Odfjell - waiting for the turnaround

May 11 2018

Odfjell’s results for 1Q18 reflected a challenging chemical tanker market and a busy quarter of delivery and redelivery of vessels, the company said.

EBITDA was $34 mill, compared with $41 mill in the previous quarter. A net loss of $12 mill was reported, compared to a gain of $104 mill in 4Q17.·

Odfjell Tankers recorded an EBITDA of $27 mill, compared to $31 mill in 4Q17. Higher costs related to deliveries and less revenue days were the main issues, the company said. 

Odfjell Terminals EBITDA was $6 mill, compared to $10 mill in 4Q17. The downturn was primarily due to the sale of the Singapore terminal.

Following the end of 1Q18, Lindsay Goldberg (LG) said it was considering the sale of its 49% shareholding in Odfjell Terminals. Odfjell said that it considered Odfjell Terminals as a core business, but may evaluate selling its 51% shareholding in Odfjell Terminals Rotterdam (OTR).

"The first quarter of 2018 was a busy quarter for Odfjell, as we executed on our extensive vessel delivery and re-delivery programme. The chemical tanker market remained challenging during the quarter, but we continue to outperform the general market," said Kristian Mørch, Odfjell CEO.

Norne Reasearch said that the figures were in line or slightly below its estimates.

The chemical tanker market improvement seen at the end of 4Q17 continued into the beginning of 2018 but failed to materialise in the latter half of this quarter.

However, the supply/demand balance signals a recovery in 2019 and the analyst’s outlook is unchanged.

Furthermore, it will be interesting to hear more about the sale consideration of Rotterdam Terminal’s share during the presentation. “Our estimates will have only minor adjustments and we are likely to reiterate our long term ‘Buy’ recommendation,” Norne said.

Tanker revenues were in line with the previous quarter. However, slightly higher opex related to newbuilding deliveries and higher than usual G&A expenses, plus a negative contribution from Tank Terminals brought EBITDA to $25 mill, lower than $28 mill projected.

A negative bottom line came as a no surprise, as the environment for chemical tankers remained challenging during the quarter, Norne said.

The gradual improvement in the chemical tanker market is still expected to materialise from 2H18 by Odfjell, while 2018 is also expected to be the first year since 2012 with demand growth outpacing vessel supply. Furthermore, the trade war between the US and China has not provided a physically visible impact so far. 

As Odfjell’s joint venture partner, Lindsay Goldberg, announced it was considering a sale of its share in Rotterdam Terminal, Odfjell might also evaluate selling its share, although terminals are considered as a core business and in terms of capacity, the Rotterdam Terminal share is larger than the others combined, Norne said.


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