Interim report - first half 2006

Transcription

1 Copenhagen Stock Exchange Nikolaj Plads Copenhagen K Announcement No August 2006 Interim report - first half 2006 First half highlights The profit for the first half-year was USD 88 million, including profits from the sale of vessels of USD 39 million and a negative fair value adjustment of certain hedging instruments of USD 4 million. In the same period last year, the profit was USD 167 million, including profits from the sale of vessels of USD 19 million and a positive fair value adjustment of certain hedging instruments of USD 24 million. The profit has been obtained in declining freight markets. The dry cargo and tanker markets were down on the same period last year by 39% and 7%, respectively. In the first half-year, the Company's operations generated a positive cash flow of USD 74 million. The total amount of cash and cash equivalents decreased by USD 42 million. The Dry Cargo Department's profit was USD 74 million, including profits of USD 39 million from the sale of vessels, while the Tanker Department's profit was USD 21 million, not including any profits from the sale of vessels. At the end of the half-year and further into the third quarter, the dry cargo market has strengthened more than expected. NORDEN has adjusted its coverage to the strengthened market. The tanker market has also risen considerably in the second quarter and into the third quarter. During the second quarter, NORDEN has expanded its activities in the dry cargo market, and now they also include the Handysize segment, which is considered attractive. The organisation for this purpose has been established. The expansion of the fleet continues. Since the turn of the year, the active fleet has been expanded from 124 to 137 vessels as at 30 June. At the same time, the number of vessels for delivery has been increased from 50 to 57 vessels, amongst other means, by long-term chartering 10 vessels with purchase options. As at 30 June, the Company's 12 owned vessels and 8 owned newbuildings are estimated to have an added value of USD 304 million, compared to the book value of the vessels and the newbuilding price estimates, resulting in a Net Asset Value per share of DKK 2,508 against DKK 2,099 at the same time last year. In 2006, NORDEN expects a result in the range of USD million, including profits from the sale of vessels of USD 56 million and a negative fair value adjustment of certain hedging instruments of USD 13 million. Mogens Hugo Jørgensen Chairman of the Board Carsten Mortensen President Today at hours (CET), NORDEN will hold a telephone conference where CEO Carsten Mortensen and CFO Jens Fehrn- Christensen will comment on the first half of 2006 and the expectations for the whole year. By (CET) at the latest, Danish participants should dial while participants from abroad should dial The telephone conference can also be followed live at where the accompanying presentation also is available. Further information: President Carsten Mortensen, tel DAMPSKIBSSELSKABET "NORDEN" A/S, 49, AMALIEGADE, DK-1256 COPENHAGEN K, DENMARK, CVR-NO /19

2 Contents Page Key figures and ratios for the Group 3 INTERIM REPORT Comments on the development of the period for the Group 4 Activity and earnings 4 Expansion of the fleet 4 Cash flows 5 Equity 5 Fleet related added value 5 Segment information 6 Dry Cargo 7 Market trends 7 Financial highlights 7 Fleet changes and employment 8 Tanker 9 Market trends 9 Financial highlights 9 Fleet changes and employment 10 Expectations for the rest of Dry Cargo 11 Tanker 11 The Group 11 INTERIM REPORT FIRST HALF-YEAR - THE GROUP Statement 12 Income statement 14 Income statement per quarter 15 Balance sheet 16 Summarised cash flow statement - the Group 17 Statement of changes in equity - the Group 18 DAMPSKIBSSELSKABET "NORDEN" A/S, 49, AMALIEGADE, DK-1256 COPENHAGEN K, DENMARK, 2/19

