NORDIC SHIPHOLDING. Interim Report Q May 2018 CVR-no

Transcription

1 NORDIC SHIPHOLDING Interim Report Q May 2018 CVR-no

2 Summary The comparison figures for period ended 31 March 2017 are stated in parenthesis. The Group started 2018 on a positive note as the average daily Time Charter Equivalent ( TCE ) rate in January 2018 and February 2018 for the 6 vessels was approximately 25% higher than the average TCE rate in Q However, the TCEs earned in March 2018 fell short of expectations and were generally below the average TCEs earned in the previous 2 months. As a result, the average TCEs earned by the 6 vessels in Q came in below the forecasted rates. Compared to the same quarter last year, the softer tanker market led to a decline in TCE revenue to USD 5.9 million (USD 6.8 million) in Q Further, the TCE revenue from the LR1 vessel deployed in Straits Tankers Pool in Q was lower than the TCE revenue derived from the 3-year time charter locked in for the LR1 vessel in Q For the 3 months ended 31 March 2018, the Group incurred a loss after tax of USD 0.9 million (loss of USD 0.2 million). The lower tanker TCE revenue from the vessels deployed in the pools and the change in deployment for the LR1 vessel contributed to the higher losses in Q Expenses relating to the operation of vessels in Q decreased to USD 3.7 million (USD 4.0 million) as there were certain minor ad-hoc repairs done in Q EBITDA fell to USD 1.7 million (USD 2.3 million) due to the reduction in TCE revenue in Q The Group did not make any impairment nor reversal of impairment during the quarter. The development in rates are being monitored during Q After accounting for depreciation, interest expenses and other finance expenses, the loss after tax in Q was USD 0.9 million (loss after tax of USD 0.2 million). Under the loan agreement, cash in excess of USD 6.0 million will be used to pay down the loan facility. As the cash balance did not exceed USD 6.0 million, there was no cash sweep in Q (Q1 2017: NIL). During the financial period, cash flow generated from operations was USD 0.4 million (USD 1.3 million) mainly contributed by earnings from the three pools. During the financial period, the Group paid USD 11K (USD nil) for the preparation of dry-docking for Nordic Ruth in Q The Group used previously swept cash to make the repayment (repayment of USD 1.7 million from operating cashflows) on the term loan facility under the scheduled amortisation. As at 31 March 2018, cash and cash equivalents was USD 3.7 million (USD 4.6 million). The relatively weak tanker market which commenced during March 2018 extended into Q Based on the respective commercial managers updated forecasts, the Board has revised the forecast for 2018 previously indicated in the 2017 Annual Report. The result before tax is expected to be between USD -6.5 million USD -4.5 million, decreased from USD -3.5 million USD -1.5 million. 1

3 Consolidated financial highlights Amounts in USD thousand Q Q FY 2017 Time charter equivalent revenue (TCE revenue) 5,913 6,770 23,232 EBITDA 1,715 2,308 6,651 Operating result (EBIT) (20) 628 (180) Net finance expenses (898) (864) (3,384) Result after tax (918) (236) (3,564) Equity ratio (%) 30.4% 33.0% 31.3% Earnings per share, US cents (0.23) (0.06) (0.88) Market price per share DKK, period end Market price per share USD, period end Exchange rate USD/DKK, period end Number of shares, period end 406,158, ,158, ,158,403 Average number of shares 406,158, ,158, ,158,403 Company data Company Nordic Shipholding A/S (the Company ) Sundkrogsgade 19, DK-2100 Copenhagen, Denmark CVR- no Website: Registered office: Copenhagen Contact persons regarding this interim report: Knud Pontoppidan, Chairman Philip Clausius, CEO Executive Management Philip Clausius, CEO Board of Directors Knud Pontoppidan, Chairman Jon Robert Lewis, Deputy Chairman Kanak Kapur Philip Clausius Jens V. Mathiasen (appointed on 20 April 2018) Esben Søfren Poulsson (appointed on 20 April 2018) Auditors PricewaterhouseCoopers, Statsautoriseret Revisionspartnerselskab Forward-looking statements This report contains forward-looking statements reflecting Nordic Shipholding A/S s current beliefs concerning future events. Forward-looking statements are inherently subject to uncertainty, and Nordic Shipholding A/S s actual results may thus differ significantly from expectations. Factors which could cause actual results to deviate from the expectations include, but not limited to, changes in macroeconomic, regulatory and political conditions, especially on the Company s main markets, changes in currency exchange and interest rates, freight rates, operating expenses and vessel prices as well as possible disruptions of traffic and operations resulting from outside events. 2

