1H Report I.M. Skaugen SE - Innovative Maritime Solutions

Transcription

1 1H Report 2016 I.M. Skaugen SE - Innovative Maritime Solutions

2 Result 1H 2016 I.M. Skaugen SE s (IMSK) core business is liquefied gas transportation. The fleet of 15 advanced gas carriers is operated in a revenue sharing pool managed by Norgas Carriers Pte Ltd. The Norgas Carriers segment generated revenues of USD 58.3 million in 1H 2016 of which USD 36.7 million was IMS share on a proportional consolidated basis. 1H 2Q 1Q FY Highlights (USD million, except per share data) EBIT Financial items, investments, associates and tax Net result Total assets Net debt Interest rate coverage ratio Total liquidity Equity ratio * 22.5% 25.1% 22.5% 25.1% 25.0% 25.2% Book equity Book equity per share EPS * book equity / total assets 1H 2Q 1Q FY Segment reporting (Unaudited) (USD 000) Gross Revenue gas transportation activities managed by IMS EBITDA gas transportation activities managed by IMS Gross Freight Revenue-Gas Transportation Activity Revenues gas transportation activities Voyage related expenses Charter hire Other operating cost Depreciation and amortization Gains/losses from restructuring and sale of assets Segment operating profit (EBIT) General administration and legal expenses Depreciation Share of investments of other joint ventures Financial revenues Financial expenses Other Net result I.M. SKAUGEN SE - 1H REPORT

3 Report 1H 2016 IMSK performance 1H 2016 Norgas fleet TCE vs 10 year average Source: Norgas Economic performance improved in 1H16 vs 1H15 as underlying time charter equivalent earnings of the Norgas Carriers fleet increased with 30% vs 1H15. The average earnings of the Norgas Carriers fleet of gas carriers are almost back to a level equal to the 10-year historical average. Supported by lower administration and operating costs, the EBITDA increased further with 85% in 1H16 vs 1H15, and EBIT improved to negative USD 0.9 m in 1H16 from negative USD 6.8 m in 1H Norgas TCE average 10 Year average H H 2016 Small Scale LNG - regional redistribution of LNG mainly for the power sector LNG vs Diesel for power production Source: Artic Our long term view is that Small Scale LNG will substitute diesel and naphtha for use by smaller and stranded power plants. We thus monitor the LNG and diesel price differences to see if the SSLNG projects we are following are viable in a lower oil price environment. During 1H16 we have seen increased divergence in the costs where oil prices have risen and LNG prices have continued its downward trend. This development reflects the anticipation of continued oversupply in the LNG markets vs a potentially more balanced supply demand outlook in the crude oil market. The delta between the diesel and LNG prices, which provides for the cost of shipping, conversion, storage and regas, has thus started increasing recently. This has brought new life to some of our LNG projects which have previously been postponed or for other reasons delayed. 50 USD/MWh Diesel LNG Jan 2011 Jan 2016 In 1H16 Norgas Carriers continued to perform several LNG voyages in Asia with one of our Multigas vessels (MG). We loaded LNG from a large export terminal in Asia and delivered the LNG to a smaller re-distribution hub. The main use for the LNG from this trade is for a fast growing transport market either in the form of LNG or CNG (compressed natural gas). These voyages confirm the versatility and flexibility our Multigas carriers have in terms of loading LNG from any source of LNG. It also re-confirms the USD premium our MG vessels can achieve when performing LNG trade, due to a more complex operation compared to the LPG/petrochemical market. Norgas is set to continue to perform further LNG spot voyages with this client in 2H16 and we foresee a growing spot market in Asia. The current order book for similar sized vessels for small scale LNG and liquefied gas transportation is low. For smaller LNG vessels we can note a global order book of only 5 smaller sized LNG vessels where 3 are targeted for specialized marine bunkering operations and 1 vessels is tied up in a long term charter contract. In addition, the remainder of the current sailing fleet of small-scale LNG vessels is currently tied up in longer charter agreements. This gives I.M Skaugen a continued and unique position to provide suitable LNG tonnage for our clients in the near to medium term, especially where early delivery of vessels is required to ensure the early start-up of projects. I.M. SKAUGEN SE - 1H REPORT