3 Key figures and ratios for the Group The interim report is prepared in accordance with the International Financial Reporting Standards (IFRS) and additional Danish disclosure requirements for interim reports of listed companies. The accounting policies are the same as applied to the annual report for USD' /1-30/ /1-30/6 Change 1 st half /1-31/12 INCOME STATEMENT Freight income (revenues) 522, ,334-25% 1,296,457 Costs -457, ,131-18% -1,080,535 Profit before depreciation, etc. (EBITDA) 65, ,203-51% 215,922 Profits from the sale of vessels, etc. 38,981 19, % 120,104 Depreciation -9,312-8,077 15% -16,291 Share of results of joint ventures 942 7,853-88% 8,277 Profit from operations (EBIT) 95, ,426-38% 328,012 Fair value adjustment of certain hedging instruments -3,979 23, % 25,965 Net financials 7,360-7, % -8,084 Profit before tax 99, ,475-41% 345,893 Profit for the period 87, ,924-48% 336,336 Profit for the period (NORDEN's share) 87, ,647-47% 336,018 Profit for the period (minorities' share) % 318 CASH FLOWS From operating activities 73, ,887-53% 244,686 From investing activities, including vessels -22,462-60,654-63% 10,106 From financing activities -93,232-91,134 2% -76,014 Change in cash and cash equivalents for the period -41,820 4, % 178,778 KEY FIGURES FOR THE BALANCE SHEET Non-current assets 426, ,999 52% 361,597 Total assets 784, ,531 34% 821,531 Equity (including minority interests) 624, ,835 42% 611,203 Non-current liabilities 96,863 86,352 12% 69,260 Current liabilities 63,212 56,344 12% 141,068 FINANCIAL AND ACCOUNTING RATIOS Number of shares (excluding treasury shares) 2,166,742 2,162,826 0% 2,161,985 Earnings per share (EPS), USD (DKK) 40.3 (245) 75.5 (438) -47% (920) Diluted earnings per share (diluted EPS), USD (DKK) 40.3 (245) 74.9 (434) -46% (914) Intrinsic value per share (excluding treasury shares), USD (DKK 1) ) 287 (1,684) 203 (1,252) 42% 282 (1,781) Equity ratio 79.3% 75.2% 6% 74.1% Share price at period-end, DKK 2,483 3,102-20% 2,959 Share price/intrinsic value 2) % 1.66 Net Asset Value per share excl. purchase options for vessels, USD (DKK 1) ) 428 (2,508) 339 (2,094) 26% 395 (2,500) Net interest-bearing debt, USD -168,209-39, % -201,560 Invested capital, USD 456, ,464 14% 409,643 Average USD rate % USD rate at period-end % ) Translated to the USD/DKK rate at period-end. 2) Intrinsic value is calculated as equity (excluding minority interests) in USD translated to the USD/DKK rate at period-end. The key figures and ratios are calculated in accordance with guidelines issued by the Danish Association of Financial Analysts 2005 (Anbefalinger og Nøgletal 2005). DAMPSKIBSSELSKABET "NORDEN" A/S, 49, AMALIEGADE, DK-1256 COPENHAGEN K, DENMARK, 3/19

4 Comments on the development of the period for the Group Activity and earnings In the first half-year, the Company achieved freight income of USD 523 million, a 25% decrease. The decrease, which was as expected, can primarily be attributed to declining freight rates. On average, the dry cargo market was thus 39% below the same period last year while the tanker market was 7% below. In the first half-year, the number of ship days was at the same level as in the same period last year. In the first half-year, the profit before depreciation and profit from sales (EBITDA) amounted to USD 65 million (2005: USD 134 million). The profit from operations (EBIT) amounted to USD 96 million (USD 153 million) in the first half-year, including profits of USD 39 million (USD 19 million) from the sale of 3 Handymax bulkcarriers. Fair value adjustment of certain hedging instruments amounted to net USD -4 million (USD 24 million), of which USD 3 million related to bunker hedging contracts and USD -7 million related to Forward Freight Agreements (FFAs). For the period, covering the remainder of , the fair value adjustment of open bunker hedging contracts amounts to USD 10 million, and in connection with the FFAs, covering the remainder of 2006, USD -1 million; for further details, kindly see the section "Income statement". Furthermore, the Company has taken delivery of 3 Handymax bulkcarriers by exercising purchase options, of which 1 purchase option was declared in 2005 and 2 options in the first quarter of At the end of the first half-year, the Company thus has a total of 63 long-term chartered vessels with purchase options, of which 25 have been delivered. All purchase options are in-themoney. In the second quarter, the Company has entered into an agreement on the purchase of 1 Handymax bulkcarrier from Japanese yard for delivery in In parallel with the expansion of the fleet, the Company continuously considers the optimum time for taking profits by selling vessels. In the first half-year, total profits of USD 39 million have been recognised from the sale of 3 Handymax bulkcarriers, of which 1 was sold in the second quarter with a profit of USD 14 million. After the turn of the half-year, 1 additional Handymax bulkcarrier has been sold, and the profit of USD 17 million will be recognised at the time of delivery to the owner in the fourth quarter of At the end of the first half-year, the Company had 12 owned vessels and 8 newbuildings as follows: Owned vessels as at 30 June 2006 Financial items contributed by net USD 7 million (USD -8 million). The increase compared to last year is due to a combination of lower interest costs on vessel loans, increased interest income on bank deposits, and profit on exchange. The Company's interest rate risk with regard to the non-current debt has been hedged for a period of 3.4 years at an interest rate of 4.6%, including lenders margin. For the first half-year, the profit was USD 88 million (USD 167 million). The result yields a rate of return on equity of 28% (p.a.). The profit has been achieved in a declining market and meets the expectations. Expansion of the fleet The Company continues its planned expansion of the fleet and has, during the first half-year, entered into agreements for another 10 long-term charters with purchase options as follows: Contract entered Vessel type Delivery Dry Cargo: 1 st quarter 1 Handymax nd quarter 5 Handymax 2010 Tanker: 1 st quarter 1 Product tanker MR st quarter 3 Product tankers MR* 2010 *Of which 2 in 50% partnership. Aframax 2 Product tanker - SR 3 Total Tanker Department 5 Capesize 2 Panamax 2 Handymax 3 Total Dry Cargo Department 7 Total 12 Newbuilding programme as at 30 June 2006 Tanker Department Delivery Ownership (%) Product tanker - SR 3 rd quarter Product tanker - SR 2 nd quarter Product tanker - SR 3 rd quarter Product tanker - SR 3 rd quarter Dry Cargo Department Handymax 3 rd quarter Handymax 1 st quarter Handymax 2 nd quarter Handymax 4 th quarter DAMPSKIBSSELSKABET "NORDEN" A/S, 49, AMALIEGADE, DK-1256 COPENHAGEN K, DENMARK, 4/19