4 Management s review The Group with its six vessels, continues to be a tonnage provider in the product tanker segment. The five handysize tankers remained commercially managed by the UPT Handy Pool (Nordic Agnetha, Nordic Amy and Nordic Ruth) and Hafnia Handy Pool (Nordic Pia and Nordic Hanne) while the LR1 tanker (Nordic Anne) remained commercially managed by Straits Tankers Pool. In Q1 2018, the average daily TCE rate earned by the vessels in the three pools was lower than the forecasted daily rate. Financial results for the period 1 January 31 March 2018 The comparison figures for the same period in 2017 are stated in parenthesis. The Group started 2018 on a positive note as the average daily Time Charter Equivalent ( TCE ) rate in January 2018 and February 2018 for the 6 vessels was approximately 25% higher than the average TCE rate in Q However, the TCEs earned in March 2018 fell short of expectations and were generally below the average TCEs earned in the previous 2 months. As a result, the average TCEs earned by the 6 vessels in Q came in below the forecasted rates. Compared to the same quarter last year, the softer tanker market led to a decline in TCE revenue to USD 5.9 million (USD 6.8 million) in Q Further, the TCE revenue from the LR1 vessel deployed in Straits Tankers Pool in Q was lower than the TCE revenue derived from the 3-year time charter locked in for the LR1 vessel in Q For the 3 months ended 31 March 2018, the Group incurred a loss after tax of USD 0.9 million (loss of USD 0.2 million). The lower tanker TCE revenue from the vessels deployed in the pools and the change in deployment for the LR1 vessel contributed to the higher losses in Q Expenses relating to the operation of vessels in Q decreased to USD 3.7 million (USD 4.0 million) as there were certain minor ad-hoc repairs done in Q EBITDA fell to USD 1.7 million (USD 2.3 million) due to the reduction in TCE revenue in Q The Group did not make any impairment nor reversal of impairment during the quarter. The development in rates are being monitored during Q During the financial period, depreciation amounted to USD 1.7 million (USD 1.7 million). Net finance expenses remained consistent at USD 0.9 million (USD 0.9 million). After accounting for depreciation, interest expenses and other finance expenses, the loss after tax in Q was USD 0.9 million (loss after tax of USD 0.2 million). 3