4 REPORT 1H 2016 Global ETH/PPL/C4s LH Trade (kt) Source: Ship tracks/ims/brokers SR/ETH Fleet Orderbook Source: Clarcksons 800 ETH PPL BD/CC cbm Existing Fleet Orderbook Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q >17000 Petrochemical Gases and LPG Norgas Carriers is directly involved in the 8-17k cbm part or segment of the semi-ref / ethylene market. These are the vessels that primarily cover long-haul transportation of petrochemicals and short/medium haul transportation of LPG. Norgas Carriers operates under a spot / coa strategy to be able to achieve triangulation on voyages where at least 2 out of 3 legs on a voyage is fixed with cargo and the last leg is either a ballast or positioning voyage without cargo. When successful Norgas is normally able to achieve higher than 50% and closer to 60% laden time and as such outperform the period market. Over time this strategy has yielded results and Norgas has by this performed better than the period market over a longer time period. From a period of decline in volumes available for global seaborne transport we see recovery and growth in ton miles in the petrochemical gas markets. We experience growth in the Atlantic market for seaborne transportation of LPG and petrochemicals and we see that Far East Asia is increasingly short on products that more often needs to be covered by long haul transport. At the same time, excess supply often is brought on stream in the US (LPG, petrochemical gas and ethane) and also from Iran following the lifting of sanctions in January This drives a fundamental increase in ton-miles and a gradual improvement in the overall utilization of the semi-ref/ethylene capable fleet. The lower oil price should further support our LPG and petrochemical gas business. Lower product prices stimulate end user demand. There are also other pockets of excess petrochemical gas emerging from a revival of the many naphtha based crackers and especially in Europe, which has seen remarkable margin improvements along with the drop in the oil price (and thus naphtha). The naphtha based production creates many by-products such as butadiene which in turn generate additional trading opportunities. In 1H 2016 we saw stable petrochemical export volumes compared to the same period last year with main growth stemming from long haul ethylene ex. US, S. America and Europe coupled by additional spot Butadiene (C4s) exports out of Europe destined for Asia. East of Suez or Asia has in general been short on product, while the West of Suez or the west has had excess supply to offer. However, for owners in this size range a vibrant petrochemical market and LPG market is needed in order for rates to improve and to get closer to full employment. Despite continued growth in LPG exports out of the US, oversupply of larger LPG vessels (VLGC) has impacted LPG transportation markets negatively, especially in 2Q when the Norgas fleet saw less opportunities for LPG backhaul cargoes, lowering our laden time and ability to achieve triangulation. At the same time the handy sized (22k cbm) ethylene vessels, which normally carry LPG, increased their presence in the petrochemical segment due to lack of LPG cargoes, which directly affected trading and scheduling for our sized vessels. At the start of the year, there were 111 vessels in this 8-17k cbm Ethylene/Semi-Ref (ETH/SR) segment. In the first six months of the year 2016, there were two vessels delivered in the 8-17kcbm ETH/ SR fleet segment with 1 SR vessel scrapping. For the remainder of the year, there are no vessels due for delivery. One of the shipyards currently constructing small, handy and medium-size gas carries has recently reported to have run into financial difficulties resulting in the cancellation of 2 x 17k cbm ethylene vessels. There are speculations regarding potential cancellation of the majority of the 16 remaining vessels on order at the yard (2 x 17k cbm, 9 x 22k cbm, 3 x 36k cbm, 2 x 27.5k cbm). While orders at this yard make up about 26% of the orders in the SR/ETH fleet (including ethane carriers), they make up 37% of the ethylene-capable fleet (above 8k cbm size). With the confirmed cancellations, the order book in the 8-17k cbm SR/ETH segment is now ten vessels, marking a growth of 11% vs the existing fleet. At the same time, about 14% of this part of the fleet is more than 25 years old and will thus be exiting the competitive fleet in the same period which means there is now negative growth in this part of the fleet. The larger than 17k cbm vessels on order (24 vessels) are expected to be absorbed into the growing LPG and possibly also ethane trade on the back of increased US and Iranian exports and specially when new US based export terminal capacity will come on-line. Potentially 9 of these vessels could be cancelled due to the yard problems described above easing concerns about an oversupply in this part of the market. I.M. SKAUGEN SE - 1H REPORT

