The average daily TCE rate earned by the vessels in the Handytankers Pool was below the forecast daily rate, and also lower than the rates earned during the same period in 2015, whilst the LR1 ‘Nordic Anne’ tracked the forecast daily rate.
The softer tanker market led to a decline in gross revenue primarily from the vessels in the Handytankers Pool, and TCE earnings fell to $8.5 mill in 1Q16, compared to $9.2 mill in 1Q15.
EBITDA decreased to $4.2 mill from $5.2 mill in the same periods, due to the reduction in TCE earnings and higher vessel operating cost in 1Q16.
Expenses relating to the operation of vessels increased to $3.8 mill from $3.4 mill in 1Q16. The increase was mainly due to a rise of expenditure on vessel spares and repairs.
During 1Q16, depreciation amounted to $1.8 mill ($1.7 mill in 1Q15).
Under the loan agreement, cash in excess of $6 mill will be used to pay down the loan facility. As in the previous four quarters, this cash sweep mechanism was activated in 1Q16 and $2.7 mill was used to pay down the loan, in addition to the regular loan amortisation.
As a consequence of the cumulative earnings and repayment on loans, the equity increased from $33.2 mill to $45.6 mill and the equity ratio improved from 24.2% to 34.3% between 31st March, 2015 and 31st March, 2016.
Cash flow generated from vessel operations was $3.8 mill ($5.2 mill in 1Q15) mainly from the distributions earned by the Handytankers Pool and timecharter income received for ‘Nordic Anne’, offset by payment of periodic interest expenses on the term loan.
In 1Q16, Nordic paid $0.2 mill in drydocking fees and made a partial repayment of $4 mill ($2.1 mill in 1Q15) on the term loan facility.
Cash and cash equivalents stood at $6.3 mill, a reduction of $1.1 mill from 31st March, 2015.
Nordic will withdraw the five vessels from the Handytankers Pool. The said that pool earnings can be optimised by being a member of a smaller and more focused pool as the company will have a greater influence on the way the pool is operated.
The first vessel is expected to be redelivered to Nordic on/around 25th May, 2016 with the remaining four vessels being redelivered within the 90 days’ redelivery window.
Three Handysize vessels will enter the UPT Handy Pool, while the other two vessels will be employed in the Hafnia Handy Pool.
Despite the current softer sentiments on the tankers’ market, the outlook for 2016 - based on the respective commercial managers’ forecasts - remained unchanged, and as indicated in the 2015 Annual Report.
For 2016, Nordic expected the TCE revenue from the five product tankers in the pool and the timecharter income from ‘Nordic Anne’ to be in the region of $33 mill – $36 mill. EBITDA is expected to be in the range of $17 mill – $20 mill, while the result before tax is forecast to be between $7 mill – $9 mill.
This outlook for 2016 does not take into account any further reversal of impairment loss nor any write-downs of vessels’ carrying value, Nordic explained.