5 Cash flows The Company's available funds decreased during the first halfyear by USD 42 million and amounted to USD 268 million as at 30 June During the period, the Company's operations generated a positive cash flow of USD 74 million, whereas investing and financing activities totalled USD -23 million and USD -93 million, respectively. The investing activities consist of proceeds from the sale of vessels of USD 105 million and investments in vessels and newbuildings of USD -128 million (including 1 newbuilding in joint venture). The financing activity primarily relates to dividends paid for 2005 of USD -74 million, net repayment on debt of USD -15 million, and the acquisition of treasury shares of USD -4 million. Fleet related added value As at 30 June, the Company's 12 owned vessels and 8 newbuildings are estimated to have an added value of USD 304 million compared to book value of the vessels and newbuilding prices. This corresponds to USD 140 (DKK 823) per share, excluding the Company's stock of treasury shares. Net Asset Value per share is hereafter totally USD 428 (DKK 2,508) per share. Furthermore, the Company's purchase options on longterm chartered vessels are also estimated to have a considerable non-entered value. Equity The Company's equity amounted to USD 624 million as at 30 June 2006 and has, this year, thus been increased by USD 13 million or 2%. The change in equity primarily comprises the profit for the period of USD 88 million, dividends paid for 2005 of USD -74 million, net write-down in connection with the acquisition/sale of treasury shares of USD -4 million, and fair value adjustment of certain hedging instruments of USD 4 million. Equity development, 1 January - 30 June USD' Equity at 1 January 611, ,077 Value adjustment of hedging instruments 3,571 4,266 Profit for the period 87, ,924 Acquisition/sale of treasury shares -3,597-32,421 Dividend paid -74,541-38,072 Share-based incentive programme Equity at period-end 624, ,835 DAMPSKIBSSELSKABET "NORDEN" A/S, 49, AMALIEGADE, DK-1256 COPENHAGEN K, DENMARK, 5/19

6 Segment information Second quarter 2006 Second quarter 2005 USD'000 Dry Not Dry Not Cargo Tanker allocated Total Cargo Tanker allocated Total Freight income 242,009 25, , ,905 30, ,833 Costs -220,806-15,203-1, , ,406-14,919-1, ,886 Profit before depreciation, etc. (EBITDA) 21,203 10,633-1,389 30,447 60,499 16,009-1,561 74,947 Profits from sale of vessels, etc. 13, , Depreciation -2,563-1, ,893-1,071-2, ,120 Share of results of joint ventures , ,883 Profit from operations (EBIT) 32,475 9,072-1,780 39,767 59,407 21,199-1,914 78,692 Fair value adjustment of certain hedging instruments -7, ,260 12, ,471 Net financials 0 0 4,838 4, ,590-3,590 Profit before tax 25,215 9,072 3,058 37,345 71,878 21,199-5,504 87,573 Profit for the period 25,215 9,072-1,464 32,823 71,878 21,199-6,514 86,563 First half 2006 First half 2005 USD'000 Dry Not Dry Not Cargo Tanker allocated Total Cargo Tanker allocated Total Freight income 467,294 55, , ,838 64, ,334 Costs -423,106-31,712-2, , ,054-33,326-2, ,131 Profit before depreciation, etc. (EBITDA) 44,188 23,695-2,703 65, ,784 31,170-2, ,203 Profits from sale of vessels, etc. 38, ,981 19, ,447 Depreciation -4,910-3, ,312-2,006-5, ,077 Share of results of joint ventures , ,853 Profit from operations (EBIT) 78,255 21,019-3,483 95, ,222 33,632-3, ,426 Fair value adjustment of certain hedging instruments -3, ,979 23, ,577 Net financials 0 0 7,360 7, ,528-7,528 Profit before tax 74,276 21,019 3,877 99, ,799 33,632-10, ,475 Profit for the period 74,276 21,019-7,744 87, ,799 33,632-13, ,924 DAMPSKIBSSELSKABET "NORDEN" A/S, 49, AMALIEGADE, DK-1256 COPENHAGEN K, DENMARK, 6/19