5 Financial position as at 31 March 2018 The comparison figures for 31 December 2017 are stated in parenthesis. Total assets amounted to USD million (USD million). Vessels and docking stood at USD million (USD million). The change is mainly due to depreciation on the vessels. Receivables balance was USD 7.5 million as at 31 March 2018 (USD 6.8 million). The increase was primarily due to the increase in receivables allocated to the vessels by the various pools. From 31 December 2017 to 31 March 2018, net working capital 1 increased by USD 0.2 million from USD 4.7 million to USD 4.9 million. Cash and cash equivalents stood at USD 3.7 million (USD 3.3 million), an increase of USD 0.4 million from 31 December Between 31 December 2017 and 31 March 2018, equity decreased from USD 35.8 million to USD 34.7 million as a result of the cumulative loss during the period and the downward adjustment of USD 239K due to the adoption of IFRS 15, Revenue from Contracts with Customers. Please see page 11, Note 1 for the discussion of the adoption of IFRS 15. Consequently, the equity ratio decreased from 31.3% to 30.4% between 31 December 2017 and 31 March Non-current liabilities increased to USD 75.1 million (USD 72.7 million) due to the reclassification of current portion of term loan. Based on the revised 2018 forecast, USD 5.0 million (from the cash sweep activated in 2015 and 2016) is expected to be used to offset the scheduled loan amortisation for the rest of Current liabilities amounted to USD 4.2 million (USD 5.9 million). Under the loan agreement, cash in excess of USD 6.0 million will be used to pay down the loan facility. As the cash balance did not exceed USD 6.0 million, there was no cash sweep in Q (Q1 2017: NIL). The Group has reached an agreement with the lending banks to amend certain loan covenants, in particular, the Minimum Value Covenant under the syndicated facility for the financing of 3 vessels. In consideration of the amendment, the loan margin for this facility was increased by 25 basis points. No change was made to the bilateral facility for the remaining 3 vessels. Further, the following shareholder support was provided: USD 3.85 million Banker s Guarantee as additional security to the syndicated lenders; and USD 1.0 million standby line of credit to ease operational and capital expenditure, if need be. 1 Net working capital is defined as inventories, receivables and other current operating assets less trade payables and other liabilities (excluding provisions) as well as other current operating liabilities. 4

6 Cash flow for the period 1 January 31 March 2018 The comparison figures for the same period in 2017 are stated in parenthesis. During the financial period, cash flow generated from operations was USD 0.4 million (USD 1.3 million) mainly contributed by earnings from the three pools. During the financial period, the Group paid USD 11K (USD nil) for the preparation of dry-docking for Nordic Ruth in Q The Group used previously swept cash to make the repayment (repayment of USD 1.7 million from operating cashflows) on the term loan facility under the scheduled amortisation. As at 31 March 2018, cash and cash equivalents was USD 3.7 million (USD 4.6 million). Events occurring after the end of the financial period There is no significant event which has occurred after 31 March Outlook for 2018 For the rest of 2018, the 5 handysize vessels are expected to remain commercially deployed in the UPT Handy Pool and Hafnia Handy Pool respectively. The LR1 vessel will continue to be deployed in the Straits Tankers Pool. The TCE generated in the first two months of the year tracked generally the forecasts provided by the respective pool managers. However, the market deteriorated during March Consequently, the commercial managers for the respective pools revised downwards their forecasts for the remainder of As a result, the Board has revised downwards the forecast for 2018 previously indicated in the 2017 Annual Report. The EBITDA (earnings before interest, tax, depreciation and amortisation) is expected to be in the range of USD 4.0 million USD 7.0 million, a reduction from USD 7.0 million USD 10.0 million. The result before tax is expected to be between USD -6.5 million USD million, decreased from USD -3.5 million USD -1.5 million. This outlook for 2018 does not take into account any impairment of vessels carrying values. The Board will look at growth and consolidation opportunities that are accretive to the Company. 5

7 Management statement We have today considered and approved the interim financial statements of Nordic Shipholding A/S for the period 1 January 31 March The interim report, which has not been audited or reviewed, has been presented in accordance with IAS 34, Interim Financial Reporting, as adopted by the EU and additional Danish disclosure requirements for interim reports of listed companies. In our opinion, the accounting policies applied are appropriate and the interim report gives a true and fair view of the Group s financial position at 31 March 2018 and of its financial performance and cash flows for the period 1 January 31 March In our opinion, the management s review gives a true and fair review of the development in and results of the Group s operations and financial position as a whole and a specification of the significant risks and uncertainties facing the Group. Besides what has been disclosed in the interim report for the period 1 January 31 March 2018, no changes in the Group s most significant risks and uncertainties have occurred relative to what was disclosed in the 2017 Annual Report. Copenhagen, 22 May 2018 Executive Management Philip Clausius, CEO Board of Directors Knud Pontoppidan Jon Robert Lewis Kanak Kapur Chairman Deputy Chairman Jens V. Mathiasen Esben Søfren Poulsson Philip Clausius 6

