Hafnia Tankers Ltd. Interim Report. For the Three and Six Months Ended June 30, 2017 and 2016

Transcription

1 Interim Report For the Three and Six Months Ended June 30, 2017 and 2016

2 Condensed Consolidated Balance Sheet As of June 30 December 31 Note ASSETS Current assets Cash and cash equivalents 64,873 95,488 Accounts receivable 9,901 9,960 Prepaid expenses and other receivables 7,999 10,605 Inventories 4,854 4,484 Total current assets 87, ,537 Non-current assets Vessels and dry dock 4 1,056, ,476 Vessels under construction 4-42,893 Goodwill 3 6,003 6,003 Time charters acquired Contract values vessels under construction Interests in associates 2,183 1,940 Loans receivables 1,850 - Pool working capital deposit 5 29,600 26,000 Deferred tax Total non-current assets 1,096,155 1,041,040 Total assets 1,183,782 1,161,577 LIABILITIES & EQUITY Current liabilities Bank loans 6 50,603 47,713 Accounts payable 4,650 1,733 Accrued expenses and other payables 8,468 9,822 Deferred revenue - 1,212 Tax payable Total current liabilities 63,784 60,527 Non-current liabilities Bank loans 6 525, ,804 Derivatives 11 3, Total non-current liabilities 528, ,443 Total liabilities 592, ,970 Shareholders' equity Issued, authorized and paid in share capital Share capital Additional paid in capital 352, ,423 Treasury shares (14,038) (258) Accumulated profits 45,099 42,705 Cash flow hedging reserve (2,071) (473) Translation reserve (34) (34) Equity holders of the parent 381, ,702 Non-controlling interests 209, ,905 Total equity 591, ,607 Total liabilities and equity 1,183,782 1,161,577 1

3 Condensed Consolidated Statement of Profit For the three months ended For the six months ended June 30 June 30 Note Revenue Revenue 44,759 50,328 98, ,951 44,759 50,328 98, ,951 Operating expenses Vessel operating costs (20,253) (18,714) (39,319) (35,021) Technical management fee (1,403) (1,172) (2,781) (2,318) Charter hire 7 (5,034) (7,839) (11,595) (15,979) Voyage expenses (243) (160) (414) (274) Depreciation 4 (13,140) (10,472) (25,845) (20,893) General and administrative expenses 8 (2,714) (2,972) (5,267) (5,944) Total operating expenses (42,787) (41,329) (85,221) (80,429) Other operating income Other operating income 548 2,117 1,525 3,284 Share of associates profit ,366 1,767 3,926 Operating profit 2,650 11,365 14,766 28,448 Financial expenses and income Financial expenses (6,456) (4,776) (12,447) (10,134) Financial income (Loss) / profit before tax (3,729) 6,597 2,415 18,349 Taxes (23) (1,095) (154) (1,133) (Loss) / profit for the period (3,752) 5,502 2,261 17,216 Attributable to: Equity holders of the parent (2,435) 3,571 1,468 11,175 Non-controlling interests (1,317) 1, ,041 (3,752) 5,502 2,261 17,216 Earnings per share attributable to equity holders of the parent: Basic (loss) / earnings per share (USD) 9 (0.07) Diluted (loss) / earnings per share (USD) 9 (0.07) Shares used in computing earnings per share attributable to equity holders of the parent: Basic (in thousands) 9 32,800 33,946 33,352 33,946 Diluted (in thousands) 9 32,800 33,980 33,382 33,970 2

4 Condensed Consolidated Statement of Comprehensive Income For the three months ended For the six months ended June 30 June (Loss) / profit for the period (3,752) 5,502 2,261 17,216 Other comprehensive (loss) / income Items that may be reclassified subsequently to profit or (loss): Fair value (losses) on cash flow hedges (1,854) (1,321) (3,002) (3,005) Reclassification to profit or (loss) related to cash flow hedges Other comprehensive (loss) after tax (1,584) (1,050) (2,462) (2,464) Total comprehensive (loss) / income (5,336) 4,452 (201) 14,752 Attributable to: Equity holders of the parent (3,464) 2,890 (130) 9,576 Non-controlling interests (1,872) 1,562 (71) 5,176 (5,336) 4,452 (201) 14,752 3

