Interim Report

INTERIM REPORT January 1 - September 30, 1999 * Income before taxes SEK 33 M (January-September 1998: SEK 54 M) * Net asset value on September 30, 1999: SEK 10 per share, unchanged from June 30, 1999. * Weak freight rates during the third quarter of 1999. FINANCIAL POSITION Income During the period January 1 - September 30, 1999, the income of the NTA Group before taxes was SEK 33 M. During the same period of 1998, the Group reported an income before taxes of SEK 54 M. Income during the third quarter of 1999 was SEK -36 M (third quarter of 1998: SEK 13 M). The very weak tanker market during the quarter was offset to some extent because NTA managed to charter at rates considerably higher than the spot market average. Income during the first quarter of 1999 was SEK 53 M (year-earlier: SEK 26 M) and during the second quarter SEK 16 M (SEK 15 M). NTA terminated its time charter on the dry bulk vessel United Respect in September. This had no impact on earnings, because in its 1998 financial statements NTA made a provision for the entire cost of discontinuing its dry bulk operations. Cash earnings Cash earnings from current operations totaled SEK 296 M (January-September 1998: SEK 502 M). This was equivalent to SEK 1.43 (SEK 2.51) per share. The calculation of cash earnings is based on the cash flow statement included in this Report. Net asset value Based on vessel valuations by independent shipbroking firms, net asset value on September 30, 1999 was estimated at SEK 10 per share, unchanged from June 30, 1999. The valuation of the VLCC newbuilding was NTA's own estimate. A change of 10 percent in the market value of the fleet would affect net asset value by about SEK 2.40 per share. Liquidity and equity/assets ratio On September 30, 1999, the NTA Group's available liquidity amounted to SEK 779 M (June 30, 1999: SEK 798 M), including unutilized overdraft facilities totaling SEK 10 M (June 30, 1999: SEK 10 M) and after subtracting SEK 203 M (June 30, 1999: SEK 210 M) in pledged funds. On September 30, 1999, the adjusted equity/assets ratio, which takes into account the market value of the fleet and commitments related to the current newbuilding program, amounted to 32 percent (June 30, 1999: 32 percent). The visible equity/assets ratio was 38 percent (June 30, 1999: 38 percent). CAPITAL EXPENDITURES NTA Group capital expenditures during January-September totaled SEK 552 M (year-earlier: SEK 574 M, excluding the acquisition of Nordström & Thulin AB). Capital expenditures for the period included final payment for the Nord Hope and Nord Horn in conjunction with their delivery to NTA during the second quarter of 1999. Construction of the VLCC contracted from the Daewoo Shipyard in South Korea is progressing as planned, and delivery is expected to occur early in 2000. THE TANKER MARKET DURING 1999 Employment of the NTA fleet During the period January - September 1999, the fleet was mainly employed in the spot market. The VLCCs Argo Pallas and Argo Daphne, however, were time- chartered at rates that were substantially higher than VLCC spot rates. The Aframax vessels Nord Jahre Princess and North Pacific are time-chartered out until February 2000 and October 2001, respectively. NTA's average net revenue, based on all calendar days during the period, including offhire and time-charter contracts Jan-Sep Jan-Sep Jul-Sep Jan-Dec USD/day 1999 1998 1999 1998 VLCC 25,200 31,600 20,600 29,800 ULCC 13,200 28,300 9,900 26,000 Suezmax 16,900 20,900 15,700 20,300 Aframax 15,000 15,900 13,700 15,800 The tanker market The oil production ceiling by the Organization of Petroleum Producing Countries (OPEC) was the dominant reason behind the continued poor tanker market during the third quarter of 1999. Tanker tonnage was hurt both by lower shipping volumes and by sharply higher bunker prices. Due to the production ceiling, the average oil price climbed during the quarter by more than 50 percent, compared to the first half of 1999. The deterioration in the freight market was especially dramatic for VLCCs, which saw freight rates fall by 55 percent during the third quarter, compared to the same period of 1998. This was because the drop in oil production was largest in the Middle East, the main loading region for these vessels. Freight rates for Suezmax and Aframax tonnage fell by 34 and 42 percent, respectively. The weak tanker market and the growing number of vessels reaching 25 years of age have led to increased scrapping. So far during 1999, about 12 million deadweight tons (dwt) have been scrapped, which is as much as deliveries from shipyards. Due to low newbuilding prices, order activity for new vessels remained high in the third quarter of 1999. So far this year new tanker contracts amounted to approximately 10 million deadweight tons, equivalent to about 30 percent of world shipyard orderbooks. The total current orderbook for VLCC, Suezmax and Aframax tonnage now stands at 35 million tons deadweight, or 15 percent of the global fleet in these categories. Despite rising oil consumption and the International Energy Agency (IEA) forecasts of a 1.5 percent global increase in demand this year, and of 2.4 percent in 2000, oil prices have now moved up to levels that - if sustained - may affect the fragile recovery of the Far Eastern economies. A setback there would in turn impact negatively again on these forecasts. High oil prices may well also affect the level and the speed of restocking oil inventories. On balance therefore, and short of unforeseen circumstances, it is not expected that the tanker market supply/demand equation will change much for the rest of this year. Although growth in energy demand should have a positive effect on the demand for tankers, one must also remain conscious of the detrimental effects of overordering of newbuilding tonnage, and the potential for an economic slowdown resulting from higher costs. OTHER EVENTS The millennium shift All essential equipment on NTA's vessels has been inventoried with respect to their function on critical dates around the transition to the year 2000. This study has not revealed any critical technical problems. Older systems and components have undergone fine-tuning and upgrading. Functional tests have been conducted on board, and safety procedures for alternative operation of systems in case of any disruptions in their function have been devised and incorporated into the vessels' safety plans and drill procedures. INFORMATION SCHEDULE - The Year-End Report of 1999 results will be published on February 23, 2000. - Interim Report for the first quarter will be published on April 26, 2000. NTA's web site contains publicly available information about the Company and freight rates. Current press releases, Interim Reports etc. are also published there. The address is: www.ntargonaut.com Stockholm, October 28, 1999 N&T ARGONAUT AB (publ) Anders Berg President and CEO Any questions about this Interim Report can be answered by Anders Berg, President and CEO, or Björn Hansson, CFO, tel. +46 8 613 19 00. The Company's auditors have not subjected this report to examination. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/10/28/19991028BIT00100/bit0001.doc The full report http://www.bit.se/bitonline/1999/10/28/19991028BIT00100/bit0002.pdf The full report