November 22, 2016
NORDIC SHIPHOLDING A/S
Company Announcement: 07/2016
Published via NASDAQ OMX on November 22, 2016
Q3 Result 2016
Chairman Knud Pontoppidan comments:
“The weakening in the market that started in Q2 2016 continued through Q3 and impacted the result of the Group. Although the long-term time charter rate on the Group’s LR1 vessel supported the weak spot market earnings for the handy-size vessels, this further weakening of the market has necessitated a downward revision of the forecast for 2016. For 2016, the Group’s profit is now expected to break even before any impairment recognition. The present global uncertainties dictate a cautious outlook for the rest of 2016 and 2017, and as a result, it has been concluded to recognize an impairment loss of USD 5.1 million.”
Summary
The comparison figures for period ended 30 September 2015 are stated in parenthesis.
This Q3 report covers the period 1 January 2016 to 30 September 2016.
For the 9 months ended 30 September 2016 (“9M 2016”), the Group incurred a loss after tax of
USD 3.7 million (which includes a one-off impairment loss of USD 5.1 million for the handysize vessels), compared to a profit after tax of USD 12.2 million in the same period last year (which included a one-off gain of USD 5.8 million for the reversal of impairment loss on the handysize vessels). Excluding the impairment loss of USD 5.1 million, the Group generated a profit after tax of USD 1.4 million for the
9 months under review.
The weaker performance was primarily due to the lower TCE income from the vessels deployed in the various handysize pools as the average daily TCE rate earned by the vessels in the respective pools was below the forecasted daily rate. Time charter earnings from the LR1 vessel (Nordic Anne) tracked the forecasted daily rate. In Q3 2016, the Group incurred a loss before tax of USD 6.2 million (profit before tax of USD 8.6 million in Q3 2015).
TCE earnings dropped by 17.3% to USD 22.0 million (USD 26.6 million) in 9M 2016 due to lower TCE earnings for the five handysize vessels deployed in the various pools.
However, EBITDA decreased by a wider margin to USD 9.2 million (USD 14.0 million) due to the reduction in TCE earnings coupled with slightly higher vessel operating cost for the nine months ended 30 September 2016.
Expenses relating to the operation of vessels in 9M 2016 increased marginally to USD 11.4 million (USD 11.1 million). This was mainly due to higher expenditure on equipment and repairs of vessels as well as crewing expenses.
Depreciation amounted to USD 5.4 million (USD 4.9 million). The increase was mainly due to additional depreciation arising from the reversal in Q3 2015 of impairment loss previously recognised in 2012 for the five handysize vessels.
Finance expenses totalled USD 2.5 million (USD 2.6 million) in 9M 2016. The decrease was due to a write-off in financial assets of USD 0.2 million in Q2 2015, partially offset by higher interest expenses in 9M 2016 due to the higher 3M-USD LIBOR.
After taking into account depreciation, interest expense and other non-operating items, the loss after tax in 9M 2016 was USD 3.7 million (profit after tax of USD 12.2 million).
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 2016, this cash sweep mechanism was activated on 31 March 2016 and a total of USD 2.7 million excess cash was used to pay down the loan. This is in addition to the regular loan amortisation totalling USD 3.8 million for 9M 2016.
Cash flow generated from operations was USD 6.0 million (USD 14.8 million) mainly arising from the distributions earned by the various pools and time charter income received for Nordic Anne, offset by payment of periodic interest expenses on the term loan. The Group invested USD 0.1 million (USD 0.8 million) in dry-docking and made a repayment of USD 6.5 million (USD 12.1 million) on the term loan facility.
Cash balance as at 30 September 2016 stood at USD 6.0 million (USD 6.4 million).
Between 30 September 2015 and 30 September 2016, equity decreased from USD 42.8 million to USD 40.5 million as a result of the cumulative loss during the period. The equity ratio improved from 31.4% to 32.9% during this period.
In view of the poorer Q3 2016 performance and the weaker outlook for Q4 2016, the Board has decided to further revise downwards the full year forecast for 2016 previously indicated in the Half-year Q2 2016 Report. Using the respective commercial managers’ forecasts, the Group projects the TCE revenue from the five product tankers in the pools and the time charter income for Nordic Anne to be in the range of USD 26.0 million – USD 28.0 million, a reduction from USD 29.0 million – USD 31.0 million forecasted in the Half-year Q2 2016 report. The EBITDA (earnings before interest, tax, depreciation and amortization) is expected to be between USD 9.0 million – USD 11.0 million revised downwards from USD 12.0 million – USD 14.0 million. The Group is expected to make a loss between USD -7 million to USD -4 million for the full year 2016. Apart from the impairment loss of USD 5.1 million recognised in Q3 2016, this outlook for 2016 does not take into account any further write-downs of vessels’ carrying amount nor any reversal of impairment loss.
The Board continues to source for suitable investment opportunities to grow the Company and seeks to maximise returns for shareholders.
For further information please contact:
Knud Pontoppidan, Chairman of the board, Nordic Shipholding A/S: +45 39 29 10 00