5 Condensed Consolidated Statement of Changes in Equity Attributable to the equity holders of the parent Share Additional Cash flow Noncapital paid in Accumulated Treasury hedging Translation controlling Total nominal capital profits shares reserve reserve Total interests equity Balance as of January 1, ,743 53,077 (200) (1,767) (34) 403, , ,603 Profit for the period , ,175 6,041 17,216 Other comprehensive (loss) for the period (1,599) - (1,599) (865) (2,464) Total comprehensive income ,175 - (1,599) - 9,576 5,176 14,752 Prepaid costs relating to future share issuance - (76) (76) - (76) Share-based compensation - - 1, ,354-1,354 Dividend paid - - (30,947) (30,947) - (30,947) Reallocation of non-controlling interests , ,411 (10,411) - - (49) (19,209) (19,258) (10,411) (29,669) Balance as of June 30, ,694 45,043 (200) (3,366) (34) 393, , ,686 Balance as of January 1, ,423 42,705 (258) (473) (34) 394, , ,607 Profit for the period - - 1, , ,261 Other comprehensive (loss) for the period (1,598) - (1,598) (864) (2,462) Total comprehensive (loss) - - 1,468 - (1,598) - (130) (71) (201) Purchase of treasury shares (13,780) - - (13,780) - (13,780) Share-based compensation - - 1, ,427-1,427 Reallocation of non-controlling interests - - (501) (501) (13,780) - - (12,854) 501 (12,353) Balance as of June 30, ,423 45,099 (14,038) (2,071) (34) 381, , ,053 4

6 Condensed Consolidated Statement of Cash Flow For the six months ended June 30 Note Operating activities Profit for the period 2,261 17,216 Depreciation 4 25,845 20,893 Amortization of time charters acquired ,057 Share-based compensation 1,427 1,354 Financial expenses 12,447 10,134 Tax expense 154 1,133 Share of associates profit (242) 2,158 42,297 54,945 Changes in assets and liabilities: (increase) / decrease in inventories (370) 191 Decrease in accounts receivable 59 8,415 (increase) / decrease in prepaid expenses and other receivables (1,527) 217 (increase) in loans receivables (1,850) - (increase) in pool working capital deposit 5 (3,600) (1,400) Decrease / (increase) in amortized financing fees 1,702 (1,119) Increase / (decrease) in accounts payable 2,952 (139) (decrease) in accrued expenses and other payables (1,438) (1,611) (decrease) / increase in deferred income (1,212) 378 (5,284) 4,932 Financial expenses paid (12,363) (12,320) Taxes paid (119) (38) Net cash inflow from operating activities 24,531 47,519 Investing activities Payments for vessels under construction (71,140) (49,783) Payments for vessels including drydock (4,549) (2,035) Net cash (outflow) from investing activities (75,689) (51,818) Financing activities Bank loan repayment (25,854) (45,762) Draw down on credit facility 60,375 70,517 Cost relating to share issuance - (76) Prepaid financing fee (163) (1,780) Dividend paid - (30,947) Purchase of treasury shares (13,780) - Net cash inflow / (outflow) from financing activities 20,578 (8,048) Net cash flow from operating, investing and financing activities (30,580) (12,347) Cash and cash equivalents at January 1 95, ,856 Effects of exchange rate changes on the balance of cash held in foreign currencies (35) (35) Cash and cash equivalents at June 30 64, ,475 5