7 Dry Cargo Market trends In the first half-year, the dry cargo market was on average 39% down on the same period last year measured by the Baltic Dry Index (BDI). However, throughout the first half-year, the dry cargo market has experienced a positive development, and at the end of June, the BDI was 23% up on the beginning of the year and 18% up on the end of the first half-year of Apart from a declining market in January, the Handymax and Panamax markets have been characterised by a steadily increasing trend with low volatility while the Capesize market has been more volatile. The increase occurred at the end of the quarter in particular, and the Handymax as well as the Panamax markets ended the half-year at the - so far - highest level for the period. On average, the second quarter of 2006 was up by 4% on the first quarter of The increases have continued into the third quarter. The market has thus developed better than expected due to a fundamentally strong demand for raw materials all over the world. Among other things, it was a manifestation of the strong demand for raw materials when the annual price and volume negotiations for iron ore contracts lead to a considerable increase in the basic iron ore price for the second year in a row. The demand for iron ore directly affects the demand for Capesize tonnage and has an indirect effect on the other segments, including Handymax and Panamax. Furthermore, the relatively strong Handymax market was positively affected by the import of cement to Europe and the USA from China. In addition to the increase in the spot market, the period market and the secondhand tonnage prices experienced a positive development during the half-year. The prices of secondhand tonnage regained some of the ground lost at the end of 2005 and in the beginning of 2006, and at the end of the second quarter, the prices were up by 15% on the turn of the year. The newbuilding market prices have recovered after a slightly declining trend during the first quarter, and at the end of the second quarter, they are at the same level as at the beginning of the year. For secondhand tonnage as well as for newbuildings, the price level is considerably above the historical average. The still limited scrapping of dry cargo tonnage - combined with a relatively high number of newbuilding deliveries - caused the total dry cargo fleet (measured by total dwt) to increase by 3.3% during the first half-year. However, this was countered by a strong development in demand, which was extremely strong in the first half-year of 2006 after a weak second half-year of Thus, the demand increased by 3.9% during the period, primarily driven by import to China and increased export from China to Europe and the USA. Financial highlights In the first half-year, the Dry Cargo Department achieved a profit from operations (EBIT) of USD 78 million (USD 123 million), including profits from the sale of vessels of USD 39 million (USD 19 million). In Capesize - the Dry Cargo Department's smallest segment - all units were chartered out on long-term charters, and thus, the daily average earnings throughout the first half-year were above the market average by 16% (Baltic Capesize Index). For Panamax, NORDEN's daily earnings were 11% above the market (Baltic Panamax Index), while the daily earnings in the largest segment of the department - the Handymax segment - were 4% below the market average for the half-year (Baltic Supramax Index). The relatively lower earnings compared to the Handymax spot market were caused by the fact that the Company, at the beginning of 2006, had covered approximately 90% of the known capacity for the first half-year of 2006 at a rate which afterwards has turned out to be below the spot market. Isolated, operations in all segments have contributed positively to the profit for the period. Employment and rates, dry cargo Number of ship days NORDEN Incl. single voyages Excl. single voyages T/C equivalent NORDEN Spot T/C average market NORDEN T/C vs. spot 1H 2006 Capesize ,693 33,237 16% Panamax 6,023 5,094 19,739 17,777 11% Handymax 11,900 10,132 17,461 18,149-4% 1H 2005 Capesize ,353 61,264-41% Panamax 5,750 4,602 33,008 31,852 4% Handymax 12,525 11,595 26,311 26,038 1% 1H 2006 vs. 1H 2005 Capesize 35% 28% 6% -46% Panamax 5% 11% -40% -44% Handymax -5% -13% -34% -30% B altic D ry Index 6,000 5,000 4,000 3,000 2,000 1, Jan M ar M ay Jul Sep Nov DAMPSKIBSSELSKABET "NORDEN" A/S, 49, AMALIEGADE, DK-1256 COPENHAGEN K, DENMARK, 7/19

