Nordic Shipholding A/S announced financial results for the first half of 2016.
Chairman Knud Pontoppidan comments:
“Despite the weakening market in Q2 2016, equity increased by USD 2.5 million in H1 2016 and the Group repaid USD 5.2 million on finance loans. Like other product tanker owners, the Group also experienced a drop in earnings during Q2 2016. The weaker market is expected to continue during the rest of 2016 and has caused the downward revision of the forecast for 2016. During Q2 2016, the Group successfully completed the change of commercial manager for the five handysize tankers.”
The comparison figures for period ended 30 June 2015 are stated in parenthesis.
This H1 report covers the period 1 January 2016 to 30 June 2016.
For the 6 months ended 30 June 2016, the Group generated a profit after tax of USD 2.5 million, compared to USD 3.7 million in the same period last year. The weaker performance was due to the lower TCE income from the vessels deployed in the various handysize pools coupled with higher operating expenses. The profit before tax for Q2 2016 was USD 1.0 million, unchanged from the same period last year.
In H1 2016, the average daily TCE rate earned by the vessels in the various pools was below the forecasted daily rate, whilst the LR1 vessel (Nordic Anne) tracked the forecasted daily rate.
TCE earnings dropped marginally by 2.5% to USD 16.4 million (USD 16.8 million) in H1 2016 due to lower TCE earnings for the vessels in the various pools.
However, EBITDA decreased by a wider margin to USD 7.7 million (USD 8.8 million) due to the slight reduction in TCE earnings coupled with higher vessel operating cost in H1 2016.
Expenses relating to the operation of vessels in H1 2016 increased to USD 7.6 million (USD 7.0 million). This was mainly due to higher expenditure on spares and repairs of vessels as well as crewing expenses.
The Group did not make any impairment nor reversal of impairment during the first half of the year.
After taking into account depreciation, interest expense and other non-operating items, the result after tax in H1 2016 reached USD 2.5 million (USD 3.7 million).
Depreciation amounted to USD 3.6 million (USD 3.3 million). The increase was mainly due to additional depreciation arising from the reversal in Q3 2015 of impairment loss previously recognised in 2012 for the five handysize vessels.
Finance expenses totalled USD 1.7 million (USD 1.8 million) in H1 2016. The decrease was due to a write-off in financial assets of USD 0.2 million in H1 2015, partially offset by higher interest expenses in H1 2016 due to the higher 3M-USD LIBOR.
Under the loan agreement, on a quarterly basis, cash in excess of USD 6.0 million will be used to pay down the loan facility. During H1 2016, this cash sweep mechanism was activated on 31 March 2016 and a total of USD 2.7 million excess cash was used to pay down the loan. This is in addition to the regular loan amortisation totalling USD 2.5 million for H1 2016.
Cash flow generated from operations was USD 5.1 million (USD 8.9 million) mainly arising from the distributions earned by the various pools and time-charter income received for Nordic Anne, offset by payment of periodic interest expenses on the term loan. The Group invested USD 0.1 million (USD 0.7 million) in dry-docking and made a repayment of USD 5.2 million (USD 6.5 million) on the term loan facility.
Cash balance as at 30 June 2016 stood at USD 6.4 million (USD 6.1 million).
Between 30 June 2015 and 30 June 2016, equity increased from USD 34.2 million to USD 46.6 million as a result of cumulative earnings and repayment on loans. Correspondingly, the equity ratio improved from 25.8% to 35.8% during this period.
In view of the weaker outlook for the remaining months of 2016, the Board has revised downwards the forecast for 2016 previously indicated in the 2015 Annual Report. Based on the respective commercial managers’ updated forecasts, the Group expects the TCE revenue from the 5 product tankers in the pools and the time-charter income from Nordic Anne to be in the region of USD 29.0 million – USD 31.0 million, a reduction from USD 33.0 million – USD 36.0 million. The EBITDA (earnings before interest, tax, depreciation and amortisation) is expected to be in the range of USD 12.0 million – USD 14.0 million, a reduction from USD 17.0 million – USD 20.0 million. The result before tax is expected to be between USD 2.0 million – USD 4.0 million, decreased from USD 7.0 million – USD 9.0 million. This outlook for 2016 does not take into account any reversal of impairment loss nor any write-downs of vessels’ carrying amount as such are not expected.
The Board continues to source for suitable investment opportunities to grow the Company and seeks to maximise returns for shareholders.