7 (All amounts other than share data are provided in thousands of U.S. dollars, unless otherwise indicated) 1 General Information Hafnia Tankers Ltd. (the Company ) is a private limited company incorporated on October 15, 2013 in the Republic of the Marshall Islands. The Company and its subsidiaries (together, the Group ) provide seaborne transportation of petroleum products worldwide. The Company currently holds Class A Units representing approximately 64.9% of the outstanding membership interests of the Company s direct subsidiary Hafnia Tankers LLC, while the balance of Hafnia Tankers LLC s outstanding membership interests consists of exchangeable Class B and Class C Units held by existing investors representing an interest of approximately 34.8% and 0.3%, respectively, which are presented as non-controlling interests in the Company s financial statements. 2 Accounting Policies Basis of Preparation These unaudited condensed consolidated financial statements for the three and six months ended June 30, 2017 and 2016 have been prepared in accordance with International Accounting Standard ( IAS ) 34 Interim Financial Reporting as issued by the International Accounting Standards Board ( IASB ). Certain information and footnote disclosures required by International Financial Reporting Standards as issued by the IASB ( IFRS ) for a complete set of annual financial statements have been omitted, and therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the Group s annual consolidated financial statements for the year ended December 31, Accounting Policies The same accounting policies and methods of computation have been followed in these condensed consolidated financial statements as were applied in the preparation of the Group s financial statements for the year ended December 31, 2016, except for the adoption of accounting policies required by IFRS standards effective for accounting periods beginning after January 1, The new standards have not had any material effect on the Group s financial statements. Accounting Standards and Interpretations Not Yet Adopted The IASB has issued new or revised accounting standards (IAS and IFRS) and interpretations (IFRICs) that are not compulsory for the Group in the preparation of the financial statements for the current period. None of them are expected to have a material impact on the financial reporting for the Group. 6

8 3 Intangible Assets Contract values vessels under Time charters Goodwill construction acquired Total Cost Balance at January 1, ,003 26,549 12,333 44,885 Addition Disposals - - (9,501) (9,501) Cost at December 31, ,003 26,549 2,832 35,384 Accumulated amortization Balance at January 1, (22,270) (8,192) (30,462) Amortization - (4,049) (3,736) (7,785) Disposals - - 9,501 9,501 Accumulated amortization at December 31, (26,319) (2,427) (28,746) Carrying amount at December 31, , ,638 Cost Balance at January 1, ,003 26,549 2,832 35,384 Addition Disposals - (26,549) (2,832) (29,381) Cost at June 30, , ,003 Accumulated amortization Balance at January 1, (26,319) (2,427) (28,746) Amortization - (230) (405) (635) Disposals - 26,549 2,832 29,381 Accumulated amortization at June 30, Carrying amount at June 30, , ,003 Goodwill has been allocated for impairment testing purposes to the following cash-generating units (CGUs), shortrange ( SR ), medium-range ( MR ) and long-range 1 ( LR1 ). As of June 30, 2017 the value in use test for the SR, MR and LR1 CGUs was greater than its carrying amount and thus no impairment losses have been recognized during the period ended June 30, Contract values for vessels under construction are related to newbuild contracts which were acquired as a result of the merger between BTS Tanker Partners Limited and Hafnia Tankers LLC on December 31, 2013 (the Combination ). The value of the contracts is added to the cost of vessels under construction on a straight line until the time when the vessels are delivered. The final vessel was delivered in the second quarter of Time charters acquired are related to time charter contracts which were acquired as a result of the Combination. The value of the contracts is amortized on a straight line over the remaining contract period. The amortization expense of USD 405 for the period ended June 30, 2017 is recognized as charter hire. The final time charter contract acquired ran until the second quarter of