8 Fleet changes and employment Fleet Dry Cargo Department Active fleet 30/6 31/12 Owned vessels 7 7 Chartered vessels with purchase options Core fleet Chartered vessels without purchase options Active total delivered to the active fleet. During the second half-year of 2006, 6 vessels are expected to be delivered to the core fleet as 5 vessels on long-term charter and 1 newbuilding. After the end of the first half-year, the Company has - as accounted for in the stock exchange announcement on 3 August - sold 1 Handymax bulkcarrier for delivery in the fourth quarter. Furthermore, NORDEN has declared 1 purchase option, expected to be added to the fleet of owned vessels during the fourth quarter of Vessels for delivery Newbuildings 4* 3 Chartered vessels with purchase options Chartered vessels without purchase options 8 2 For delivery total Gross fleet total incl. newbuildings Of which vessels with purchase options total *Of which 0.5 has been sold. The total activity in the first half-year was 18,698 ship days, which is at the same level as the same period last year. Compared to the first quarter, the total capacity increased by 13% during the second quarter. During the second quarter, the Company initiated an expansion of the dry cargo vessel portfolio also to include Handysize tonnage. Handysize tonnage comprises vessels from approximately 25,000 dwt to 35,000 dwt. By operating in the Handysize segment, the Company meets the demand for this type of tonnage from its existing customers and opens up for new customer segments at the same time. The segment is attractive as the existing Handysize fleet consists of relatively old vessels (more than 60% are older than 20 years) while the segment order book only covers 7% of the existing fleet. The strategic decision to enter into this segment was made earlier this year, and the Company has strengthened the organisation, preparing it to do business and expand in this new market. At the end of the first half-year, the Company's active core fleet, defined as owned vessels and vessels on long-term charter with purchase options, comprised 29 units, a 2 unit increase compared to the end of the first quarter. During the second quarter, the Company took delivery of 3 newbuildings on longterm charter, while the core fleet was reduced by 1 sold Handymax unit when it was delivered to the new owner. The number of vessels for future delivery to the core fleet increased by 3 units to 32 in the second quarter as NORDEN entered into 5 new long-term charter agreements with purchase options and contracted 1 Handymax bulkcarrier from Japanese yard. Opposite, 3 long-term chartered newbuildings were For this year and next year, the company has kept the coverage below the normal level in order to profit from the positive rate development. At the end of the first half-year, the department had thus covered 67% (79%) of the total known capacity for the remainder of the year, while the corresponding figure for 2007 was 29%. For comparison, the 2006 coverage was 38% at the end of the first half-year of The angle from which to evaluate the above should be expectations of a continued high spot market and a fundamental belief in the basic driving forces of demand and raw material transport. The Dry Cargo Department's newbuilding programme as at 30 June Delivery Ownership % Handymax 3 rd quarter Handymax 1 st quarter Handymax 2 nd quarter Handymax 4 th quarter DAMPSKIBSSELSKABET "NORDEN" A/S, 49, AMALIEGADE, DK-1256 COPENHAGEN K, DENMARK, 8/19

9 Tanker Market trends The product tanker market developed positively in the second quarter and could absorb a considerable tonnage addition even while the Baltic Clean Tanker Index (BCTI) ended the period at the same level as at the same time last year. For the entire first half-year, the BCTI was 7% below the average for the same period last year. The decrease was due to a severe dip in the rates at the middle of the period (as described in the interim report for the first quarter). During the second quarter, however, the BCTI has increased by 32%, and the increase has continued after the end of the half-year. While the newbuilding prices remained at the same firm level as in the first quarter, the period market experienced a dampening as a result of the severe dip in the spot rates in the middle of the half-year. The one-year T/C rates in the MR and SR segments for the half-year were marginally down on the same period last year. The secondhand tonnage prices have been stable in the second quarter and have increased by approximately 4-5% since the beginning of the year. In the beginning of the third quarter, all 3 segments have experienced increases in a very active market. Primarily, the decrease in the middle of the half-year was partly due to bottlenecks in the refining capacity arising from maintenance work, partly due to a hard Russian winter, causing a higher home consumption and thereby reduced export. The increase during the second quarter was fuelled by the reopening of refineries after maintenance work and increasing product import to the USA for a large holiday driving demand. In addition, USA's import is transported over longer distances as a result of the instability in the nearby supplier countries. The total oil demand continues to grow, fuelled by a strong growth in the world economy. IEA, expecting a growth in the oil demand for 2006 of approximately 2% in January, have revised their expectations to an annual growth for the year downward to 1.4% - matching the same growth level as in IEA's downward revision of the total growth is caused by concern that the demand in some South Asian economies may decline due to the high oil price. However, a considerable higher growth is expected for the second half-year compared to the first half-year. The main factor behind the growth is still the demand from China and North America, respectively. The underlying bottleneck problems with regard to the refinery capacity and its location still contribute to increased transport distances. For the remainder of the year, NORDEN still expects the freight market to be marginally below the 2005 level as the increasing addition of new tonnage to some extent will be countered by the increasing demand. BP's shutdown of Prudhoe Bay Oil Field, responsible for 8% of USA's daily raw oil production with a 400,000 bd capacity, may give the freight markets a positive boost - depending on the duration of the shutdown - and once again underlines the fine balance in the present oil market. Financial highlights In the first half-year, the Company's Tanker Department achieved a profit from operations (EBIT) of USD 21 million (USD 34 million), including profits from the sale of vessels of USD 0 million. (USD 8 million, recognised in "Share of result of joint ventures"). During the first half-year, the total tanker fleet increased by 10.4 million dwt, corresponding to an increase of 3.2%. Employment and rates, tanker Number of ship days NORDEN Total Of which number employed of in the ship days spot market T/C equivalent NORDEN 12 months T/C average market NORDEN T/C vs. spot 1H 2006 Aframax ,433 31,923-36% Product tanker - MR ,023 26,097 0% Product tanker - SR 1, ,073 24,712-11% 1H 2005 Aframax ,663 35,443-45% Product tanker - MR ,435 25,135 21% Product tanker - SR 1,462 1,009 24,011 23,962 0% 1H 2006 vs. 1H 2005 Aframax -25% - 4% -10% Product tanker - MR 10% -32% -14% 4% Product tanker - SR -25% -32% -8% 3% Baltic Clean Tanker Index 2,500 2,000 1,500 1, Jan M ar M ay Jul Sep Nov DAMPSKIBSSELSKABET "NORDEN" A/S, 49, AMALIEGADE, DK-1256 COPENHAGEN K, DENMARK, 9/19

