NORDEN reports strong winter tanker market

May 10 2019

In a healthy winter product tanker market and a weak drycargo market, NORDEN realised an adjusted result for the first quarter of 2019 of $7 mill, compared with a 1Q18 result of $9 mil.

The result was negatively impacted by the implementation of the new IFRS 16 regulation. Excluding this effect, the adjusted result was $10 mill.

Overhead and administration costs increased by $5 mill, mainly due to the full consolidation of the Norient Product Pool (NPP) management company, which was acquired by the end of last year.

Cash flow from operating activities amounted to $63 mill for the quarter, due to a reduction in working capital and reclassification of certain lease payments due to IFRS 16.

In line with the company’s strategy of becoming an increasingly asset light business, NORDEN sold five vessels - four drycargo and one product tanker for a total of $50 mill.

The full-year effect of the sales is expected to be a loss of $9 mill, of which a loss of $12 mill was recorded in 1Q19, and an expected gain of $3 mill will be recorded in 2Q19 when the vessels are delivered to the new owner.

After the quarter end, NORDEN sold another drycargo vessel for delivery during 2Q19.

“NORDEN generated a positive result in a quarter characterised by a strong winter market in tankers and a drycargo market on the brink of collapse. NORDEN had anticipated a weak drycargo market, but not even swift and agile response in Dry Operator could offset rates being halved within a three-week period.

“Dry Owner, however, was well protected against the weak market due to high coverage and generated a break-even result, while the Tanker business was well positioned towards a very strong winter market and delivered a good result,” CEO Jan Rindbo said.

At the end of the quarter, NORDEN’s available liquidity amounted to $263 mill with $187 mill in cash and securities supplemented by $76 mill in undrawn credit facilities.

NORDEN’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 $190 mill during the quarter to $486 mill

The decrease was as the result of vessel sales, increased coverage and cash from operations. NORDEN also estimated that acquisition and installation of the ballast water treatment systems and the scrubber programmes will incur CAPEX of $79 mill during 2019 and 2020.

In 1Q19, NORDEN’s Tanker business generated an adjusted result of $10 mill, compared with zero in 1Q18. This corresponded to an EBIT of $6 mill for 1Q19.

The company’s Handysize tankers generated average daily earnings of $17,131, while daily earnings in the MR fleet amounted to $15,994. Compared to the average annual timecharter rate during the last 12 months, NORDEN’s result was 6% higher, corresponding to $715 per vessel per day.

Towards the end of 2019, refineries are expected to increase production of distillates, and together with widescale distribution of IMO 2020 compliant fuel and increased off-hire from scrubber installations, this is expected to result in considerable market improvements towards the end of 2019.

NORDEN’s performance in a strong winter tanker market has created a stronger first quarter result than expected, and on this basis, the full-year expectations for Tankers were adjusted to $15 to $30 mill from the previous $5 to $20 mill.


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June 2020

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