9 4 Tangible Assets Vessels under Vessels Dry dock construction Total Cost Balance at January 1, ,029 24,636 96,393 1,011,058 Additions 751 5, , ,589 Transfers 153,382 3,200 (156,582) - Disposals - (2,574) - (2,574) Cost at December 31, ,044,162 31,018 42,893 1,118,073 Accumulated depreciation Balance at January 1, 2016 (62,226) (7,194) - (69,420) Depreciation (39,185) (5,673) - (44,858) Disposals - 2,574-2,574 Accumulated depreciation at December 31, 2016 (101,411) (10,293) - (111,704) Carrying amount at December 31, ,751 20,725 42,893 1,006,369 Cost Balance at January 1, ,044,163 31,018 42,893 1,118,074 Additions 24 4,525 71,370 75,919 Transfers 111,863 2,400 (114,263) - Disposals - (1,639) - (1,639) Cost at June ,156,050 36,304-1,192,354 Accumulated depreciation Balance at January 1, 2017 (101,410) (10,293) - (111,703) Depreciation (22,476) (3,369) - (25,845) Disposals - 1,639-1,639 Accumulated depreciation at June 30, 2017 (123,886) (12,023) - (135,909) Carrying amount at June 30, ,032,164 24,281-1,056,445 Vessels are pledged to secure the bank loans of the Group. In accordance with IAS 36 Impairment of Assets, the Company has determined its cash-generating units (CGUs) based on the vessel classes, namely SR, MR and LR1. As of June 30, 2017, the fair value less cost to sell of the SR, MR and LR1 vessels were less than their carrying amounts and accordingly, a value in use calculation was performed. The significant assumptions applied in determining the value in use of the SR, MR and LR1 fleet are the future charter rates, vessel operating expenses and the discount rate. The Company estimated the future cash flows of the SR, MR and LR1 CGUs based on a combination of the current time charter rates for the next three years and the most recent ten-year historical average for one-year time charter rates for periods thereafter. The Company estimated the operating expenses based on budgets agreed with third party technical managers for 2017 adjusted for an escalation factor. The future cash flows were then discounted to their present value. The value in use calculation was greater than the carrying amount for both SR, MR and LR1 vessels and as a result of this testing, no impairment charge was recorded. As of June 30, 2017, the Company had nil vessels under construction. The final vessel was delivered in the second quarter of

10 5 Other Assets As of June 30 December Deposit of working capital to the pools, long term 29,600 26,000 29,600 26,000 Participating in pools requires a deposit of working capital. The deposit ranges from USD 600 to USD 1,000 per vessel. The deposit is paid upon entrance to the pool and is repaid when the pool is exited. The amount is non-interest bearing. 6 Bank Loans As of June 30 December Current portion 50,603 47,713 Non-current portion 525, ,804 Carrying amount 576, ,517 We consider that the carrying amount of the bank loans to approximate their fair value due to the interest rates being at floating rates. Summary of borrowing arrangements For the six months ended June 30, 2017, the Group drew down USD 60,375 on the USD 360,000 credit facility to finance newbuild vessels delivered during the period. The interest rates on the drawn amounts are LIBOR plus a margin of 2.25% and are to be repaid in quarterly installments with a balloon payment at the end of the seventh year. The drawn amounts are secured by first priority mortgages on vessels. The drawn amounts are subject to the following significant financial covenants: Working capital above zero A minimum liquidity above USD 10,000 and above 5% of total debt Equity above USD 100,000 and above 30% of the total assets The Group was fully compliant with all loan covenants at June 30, The Group is subject to a minimum security value clause under which the security value must at all times exceed a given percentage of the aggregate outstanding amount of debt. The Group was fully compliant with this clause at June 30, The following table summarizes the current contractual maturities of the Group s bank loans and presents the total principal amount based on the earliest date on which the Group can be required to pay. 9

11 As of June 30, 2017 <1 year 1-5 years >5 years Total Bank loans 50, , , ,447 As of December 31, 2016 <1 year 1-5 years >5 years Total Bank loans 47, , , ,517 7 Charter Hire The table below shows the Group s time chartered-in vessel commitments as of June 30, 2017, assuming no off-hire days: Optional Earliest extension Subject to Purchase Type Delivery re-delivery period profit split option MR years No Yes MR years No Yes LR No No No LR No No No LR No No No The cost of Charter Hire recognized as expense during the three months ended June 30, 2017 was USD 4,957 (June 30, 2016: USD 7,112). Minimum charter hire Year , , , , , , , , ,706 Total as of June 30, ,310 Total as of December 31, ,400 10

