INTERIM REPORT H1 2012

8/31/2012 3:02 AM EST

Nordic Shipholding A/S
Half Year financial report

INTERIM REPORT H1 2012

Summary

Nordic Shipholding sold its chemical tanker activities and the entire
organization in Q2 to the private equity fund Triton. If nothing else is
mentioned, the discussions of financial data relate to the continuing business.
After the sale, Nordic Shipholding’s activities consist of six product tankers
– 5 Handy Size (35-38,500 dwt) vessels and 1 LR1 (75,000 dwt) vessel. 

The divestment to Triton lead to a restructuring of the Company to a pure
tonnage provider and the general  management role has been contracted to
Tankers Inc. Holdings A/S Therefore management positions in Nordic Shipholding
were closed in July 2012, and costs of approx. USD 1 million will be granted as
compensation. These compensation costs will be realized in Q3 2012. 

Due to the Company’s financial situation and the very simple and transparent
organization, external communication such as website updates and shareholder
newsletters are scaled down to a minimum in an effort to keep costs low. While
acknowledging this may affect the communication flow to shareholders, it is a
necessity. Nordic Shipholding is focusing on creating a slim and efficient
operation to regain profitability. The company expects to distribute a
newsletter later in 2012. 

In H1 2012, the Time Charter Equivalent (TCE) revenue decreased by USD 0.4
million from USD 13.8 million to USD 13.4 million in spite of an increase in
sailing days. The low freight rates, which have dominated the Company’s market
segments during the previous three years, remained at unsatisfactory low
levels. EBITDA was USD 4.7 million in H1 2012, down from USD 6.5 million in H1
2011. The result after tax for continuingoperations was a loss of USD 3.6
million. 

Despite the bad market the Company delivered a positive cash flow for its
continuing operations of USD 0.5 million deriving from operating activities.
The cash flow has been negatively affected in Q2 by USD 0.5-1 million in
one-off costs in connection with the divestment of the chemical division. The
comparable figure for H1 2011 was USD 0.5 million. 

For 2012 Nordic Shipholding maintains the expectations as announced in the
Annual Report for 2011. The expectation for its continuing operations of TCE
revenues is in the region of USD 23 – 27 million, with an EBITDA of USD 7 - 10
million. The result before tax for the continuing operations is expected to be
a loss of USD 7 to 12 million before any write-downs on vessels, goodwill or
other assets. 

The result before tax including discontinued operation is expected to be a loss
of USD 15 to 20 million including an actual book loss from the sale of the
chemical tanker activities of USD 4.6 million but before any write-downs on
vessels, goodwill or other assets. 

The divestment of the chemical tanker business was approved at the Annual
General Meeting on 20 April 2012 and the divestment was completed on 30 April.
The divestment price of USD 30 million was split into two: 

  1. USD 10 million in cash that was applied to reduce bank debt in the product
     tankers remaining in Nordic Shipholding, and
  2. USD 20 million that was lent to the company acquiring the chemical tankers.
     

The divestment has given the Company time to achieve a permanent solution to
its financial challenges and the board is actively pursuing a number of
different options. The process for establishing a long-term solution is
proceeding according to plan. However, if new equity is not injected and/or the
moratorium granted is not extended beyond 31 March 2013, the Company may be
unable to honor its commitments towards its banks, which consequently may
result in loss of equity or bankruptcy. However, the company expects to find a
solution creating value for lenders and shareholders. 

The Company’s assets passed the impairment test end Q2 2012 and therefore no
write-down has been made. However, book value is $163.8 million versus broker
estimates of $141.3 million. Should the Company be forced to sell the remaining
product tankers in a distressed sale, the equity will as a consequence hereof
probably be lost.