8 Consolidated statement of comprehensive income (condensed) Amounts in USD thousand Q Q FY 2017 Total revenue 9,032 8,659 32,841 Voyage related expenses (3,119) (1,889) (9,609) TCE revenue 5,913 6,770 23,232 Expenses related to the operation of vessels (3,676) (3,993) (14,680) Staff costs (89) (77) (282) Other external costs (433) (392) (1,619) EBITDA 1,715 2,308 6,651 Depreciation (1,735) (1,680) (6,831) Write-downs Operating result (EBIT) (20) 628 (180) Financial income Financial expenses (898) (864) (3,402) Result before tax (918) (236) (3,564) Tax on result Result after tax (918) (236) (3,564) Other comprehensive income Comprehensive income (918) (236) (3,564) Distribution of result Parent Company (918) (236) (3,564) Non-controlling interest (918) (236) (3,564) Distribution of comprehensive income Parent Company (918) (236) (3,564) Non-controlling interest (918) (236) (3,564) Number of shares, end of period 406,158, ,158, ,158,403 Earnings per share, US cents (0.23) (0.06) (0.88) Diluted earnings per share, US cents (0.23) (0.06) (0.88) 7

9 Statement of financial position (condensed) Amounts in USD thousand 31 Mar Mar Dec 2017 Non-current assets Vessels and docking 101, , ,959 Other financial assets Total non-current assets 101, , ,959 Current assets Bunkers and lubricant stocks 1,493 1,027 1,315 Receivables 7,496 6,021 6,813 Other financial assets 9-3 Cash & cash equivalents 3,693 4,596 3,310 Total current assets 12,691 11,644 11,441 Total assets 113, , ,400 Equity and liabilities Equity Equity, Parent Company 34,662 39,147 35,819 Equity, non-controlling interest Total equity 34,662 39,147 35,819 Liabilities Non-current liabilities Finance loans, etc. 75,081 70,192 72,674 Total non-current liabilities 75,081 70,192 72,674 Current liabilities Finance loans, etc. 45 6,689 2,429 Other current liabilities 4,138 2,576 3,478 Total current liabilities 4,183 9,265 5,907 Total liabilities 79,264 79,457 78,581 Equity and liabilities 113, , ,400 8

10 Statement of changes in equity (condensed) Share capital Retained earnings Equity Parent company Noncontrolling interest Total equity Amounts in USD thousand Equity as at 1 January ,437 28,382 35,819-35,819 Impact due to IFRS 15 - (239) (239) - (239) Result for the period - (918) (918) - (918) Other comprehensive income for the period Equity as at 31 March ,437 27,225 34,662-34,662 Share capital Retained earnings Equity Parent company Noncontrolling interest Total equity Amounts in USD thousand Equity as at 1 January ,437 31,946 39,383-39,383 Result for the period - (236) (236) - (236) Other comprehensive income for the period Equity as at 31 March ,437 31,710 39,147-39,147 9

11 Statement of cash flow (condensed) YTD 31 Mar 2018 YTD 31 Mar 2017 Year 2017 Amounts in USD thousand Operating result (EBIT) (20) 628 (180) Adjustments for: Depreciation and write-downs 1,735 1,680 6,831 Non-cash financial expenses - - (39) Operating profit before working capital changes 1,715 2,308 6,612 Changes in working capital (441) (150) (329) Net financial expenses paid (880) (820) (3,278) Cash flows from operating activities 394 1,338 3,005 Investments in tangible assets (11) - (1,168) Net cash from investing activities (11) - (1,168) Purchase of interest rate caps - (35) - Repayment of finance loans - (1,670) (3,490) Net cash from financing activities - (1,705) (3,490) Cash flows for the period 383 (367) (1,653) Cash and cash equivalents at beginning of period 3,310 4,963 4,963 Cash and cash equivalents at end of period 3,693 4,596 3,310 10

