 March 2014.
     
  • By 31 March 2014, TORM had covered 12% of the remaining tanker earning days in 2014 at USD/day 15,337. 60% of the remaining bulk earning days in 2014 were covered at USD/day 11,466.
     
  • For the full year 2014, TORM adjusts the forecasts for a positive EBITDA of USD 70-100m and a loss before tax of USD 260-290m. As at 31 March 2014, 12,594 earning days for 2014 were unfixed, meaning that a change in freight rates of USD/day 1,000 will impact the forecasts by USD 13m. The forecasts are before any potential further vessel sales or impairment charges.
     
  • TORM expects to be operational cash flow positive after full interest payments. By 31 March 2014, TORM was in compliance with its financial covenants. With the current forecasts on freight rates, TORM expects to be unable to comply with the covenant on minimum interest cover when tested as at 30 June 2014, however, TORM has already approached the lenders and expects to obtain a covenant waiver in advance of the test. TORM is in constructive dialogue with long-standing and new lenders regarding a long-term capital structure and expects them to remain supportive.
Conference call   Contact TORM A/S
TORM will be hosting a conference call for financial analysts and investors at 3 pm CEST today. Please dial in 10 minutes before the conference is due to start on +45 3271 4607 (from Europe) or +1 877 491 0064 (from the USA). The presentation can be downloaded from www.torm.com.   Tuborg Havnevej 18, DK-2900 Hellerup, Denmark
Tel.: +45 3917 9200 / Fax: +45 3917 9393, www.torm.com
DK-VAT: 22460218
Jacob Meldgaard, CEO, tel.: +45 3917 9200
Mads Peter Zacho, CFO, tel.: +45 3917 9200
Christian Søgaard-Christensen, IR, tel.: +45 3076 1288