Nordic Shipholding turns the corner

Nov 27 2015

Higher average TCE rates from the vessels deployed in Handytankers Pool, higher TCE income earned by the LR1 ‘Nordic Anne’, as well as lower vessel operating expenses, contributed to Nordic Shipholding’s better performance in the nine months of 2015.

For the period, Nordic Shipholding generated a profit after tax of $12.2 mill, which included a one-off gain of $5.8 mill from the reversal of impairment loss on the vessels deployed in the Handytankers Pool. 

Excluding the reversal of previous years’ impairment, the Group generated a profit after tax of $6.4 mill, compared to a loss after tax of $4.6 mill in the same period of 2014.

Despite the higher gross freight revenue generated by the vessels in the pool, the total gross revenue earned during the period was marginally lower by 2.5% as the 9M 2015 revenue from the timecharter income from the ‘Nordic Anne’, whilst last year’s gross revenue represented freight income from the LR1.

TCE earnings rose 41.3% to $26.6 mill, compared to $18.9 million, in the period, due to higher TCE earnings for the vessels in the Handytankers Pool arising primarily from higher gross freight rates and reduced bunker expenses. The TCE income from the three-year timecharter locked in for ‘Nordic Anne’ was also higher than the LR1 pool earnings. 

Vessel operations expenses fell 18% to $11.1 mill from $13.6 million. This fall was largely attributed to last year’s change of technical managers and a one-off cost incurred in 2014 of $1.8 mill, relating to the change of technical managers.

As a result, the Group’s EBITDA amounted to $14 mill, compared with $ 2.6 mill, due to the higher TCE earnings and the one-off costs incurred in 2014.

Under a loan agreement, on a quarterly basis, cash in excess of $6 mill will be used to pay down the loan facility. During the first nine months of this year, this cash sweep mechanism was activated on 31st March, 2015, 30th June, 2015 and 30th September 2015. A total of $9.1 mill excess cash was used to pay down the loan. This is in addition to the regular loan amortisation totalling $3 mill.

As a consequence of the result and repayment on loans, the equity increased from $23.6 mill to $42.8 mill and the equity ratio improved from 17.8% to 31.4% between 30th September, 2014 and 30th September, 2015.

Cash flow generated from operations was $14.8 mill, compared to $3.3 mill mainly arising 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. Cash balance as at 30th September, 2015 stood at $6.4 mill, compared to $4.6 mill the previous year.

The 3Q15 performance was better than forecast primarily due to the $5.8 mill reversal of impairment loss, as well as higher TCE rates earned by the vessels in the Handytankers Pool.  As a result, the board revised the outlook for the full year. The Group expects 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, an increase from $31 mill – $34 mill reported in the 1H15 interim report.

After accounting for operating expenditure, the Group expects EBITDA to be in the range of $16 mill – $19 mill, up from $15 mill – $18 mill previously forecast. The result before tax is expected to be between $13 mill and $15 mill, revised upwards from $5 mill – $8 mill, primarily due to the reversal of 2014’s impairment loss of $5.8 mill. 

Chairman Knud Pontoppidan said in comment: “The positive momentum for Nordic Shipholding continued into the third quarter. A strong market, lower operating cost and an impairment reversal led to a profit of $12.2 mill for the first nine months, compared to a loss of $4.6 mill for the same period in 2014.

“This has enabled substantial repayments on the loan facilities, resulting in an improved equity ratio. The improved performance has led to an upward revision in the forecast for the full year,”he said. 

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