5 REPORT 1H 2016 Corporate Activities As reported in the Annual Report for 2015; in 1H 2016 the maturity of the IMSK12 bond was extended to 17 February 2017 and the equity ratio covenant was waived. As in integral part of this transaction, the Group reached an agreement to roll forward a USD/NOK cross currency swap that had maturity at the same time as the extended IMSK12 bonds, to 17 February The bondholders of IMSK 13 and the syndicate banks of its 1st priority mortgage debt also agreed to waive all or part of the equity ratio covenant of the bond and loan. With this short term maturity deferment, we will have no major debt repayment in 2016 nor any major capex approved. OUTLOOK We remain cautiously positive and expect a gradual recovery of the trading opportunities in the longer haul petrochemical gas markets. The recovery that we have seen in 2H15/1H16 is expected to continue into 2H 2016/17 with regards to petrochemicals. LPG volumes should continue to grow, but with oversupply of larger LPG vessels in the near term the opportunities for backhaul cargoes may be fewer than over the past few years. There is a fundamental oversupply of LPG world wide and the exporters of LPG will need to find new distribution patterns to find new clients and this will benefit smaller vessels compared to the much larger vessels. IMS is currently developing 4 specific LNG projects to supply power plants with LNG and on the back of these projects we could deploy the fleet of our LNG capable vessels in in 2016/2017. Our focus is on projects or countries with a required such early start-up, and all such projects could enable the company to utilize the unique Small Scale LNG competence and knowhow developed over the past 10 years. We have provided offers and we are participating in tenders where our services are critical for the success of the projects and which could materialize soon. The potential longer-term LNG contracts we are thus pursuing will allow us to visualize the inherent value of our LNG R&D, knowhow and expertise built up over time and the value of our LNG capable vessels we own and/or control, and as a result, improve the cash flow, which will enable a refinancing of our debt maturities in Global supply of LNG vs demand Source: South Court LTD. 700 LNG capacity - planned LNG Capacity - current 600 LNG capacity - under-construction 500 Historical LNG Demand I.M. SKAUGEN SE - 1H REPORT

6 Consolidated Financial Statements Income Statements - Equity method (USD 000) (Unaudited) Gross freight revenues Revenues Share of investments in strategic joint ventures/associates Voyage related expenses Charter hire Depreciation and amortisation Gains from sale of fixed assets Other operating expenses vessels Other operating expenses/general admin and legal expenses Operating profit Financial revenue Financial expenses Gains/losses on exchange Share of investments in other joint ventures/associates Net result before taxes Taxes Changes in deferred tax Net result for the period Attributable to: Equity holders of the company Earnings per share - basic and diluted Statement of Comprehensive Income (USD 000) (Unaudited) Net result for the period Other comprehensive income Items that will not be reclassified to profit and loss Other comprehensive income for the period, net of tax Total comprehensive income for the period Comprehensive income attributable to: Equity holders of the company I.M. SKAUGEN SE - 1H REPORT

7 CONSOLIDATED FINANCIAL STATEMENTS Balance Sheets - Equity method (USD 000) (Unaudited) Non-current assets Deferred tax assets Non-current other debtors Tangible fixed assets Investments in strategic associates and joint ventures Investments in other associates and joint ventures Non-current financial assets Total non-current assets Current Assets Receivables and other debtors Purchase options for vessels Other current assets Cash and Bank deposits Total Current Assets Total Assets Equity Paid in equity Retained earnings Other reserves Total Equity Liabilities Long term liabilities Current interest bearing liabilities Derivative financial instruments Other current liabilities Total Liabilities Total Equity and Liabilities Statement of Changes in Equity (USD 000) (Unaudited) Equity at start of period Comprehensive income for the period Net result Equity at end of period I.M. SKAUGEN SE - 1H REPORT

8 CONSOLIDATED FINANCIAL STATEMENTS Statement of Cash Flow (USD 000) (Unaudited) Cash Flow from Operations: Received payments of gross revenues Payments of operating expenses Payment of taxes Net Cash Flow from Operations Cash Flow from Investments: Payments of purchase of fixed assets Proceeds from sale of shares and parts in other companies Dividend distribution from joint ventures and associates Loan to/from others Net Cash Flow from Investments Cash Flow from Financing: Repayment of long-term debt Received payments of interest Payment of interest Net Cash Flow from Financing Net change in cash and cash equivalents Cash and cash equivalents beginning of Cash and cash equivalents end of period I.M. SKAUGEN SE - 1H REPORT

9 Notes to the Consolidated Financial Statements Note 1 Accounting principles I.M. Skaugen SE is ultimate parent company of the I.M. Skaugen Group. I.M. Skaugen SE is a public listed company traded on the Oslo Stock Exchange. The company s address is Karenslyst Allè 8B, 0278 Oslo, Norway Basis of preparation These interim consolidated financial statements have been prepared in accordance with IAS 34-Interim Financial Reporting. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the annual financial statements for the year ended 31 December 2015, which have been prepared in accordance with IFRS. The interim financial statements are unaudited. Significant accounting principles The accounting policies applied are consistent with those of the previous financial year. None of the new standards, interpretations and amendments, effective for the financial year ending 31 December 2015 are expected to have a material impact on the group. Estimates and judgments The preparation of interim financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these condensed interim financial statements, the significant judgments made by management in applying the group s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December Note 2 Net interest bearing liabilities (USD 000) YTD1H16 YTD1H15 FY2015 Loans from financial institutions - floating interest rate Bonds Derivative financial instruments Current portion interest bearing debt (incl. Bonds) Total interest bearing debt Cash and cash equivalent Net interest bearing liabilities Note 3 Transactions with related parties In the normal course of the conduct of its business, the Group enters into a number of transactions with related parties. I.M. Skaugen considers these arrangements to be on reasonable market terms. I.M. SKAUGEN SE - 1H REPORT