12 8 General and Administrative Expenses Hafnia Tankers Ltd. For the three months ended For the six months ended June 30 June Wages and salaries (1,247) (1,478) (2,494) (2,876) Outsourced functions (131) (92) (246) (200) Contributions to defined contribution plans (47) (51) (96) (100) Other social security costs (6) (6) (9) (12) Other administrative costs (309) (269) (483) (631) Auditors, consultants and legal fees (268) (390) (513) (771) (2,008) (2,286) (3,841) (4,590) Share based compensation (non-cash) (706) (686) (1,426) (1,354) (706) (686) (1,426) (1,354) (2,714) (2,972) (5,267) (5,944) 9 Earnings Per Share For the three months ended June (Loss) / profit for the period (USD thousand) (3,752) 5,502 Consolidated (loss) / profit attributable to non-controlling interests (USD thousands) (1,317) 1,931 (Loss) / profit attributable to equity holders of the parent (USD thousand) (2,435) 3,571 Weighted average number of shares (in thousands) 32,800 33,946 Diluted weighted average number of shares in issue (in thousands) 32,800 33,980 (Loss) / earnings per share (USD) (0.07) 0.11 Diluted (loss) / earnings per share (USD) (0.07) 0.11 For the six months ended June Profit for the period (USD thousand) 2,261 17,216 Consolidated profit attributable to non-controlling interests (USD thousands) 793 6,041 Profit attributable to equity holders of the parent (USD thousand) 1,468 11,175 Weighted average number of shares (in thousands) 33,352 33,946 Diluted weighted average number of shares in issue (in thousands) 33,382 33,970 Earnings per share (USD) Diluted earnings per share (USD) During the period ended June 30, 2017, potentially dilutive securities include 18,191,712 Class B Units and 162,911 Class C Units (June 30, 2016: 18,191,712 Class B Units and 162,911 Class C Units). The Class B Units and the Class C Units have not had a dilutive effect for the period ended June 30, The Class B Units and the Class C Units are exchangeable on a one-for-one basis for the Company s common shares. The Class B Units and the Class C Units are considered in computing diluted profit or loss per share on an if-converted basis. As of June 30, 2017, a total of 2,300,000 warrants, 300,000 options and 35,164 Restricted Stock Units with a potential dilutive effect has been granted to employees (June 30, 2016: 2,300,000 warrants, 200,000 options and 16,434 Restricted Stock Units). The warrant and options have not had a dilutive effect in 2017 as they are not in the money. 11

13 10 Categories of Financial Instruments Hafnia Tankers Ltd. As of June 30 December Financial assets Cash and cash equivalents 64,873 95,488 Receivables 44,318 39,354 Financial liabilities Bank loans 576, ,517 Financial liabilities measured at amortised cost 10,656 13,548 Derivative instruments in designated hedge accounting relationships 3, Cash Flow Hedging As all of the Groups debt has variable interest rates, the Group is exposed to fluctuations in interest rates. Therefore, in order to protect the Group from significant increases in interest rates, the Group has entered into several interest rate caps with a strike of 3% against the three months Libor rate. The interest rate caps has a notional amount of USD 300,000 (representing 50% of peak debt) with the last cap expiring in The underlying risk of the interest rate cap is the three month LIBOR, which is identical to the hedged risk component (i.e. the variable interest rate on the debt). The hedge ratio of the hedging relationship was determined based on the policy to hedge up to 75% of the exposure at the time the hedge was established, and on the fact that Management believe that there is some correlation between freight rates and interest rates. The Group does not consider the hedge relationship to include sources of ineffectiveness, as there is no difference in interest rate benchmark, or credit risk between the interest rate cap and the debt, the nominal amount of the hedging instrument represents 50% of the exposure, and hence there is no risk of over hedging, and the term of the hedging instrument does not exceed the term of the loans. The Group pays quarterly interests on the interest rate cap. The fair market value of the total hedging agreements as of June 30, 2017 was a liability of USD 3,101. The fair market value of the hedging agreement is comprised of discounted premiums, a liability of USD 6,644, and the value of the hedging instruments, USD 3, Fair Value Measurements Except for the hedge agreements entered into in the second quarter of 2015 and the first quarter of 2016, no assets nor liabilities are measured at fair value after initial recognition, and the carrying values of financial instruments approximate their respective fair values. Therefore, no additional disclosure related to fair value measurement has been provided in these financial statements. 13 Subsequent Events There have not been any significant events after the balance sheet date at June 30, The Condensed Consolidated Financial Statements were authorized for issuance by the Board of Directors on August 18,