10 EBITDA decreased by 24% compared to the first half-year of The decrease is caused by a combination of a declining spot market, relatively higher costs in relation to short-term chartering of tonnage, and fewer ship days in the Aframax (-25%) and product segments (-13%) as a result of tonnage being sold from these segments during The Company's Aframax tonnage is still employed on long-term charters. The product tonnage is operated by Norient Product Pool, covering between 30 and 40% of the tonnage on contracts. The Company is thereby maintaining the objective of securing stable and good earnings by combining the employment of the tonnage in the spot and period market. For the MR segment, the Company's daily earnings were at the same level as the spot market for the half-year, while they were 11% below the spot market in the SR segment due to previously secured coverage. Fleet changes and employment Fleet Tanker Department Active fleet 30/6 31/12 Owned vessels 5 3 Chartered vessels with purchase options 3 3 Core fleet 8 6 Chartered vessels without purchase options 8 8 Active total Vessels for delivery Newbuildings 4 6 Chartered vessels with purchase options 10 6 Chartered vessels without purchase options 3 3 For delivery total During the quarter, 1 unit was added to the Tanker Departments active core fleet after the delivery of 1 newbuilding from Chinese yard. Norient Product Pool had 8 newbuildings delivered in the period and operated 28 units at the end of the second quarter. The 2 pool partners have a total order book of 37 units for delivery up to 2010, 8 of which are expected to be delivered during the remainder of The Company continues the controlled expansion of the tanker activities, and has - during the quarter - chartered 2 SR iceclass 1A units from European interests with delivery at the end of the second quarter. At the end of the half-year, the coverage of the known number of ship days for the remainder of the year and for 2007 was 50% (57%) and 30% (44%), respectively. Gross fleet total incl. newbuildings Of which vessels with purchase options total 13 9 DAMPSKIBSSELSKABET "NORDEN" A/S, 49, AMALIEGADE, DK-1256 COPENHAGEN K, DENMARK, 10/19

11 Expectations for the rest of 2006 On 3 August, NORDEN revised upward its expectations for the annual result by USD 50 million. The upward revision was made as the Company's operating profit is expected to be higher than anticipated in the strengthened dry cargo market. In addition, NORDEN will - during the fourth quarter - achieve a profit of USD 17 million from the sale of 1 Handymax bulkcarrier, and furthermore the negative fair value adjustment of certain hedging instruments will also be lower than anticipated. The expectations announced on 3 August are unchanged. Dry Cargo The Dry Cargo Department expects to achieve an EBIT in the range of USD million, including profits from the sale of vessels of USD 56 million. Tanker The Tanker Department still expects to achieve an EBIT in the range of USD million. The expectations do not include any profits from the sale of vessels. Forward-looking statement The report includes forward-looking statements reflecting the management s current perception of future trends and financial performance. The statements for 2006 and the years to come naturally carry some uncertainty and NOR- DEN's actual results may therefore differ from the expectations. Factors that may cause the results achieved to differ from the expectations are, among other things, but not exclusively so, changes in the macro-economic and political conditions especially in the Company s key markets, changes in NORDEN's assumptions of rate development and operating costs, volatility in rates and vessel prices, changes in legislation, possible interruptions in traffic and operations as a result of external events, etc. The interim report is not intended to be a solicitation to purchase or trade in shares in Dampskibsselskabet "NORDEN" A/S. The Group In 2006, NORDEN expects a result in the range of USD million, including profits from the sale of vessels of USD 56 million and a negative fair value adjustment of certain hedging instruments of USD 13 million. The report is published in the Danish and the English languages. In the event of any discrepancies, the Danish version shall be governing. DAMPSKIBSSELSKABET "NORDEN" A/S, 49, AMALIEGADE, DK-1256 COPENHAGEN K, DENMARK, 11/19

12 INTERIM REPORT FIRST HALF-YEAR - THE GROUP Statement The Board of Directors and Management today reviewed and approved the interim report for the first half of 2006 of Dampskibsselskabet "NORDEN" A/S. The interim report is prepared in accordance with the International Financial Reporting Standards (IFRS) and the general Danish financial requirements. In line with previous policies, the interim report is not audited. We consider the accounting policies applied to be appropriate and the accounting estimates made to be adequate. Furthermore, we find the overall presentation of the interim report to present a true and fair view. In our opinion, the interim report therefore gives a true and fair view of the assets and liabilities of the Group, the financial position as well as the result of the Group's activities and cash flows for the interim period. Copenhagen, 23 August 2006 Management Carsten Mortensen President Jens Fehrn-Christensen Executive Vice President Board of Directors Mogens Hugo Jørgensen Chairman Alison J. F. Riegels Vice Chairman Erik G. Hansen Einar K. Fredvik Anton Kurt Vendelbo Christensen Ole Clausen Erling Højsgaard Egon Christensen DAMPSKIBSSELSKABET "NORDEN" A/S, 49, AMALIEGADE, DK-1256 COPENHAGEN K, DENMARK, 12/19