10 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 4 Non-current assets (USD 000) YTD1H16 YTD1H15 FY2015 Net carrying amount beginning Investment in non-current assets Depreciation and impairment Net carrying amount end Note 5 Intangible assets (USD 000) YTD1H16 YTD1H15 FY2015 Net carrying amount beginning Addition from separate acquisitions: Purchase options - vessels Effect of foreign currency exchagne differences Net carrying amount end Note 6 Investments in associates and joint ventures The share of result and balance sheet items from investments in associates and joint ventures are recognised based on equity method in the interim financial statements. The figures below show our share of revenues and expenses, total assets, total liabilities and equity: Strategic Joint Ventures and associates (USD 000) YTD1H16 YTD1H15 FY2015 Gross revenue EBIT Net result Non-current assets Current assets Total assets Total equity closing balance Non-current liabilities Current liabilities Total Liabilities I.M. SKAUGEN SE - 1H REPORT

11 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 6 Investments in associates and joint ventures Other Joint Ventures and associates (USD 000) YTD1H16 YTD1H15 FY2015 Gross revenue EBIT Net result Non-current assets Current assets Total assets Total equity closing balance Non-current liabilities Current liabilities Total Liabilities I.M. SKAUGEN SE - 1H REPORT

12 Responsibility Statement We confirm, to the best of our knowledge, that the condensed set of financial statements for the period 1st January to 30th June 2016 has been prepared in accordance with IAS 34 Interim Financial Reporting, and gives a true and fair view of the Group s assets, liabilities, financial position and profit or loss as a whole. We also confirm, to the best of our knowledge, that the interim report includes a fair review of important events that have occurred during the first six months or the financial year and their impact on the condensed set of financial statements, a description of principal risks and uncertainties for the remaining six months of the financial year, and majority related parties transactions. Oslo, 25th August 2016 Board of Directors - I.M. Skaugen SE If you have any questions, please contact: Bente Flø, Chief Financial Officer, on telephone / or by bente.flo@skaugen.com. This press release is also available on the Internet at our website: I.M. Skaugen SE is a Norway based Marine Transportation Service Company, with a focus on Innovative Maritime Solutions. Our core business activity is to provide logistics solutions for seaborne regional distribution of liquefied gasses such as LNG, petrochemical gases, ethane as well as LPG. The Skaugen Group of companies currently operates a fleet of 15 advanced gas carriers. In this fleet we have 6 innovative and unique vessels with the capacity to transport LNG in addition to petrochemical gases and LPG. We recruit, train and employ our own team of seafarers. IMS employs approximately 500 team members globally and with nearly 30 nationalities represented. We manage and operate our activities and service our clients from our offices in Singapore, Oslo and Houston. I.M. SKAUGEN SE - 1H REPORT

13 MAIN OFFICE GAS ACTIVITIES I.M. Skaugen SE, Oslo Visiting address: Karenslyst Allè 8 B, 0278 Oslo, Norway Post address: P.O. Box 23 Skøyen, 0212 Oslo, Norway Main Telephone: (47) Fax: (47) info@skaugen.com Website: Reg. of bus. enterprises: NO MVA Skaugen Marine Investment Pte. Ltd. Visiting address: 8 Shenton Way AXA Tower, #49-04 Singapore Main Telephone: (65) Administration fax: (65) adm.mspl@norgascarriers.com Norgas Carriers Pte. Ltd. 8 Shenton Way AXA Tower, #49-04 Singapore Telephone: (65) Commercial fax: (65) Administration fax: (65) chartering@norgascarriers.com Website: Norgas Carriers AS Visiting address: Karenslyst Allè 8 B, 0278 Oslo, Norway Post address: P.O. Box 23 Skøyen, 0212 Oslo, Norway Main Telephone: (47) Fax: (47) chartering@norgascarriers.com Website: Norgas Carriers USA office Visiting address: 3120 Southwest Freeway, Suite 615 Main Telephone: (1) chartering@norgascarriers.com Website: JOINT VENTURES Skaugen OSM Ship Management Pte. Ltd. 91 Bencoolen Street #03-01 Sunshine Plaza Singapore Tel.: (65) Fax: (65) I.M. Skaugen SE - Innovative Maritime Solutions