The company reported an EBIT of minus $7 mill (minus $2 mill for 3Q17) and was less impacted by provisioning for onerous contracts ($5.2 mill, compared to $21 mill in 3Q17).
At the end of 3Q18, NORDEN’s cash and securities amounted to $165 mill. Combined with NORDEN’s share of cash in joint ventures of $4 mill and undrawn credit facilities totalling $189 mill, liquidity amounted to $358 mill.
NORDEN claimed to have sufficient cash to cover the outstanding payments of $94 mill, due in 2018-2020 in connection with newbuilding instalments. The company’s net commitments, calculated as total bank debt, timecharter commitments and outstanding payments on newbuildings less cash and future earnings from coverage, were reduced by $63 mill during 3Q18 to $715 mill, partly due to reduced short-term exposure in tankers.
In the historically weak 3Q18, NORDEN’s tanker business generated an adjusted result of minus $18 mill (3Q17: minus$1 mill), corresponding to an EBIT of minus $17 mill. The company’s Handysize tankers generated average daily earnings of $9,062, while daily earnings in the MR fleet amounted to $10,347.
The product tanker market suffered severe headwinds during the quarter and spot rates were the lowest seen in a decade. The main factors pushing the market down were declining product imports in Asia, South America and Middle East in combination with significant competition from crude vessels, due to low rates in that market.
While high oil prices continue to dampen oil demand growth, slowing supply growth and normal seasonality imply that rates are expected to improve in the fourth quarter. At the beginning of 4Q18, rates for crude vessels have improved and there have also been positive signs for product tanker rates in the Atlantic.
in 2019, additions to refinery capacity, low fleet growth and a better crude tanker market are expected to lead to improving product tanker rates. In addition, the introduction of the IMO sulfur cap on emissions from bunker fuel is expected to further support the market balance starting in the second half of 2019.
In 3Q18, period rates were not aligned with spot rates and NORDEN used the gap to cover part of its exposure for the next six months while not taking in new short-term capacity. With 38 % of MR capacity covered for 4Q18 at $12,310 per day, NORDEN expects the tanker result to improve.
By comparison, Dry Operator generated a contribution margin of $11.5 mill and an adjusted result of $2.3 mill for 3Q18.
For 2018, NORDEN maintained its forecast for the adjusted result for the year at $0-30 mill.
Dry Owner meanwhile realised an adjusted result of $4 mill. This corresponded to an EBIT of $8 mill. For the first three quarters of 2018, Dry Owner recorded an adjusted result of $13 mill, corresponding to an EBIT of $29 mill.
CEO Jan Rindbo, said; “Good performance in Dry Operator delivering another positive result cannot make up for the severe headwinds, we are facing in the tanker market. Dry Operator has responded well to changing trade flows following trade tensions between US and China and has during the third quarter protected value in positions that will benefit results in the fourth quarter.
Dry Owner continues to benefit from an improving market and has increased cover. In tankers a gradual improvement in 2019 is expected as the market prepares for the IMO sulfur regulation. With a modern fleet, NORDEN is well prepared for this,” he claimed.