13 DAMPSKIBSSELSKABET "NORDEN" A/S, 49, AMALIEGADE, DK-1256 COPENHAGEN K, DENMARK, 13/19

14 Income statement USD' /1-30/6 1/1-30/6 1/4-30/6 1/4-30/6 Freight income (revenue) 522, , , ,833 Costs -457, , , ,886 Profit before depreciation, etc. (EBITDA) 65, ,203 30,447 74,947 Profits from the sale of vessels, etc. 38,981 19,447 13, Depreciation -9,312-8,077-4,893-4,120 Share of results of joint ventures 942 7, ,883 Profit from operations (EBIT) 95, ,426 39,767 78,692 Fair value adjustment of certain hedging instruments 1) -3,979 23,577-7,260 12,471 Net financials 7,360-7,528 4,838-3,590 Profit before tax 99, ,475 37,345 87,573 Tax on the profit for the period -11,621-2,551-4,522-1,010 Profit for the period 87, ,924 32,823 86,563 Attributable to: Shareholders of D/S "NORDEN" A/S 87, ,647 32,795 86,549 Minority interests Total 87, ,924 32,823 86,563 Earnings per share, USD Diluted earnings per share, USD ) Specification of "Fair value adjustment of certain hedging instruments" Bunker hedging: Unrealised fair value adjustment for: , , , ,627 Realised fair value adjustment reclassified to "Costs"* -6,225 Total 3,402 FFA: Unrealised fair value adjustment for Realised fair value adjustment reclassified to "Freight income"* -6,751 Total -7,381 Total -3,979 *As the hedging instruments are realised, the accumulated fair value adjustments are reclassified to profit from operations in the same item as the hedged transaction. For further information, see the section "Accounting policies" in the annual report for DAMPSKIBSSELSKABET "NORDEN" A/S, 49, AMALIEGADE, DK-1256 COPENHAGEN K, DENMARK, 14/19

15 Income statement per quarter USD nd quarter 1 st quarter 4 th quarter 3 rd quarter 2 nd quarter Freight income (revenue) 267, , , , ,833 Costs -237, , , , ,886 Profit before depreciation, etc. (EBITDA) 30,447 34,733 39,471 42,248 74,947 Profits from the sale of vessels, etc. 13,835 25,146 62,077 38, Depreciation -4,893-4,419-3,336-4,878-4,120 Share of results of joint ventures ,883 Profit from operations (EBIT) 39,767 56,024 98,378 76,208 78,692 Fair value adjustment of certain hedging instruments 1) -7,260 3,281-1,182 3,570 12,471 Net financials 4,838 2, ,590 Profit before tax 37,345 61,827 97,208 79,210 87,573 Tax on the profit for the period -4,522-7,099-5,831-1,175-1,010 Profit for the period 32,823 54,728 91,377 78,035 86,563 Attributable to: Shareholders of D/S "NORDEN" A/S 32,795 54,704 91,355 78,016 86,549 Minority interests Total 32,823 54,728 91,377 78,035 86,563 Earnings per share, USD Diluted earnings per share, USD ) Please see previous page. DAMPSKIBSSELSKABET "NORDEN" A/S, 49, AMALIEGADE, DK-1256 COPENHAGEN K, DENMARK, 15/19

16 Balance sheet USD' /6 30/6 31/12 ASSETS Land and buildings 4,022 4,108 4,069 Vessels 293, , ,189 Vessels acquired under finance leases 26,808 27,166 26,808 Prepayments on vessels and newbuildings 73,896 61,979 95,557 Fixtures, fittings and equipment 4,468 4,986 4,786 Investments in joint ventures 20,324 17,905 18,338 Other receivables 3, ,850 Non-current assets 426, , ,597 Inventories 15,775 12,997 21,849 Receivables 70,846 74, ,733 Receivables from joint ventures 0 3,188 0 Securities 2, ,557 Cash and bank balances 268, , , , , ,523 Tangible assets held for sale 0 74,832 18,411 Current assets 357, , ,934 Total assets 784, , ,531 LIABILITIES Share capital 7,321 7,321 7,321 Retained earnings 612, , ,333 Reserves 1,841-3,081-1,730 Equity (NORDEN's shareholders) 622, , ,924 Minority interests 2,331 2,238 2,279 Equity 624, , ,203 Provisions for docking costs (bareboat) Bank debt 47,050 37,099 13,008 Danmarks Skibskredit 21,433 25,233 23,689 Lease liabilities 22,703 23,760 24,442 Prepayments received on vessels for resale 3, ,850 Deferred income 1, ,271 Non-current liabilities 96,863 86,352 69,260 Provisions for docking costs (bareboat) Current portion of non-current debt 11,610 11,239 7,689 Bank debt ,553 Trade payables 17,151 19,126 39,876 Payables to joint ventures 8, ,552 Prepayments received on vessels for resale 0 0 3,000 Other payables and accruals 25,308 25,979 30,982 Current liabilities 63,212 56, ,068 Total liabilities 160, , ,328 Total equity and liabilities 784, , ,531 DAMPSKIBSSELSKABET "NORDEN" A/S, 49, AMALIEGADE, DK-1256 COPENHAGEN K, DENMARK, 16/19