12 Notes 1. Accounting policies The interim report has been presented as a condensed set of financial statements in accordance with IAS 34, Interim Financial Reporting, as adopted by the EU and additional Danish disclosure requirements for interim reports of listed companies. The accounting policies have been consistently applied. For a further description of the accounting policies, see the 2017 Annual Report for Nordic Shipholding A/S. New IAS/IFRSs Nordic Shipholding A/S has implemented the new financial reporting standards or interpretations which are effective from 1 January Among the new financial reporting standards, only IFRS 15, Revenue from Contracts with Customers, is relevant to the Group. The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The adoption of IFRS 15 results in a change in the revenue recognition method from voyage charters, whereby the Group s method of determining proportional performance changes from discharge-to-discharge to load-to-discharge. The Group uses the modified retrospective approach where the cumulative impact of the IFRS 15 adoption was recognised in the retained earnings as at 1 January 2018 and the comparative information for 2017 was not restated. The adoption of IFRS 15 has reduced the retained earnings as at 1 January 2018 by USD 239K and has improved the Q results by USD 39K. Other than IFRS 15, there is no impact on Nordic Shipholding A/S's results or equity in the interim report and disclosure in the notes. 2. Accounting estimates Impairment tests In accordance with IAS 36, intangible assets with indefinite lives are tested for impairment at least annually and tangible assets are tested if there are indications of impairment. The Group evaluates the carrying amount of vessels within two cash generating units (1) one LR1 vessel deployed in Straits Tankers Pool and (2) three vessels deployed in UPT Handy Pool and two vessels deployed in Hafnia Handy Pool respectively - to determine whether events have occurred that would require an adjustment to the recognised value of the vessels. In Q1 2018, there was no impairment loss recognised or reversal of impairment writedown. We have assessed that there is no further reversal of the impairment loss that was recognised in 2012 for the vessels. 11

13 2. Accounting estimates (continued) Impairment tests (continued) The value in use calculation is sensitive to fluctuations in freight rates. As an indication of this sensitivity, a fluctuation of 3.0% on the daily long-term TCE rate would, all things being equal, change the calculated value in use by USD 1.7 million for the LR1 tanker and USD 6.1 million for the five handysize vessels. If the daily long-term TCE rate decreases by 3%, there would be an impairment loss of USD 1.0 million for the LR1 tanker and USD 5.5 million for the five handysize vessels. Another key assumption used in the value in use calculation is its weighted average cost of capital (WACC). The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by the Group s investors. The cost of debt is based on the interest-bearing borrowings the Group is obliged to service. Similarly, a fluctuation of 0.5 percentage point on the WACC would, all things being equal, change the calculated value in use by USD 0.9 million for the LR1 tanker and USD 2.4 million for the five handysize vessels. If the WACC increases by 0.5 percentage point, there would be an impairment loss of USD 0.2 million for the LR1 tanker and USD 1.9 million for the five handysize vessels. Depreciation Depreciation on vessels is material for the Group. Vessels are depreciated over their useful life, which management estimates to be 25 years, to a residual value. The estimates are reassessed regularly based on available information. Changes to estimates of useful lives and residual values may affect the depreciation for the period. There was no change to the estimates of useful lives and residual values during Q The carrying amount of vessels as at 31 March 2018 amounted to USD million (31 March 2017: USD million; 31 December 2017: USD million). 3. Finance loans As at 31 March 2018, the Group had outstanding finance loans of USD 75.1 million (31 March 2017: USD 76.9 million; 31 December 2017: USD 75.1 million). The reduction in finance loans between 31 March 2017 and 31 March 2018 was due to partial repayment on term loan. The Group used previously swept cash to make scheduled loan repayment between 31 December 2017 and 31 March