November 25, 2015
NORDIC SHIPHOLDING A/S
Company Announcement: 06/2015
Published via NASDAQ OMX on November 25, 2015
Q3 Result 2015
Chairman Knud Pontoppidan in comment:
“The positive momentum for Nordic Shipholding continued into the third quarter. A strong market, lower operating cost and an impairment reversal led to a profit of USD 12.2 million for the first nine months, compared to a loss of USD 4.6 million for the same period in 2014.
This has enabled substantial repayments on the loan facilities, resulting in an improved equity ratio. The improved performance has led to an upward revision in the forecast for the full year.”
Summary
The comparison figures for period ended 30 September 2014 are stated in parenthesis.
This Q3 report covers the period 1 January 2015 to 30 September 2015.
For the 9 months ended 30 September 2015 (‘9M 2015’), the Group generated a profit after tax of USD 12.2 million, which includes a one-off gain of USD 5.8 million from the reversal of impairment loss on the vessels deployed in the Handytankers Pool. Excluding the reversal of prior years’ impairment, the Group generated a profit after tax of USD 6.4 million compared to a loss after tax of USD 4.6 million in the same period last year (‘9M 2014’). The higher average TCE rates from the vessels deployed in Handytankers Pool, higher TCE income earned by the LR1 vessel (Nordic Anne) as well as lower vessel operating expenses contributed to the better performance in the first 3 quarters of 2015.
Despite the higher gross freight revenue generated by the vessels in the Handytankers Pool, the total gross revenue earned in 9M 2015 was marginally lower by 2.5% as the 9M 2015 revenue comprised time-charter income (i.e. net of voyage expenses) from the LR1 vessel (Nordic Anne) whilst the 9M 2014 gross revenue represented freight income from the LR1 vessel.
TCE earnings rose 41.3% to USD 26.6 million (USD 18.9 million) in 9M 2015 due to higher TCE earnings for the vessels in the Handytankers Pool arising primarily from higher gross freight rates and reduced bunker expenses. The TCE income in 9M 2015 from the 3-year time-charter locked in for Nordic Anne was also higher than the LR1 pool earnings in 9M 2014.
Expenses relating to the operation of vessels in 9M 2015 fell 18.0% to USD 11.1 million (USD 13.6 million). The decrease in expenditure in 9M 2015 was largely attributed to the change of technical managers in 2014 and one-off cost incurred in 2014 (USD 1.8 million) relating to the change of technical managers.
As a result, the Group’s EBITDA amounted to USD 14.0 million (USD 2.6 million) from the higher TCE earnings in 9M 2015 and one-off costs incurred in 9M 2014 arising from (i) the change of technical managers amounting to USD 1.8 million and (ii) higher professional fees in beginning of 2014 due to the restructuring in December 2013.
In 9M 2015, the Group reversed partially the impairment loss recognised in 2012 for the vessels deployed in the Handytankers Pool (considered as one cash-generating unit) of USD 5.8 million as independent broker valuations for these vessels were materially higher than the carrying amount of the vessels after the impairment in 2012.
In the last quarter of 2014, the Group reversed partially the impairment loss recognised in 2012 for Nordic Anne of USD 5.2 million.
Depreciation amounted to USD 4.9 million (USD 4.6 million). The increase was due partially to periodic dry-docking.
Excluding the write-off in financial assets of USD 0.2 million in 9M 2015 (USD NIL), net finance expenses were slightly lower at USD 2.4 million (USD 2.6 million) as the Group repaid the working capital loan in full in December 2014 and made regular loan amortisations and cash sweeps totalling USD 12.1 million on the loan facility in the first nine months of 2015.
After accounting for depreciation, reversal of the impairment loss, interest expense and other non-operating items, the result after tax in 9M 2015 reached USD 12.2 million as compared to a loss of USD 4.6 million in 9M 2014.
Under the loan agreement, on a quarterly basis, cash in excess of USD 6.0 million will be used to pay down the loan facility. During 9M 2015, this cash sweep mechanism was activated on 31 March 2015, 30 June 2015 and 30 September 2015, and a total of USD 9.1 million excess cash was used to pay down the loan. This is in addition to the regular loan amortisation totalling USD 3.0 million.
As a consequence of the result and repayment on loans, the equity increased from USD 23.6 million to USD 42.8 million and the equity ratio improved from 17.8% to 31.4% between 30 September 2014 and 30 September 2015.
Cash flow generated from operations was USD 14.8 million (USD 3.3 million) mainly arising from the distributions earned by the Handytankers Pool and time-charter income received for Nordic Anne, offset by payment of periodic interest expenses on the term loan. The Group invested USD 0.8 million in dry-docking and repaid USD 12.1 million on the term loan facility.
Cash balance as at 30 September 2015 stood at USD 6.4 million (USD 4.6 million).
The Q3 2015 performance was better than forecast primarily due to the USD 5.8 million reversal of impairment loss, as well as higher TCE rates earned by the vessels in the Handytankers Pool. As a result, the Board has revised the outlook for the full year 2015. The Group expects the TCE revenue from the 5 product tankers in the pool and the time-charter income from Nordic Anne to be in the region of USD 33.0 million – USD 36.0 million, an increase from USD 31.0 million – USD 34.0 million reported in the H1 2015 Interim Report.
After accounting for operating expenditure, the Group expects the EBITDA (earnings before interest, tax, depreciation and amortisation) to be in the range of USD 16.0 million – USD 19.0 million. Previously, the forecasted EBITDA was in the range of USD 15.0 million – USD 18.0 million. Result before tax is expected to be between USD 13.0 million – USD 15.0 million, revised upwards from USD 5.0 million – USD 8.0 million, primarily due to the reversal of prior years’ impairment loss of USD 5.8 million. This revised outlook takes into account neither any further reversal of impairment loss in Q4 2015 nor any write-downs of vessels’ value unless significant weakness in the product tanker sector sets in.
In terms of cash flow, the Group’s cash flows is expected to be between USD 10.0 million – USD 13.0 million in 2015 (previously forecasted to be between USD 9.0 million – USD 12.0 million), after repaying the regular loan amortisation of USD 4.0 million. Under the loan agreement with the lending banks, cash in excess of USD 6.0 million will be used to pay down the long-term facility. In 9M 2015, a total of USD 9.1 million of excess cash was used to pay down the loan. An excess cash of between USD 1.5 million to USD 3.0 million is forecasted to be used to further pay down the loan in Q4 2015. This is in addition to the regular loan amortisation.
The Board is continually seeking suitable investment opportunities to grow the Company and maximise shareholder returns.
For further information, please contact:
Knud Pontoppidan, Chairman of the board, Nordic Shipholding A/S: +45 39 29 10 00