17 Summarised cash flow statement - the Group USD' /4-30/6 1/4-30/6 1/1-30/6 1/1-30/6 1/1-31/12 Net profit 32,823 86,563 87, , ,336 Reversal of items with no effect on available funds 4,514-24,264-7,765-38, ,362 Cash flows before change in working capital 37,337 62,299 79, , ,974 Change in working capital 2,716-15,348-5,912 27,903 43,712 Cash flows from operating activities 40,053 46,951 73, , ,686 Change in prepayments on newbuildings -40,312-71,164-46,597-64,990-47,872 Investments in vessels, etc. -39,848-34,601-74,032-55, ,577 Investments in subsidiaries Investments in joint ventures , Acquisition of securities ,709 Sale of securities Net proceeds from the sale of vessels, etc. 32,590 39, ,366 59, ,344 Cash flows from investing activities -48,269-65,881-22,462-60,654 10,106 Bank loans and vessel loans 16,116-2,290-15,094-20,641-4,643 Dividend paid to shareholders -74,541-38,072-74,541-38,072-38,072 Acquisition of treasury shares ,963-4,527-33,666-34,544 Sale of treasury shares ,245 1,245 Cash flows from financing activities -58,684-43,014-93,232-91,134-76,014 Change in cash and cash equivalents for the period -66,900-61,944-41,820 4, ,778 Cash and cash equivalents at period-begin 337, , , , ,982 Exchange rate adjustments -2,156-2,254-2,116-3,039-1,376 Change in cash and cash equivalents for the period -66,900-61,944-41,820 4, ,778 Cash and cash equivalents at period-end 268, , , , ,384 DAMPSKIBSSELSKABET "NORDEN" A/S, 49, AMALIEGADE, DK-1256 COPENHAGEN K, DENMARK, 17/19

18 Statement of changes in equity - the Group USD'000 Share capital Reserves Retained earnings Equity (NORDEN's Minority interests The Group's equity shareholders) Equity at 1 January ,321-7, , ,116 1, ,077 Value adjustment of hedging instruments 0 4, , ,266 Net gains recognised directly in equity 0 4, , ,266 Profit for the period , , ,924 Total recognised income for the period 0 4, , , ,190 Acquisition of treasury shares ,666-33, ,666 Sale of treasury shares 0 0 1,245 1, ,245 Distributed dividends ,036-40, ,036 Dividends, treasury shares 0 0 1,964 1, ,964 Share-based payment Total changes in equity 0 4,266 96, , ,758 Equity at 30 June ,321-3, , ,597 2, ,835 Equity at 1 January ,321-1, , ,924 2, ,203 Value adjustment of hedging instruments 0 3, , ,571 Net gains recognised directly in equity 0 3, , ,571 Profit for the period ,499 87, ,551 Total recognised income for the period 0 3,571 87,499 91, ,122 Acquisition of treasury shares 0 0-4,527-4, ,527 Sale of treasury shares Distributed dividends ,283-78, ,283 Dividends, treasury shares 0 0 3,742 3, ,742 Share-based payment Total changes in equity 0 3,571 9,585 13, ,208 Equity at 30 June ,321 1, , ,080 2, ,411 DAMPSKIBSSELSKABET "NORDEN" A/S, 49, AMALIEGADE, DK-1256 COPENHAGEN K, DENMARK, 18/19

19 Statement of changes in equity - the Group (continued) USD'000 Share capital Reserves Retained earnings Equity (NORDEN's Minority interests The Group's equity shareholders) Equity at 1 January ,321-7, , ,116 1, ,077 Value adjustment of hedging instruments 0 5, , ,405 Fair value adjustment of securities Net gains recognised directly in equity 0 5, , ,617 Profit for the period , , ,336 Total recognised income for the period 0 5, , , ,953 Acquisition of treasury shares ,544-34, ,544 Sale of treasury shares 0 0 1,245 1, ,245 Distributed dividends ,036-40, ,036 Dividends, treasury shares 0 0 1,964 1, ,964 Share-based payment Total changes in equity 0 5, , , ,126 Equity at 31 December ,321-1, , ,924 2, ,203 DAMPSKIBSSELSKABET "NORDEN" A/S, 49, AMALIEGADE, DK-1256 COPENHAGEN K, DENMARK, 19/19