Further sale of vessels and adjustment of expectations for 2009
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Dampskibsselskabet NORDEN A/S
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NASDAQ OMX Copenhagen A/S Announcement no. 22
Nikolaj Plads 6 12 May 2009
1067 Copenhagen K
Further sale of vessels and adjustment of expectations for 2009
NORDEN has agreed to sell further 2 vessels, which affects the expectations for
2009. Since other conditions affecting the expectations also have changed, and
the Company at the same time is close to finishing the interim report for the
first quarter, NORDEN finds it appropriate to give this update. The
expectations for the operating profit (EBIT) for 2009 are narrowed down to USD
110-160 million.
Profits from the sale of vessels
NORDEN has exercised its purchase option on the Panamax bulkcarrier NORD
JUPITER for the purpose of reselling the vessel, and today, the Company has
entered into an agreement on selling NORD JUPITER for delivery to the new
owners in the third quarter. In addition, NORDEN has sold the Handymax
bulkcarrier NORD WHALE for agreed delivery to the new owners in May. The sale
of NORD JUPITER and NORD WHALE results in total profits of approximately USD 15
million.
Consequently, NORDEN expects total profits from the sale of vessels of
approximately USD 55 million in 2009, while the previous expectations on 15
April were approximately USD 40 million, and the initial expectations on 10
March were USD 25 million. The sale of vessels is expected to generate total
proceeds of USD 344 million in 2009, and in addition to releasing cash and
generating profits, the sale of vessels contributes to a more appropriate
exposure of NORDEN to the markets considering that the Company takes delivery
of 8 newbuildings and 4 long-term chartered vessels with purchase option in the
rest of 2009.
Results for the first quarter 2009 (preliminary figures)
In the first quarter of 2009, NORDEN attained a net profit of USD 73 million,
of which the main part comes from positive unrealised adjustments of the value
of bunker contracts and FFAs for hedging of ship days and cargoes. The
operating profit (EBIT) for the quarter was approximately USD 22 million, and
both the Dry Cargo Department and the Tanker Department had positive operating
income at EBITDA level as well as EBIT level. NORDEN's liquidity (cash and
securities) was strengthened by USD 52 million to approximately USD 875 million
at the end of the quarter.
The results are generally affected by the poor freight markets in both dry
cargo and product tanker, but in addition to this, earnings in the Dry Cargo
Department are also very negatively affected by operating loss on a number of
expensive Panamax units, which NORDEN chartered in the historically high
markets in 2007-2008 at charter hire levels of USD 50,000 or more. The majority
of these vessels have now been redelivered, which strongly contributes to the
decrease in the Dry Cargo fleet's operating costs for the rest of the year.
In addition, earnings in the first quarter are affected by settlements with
counterparties in the Dry Cargo Department and to a less extent by
non-recurring costs as a result of shore-based cost adjustments (as disclosed
in company announcement no. 2/13 January).
Expectations for 2009
Compared to 10 March when NORDEN presented its overall expectations for 2009,
the following significant conditions have changed:
• NORDEN has renegotiated and settled several of the counterparty disputes in
dry cargo which were deemed most critical based on an assessment of the
counterparty's financial ability and will to fulfil their obligations. These
settlements have created more certainty about the Company's expectations, but
have on the other hand reduced expected contractual income in 2009.
• The disputes regarding cargo contracts which could not be settled have been
referred to the court or arbitration by NORDEN, and with the prospect of these
disputes potentially running for years, NORDEN has decided to remove the
expected contractual income from these contracts from the expectations for
2009. Although it is only a matter of a few disputes, they amount to more than
USD 100 million as the claim against Rusal Trading Int. is one of them.
• The product tanker market has developed considerably worse than expected. The
spot rates in e.g. MR have dropped approximately 40% since the beginning of
March, and similar drops in the forward rates affect the approximately 50% of
ship days in Tankers in 2009 which have not yet been covered. This is estimated
to impact earnings for the year (EBITDA) negatively by up to 50 million.
With the abovementioned settlements and disputes, the Dry Cargo Department has
addressed the counterparty disputes known in the first quarter, and the Company
has not experienced any new significant counterparty disputes after the end of
the quarter. This reorganisation of the counterparty portfolio has - together
with the high operating costs of the chartered Panamax vessels - negatively
impacted the earnings of the Dry Cargo Department and the Company in the first
quarter, which is expected to be the worst quarter of the year with respect to
earnings. In the coming quarters, EBITDA in total for the Group is expected to
improve.
Based on the above, NORDEN's expectations for 2009 are revised as follows:
• EBITDA is expected to be in the range of USD 100-150 million, whereas the
expectations announced in March were USD 100-340 million.
• As mentioned, profits from the sale of vessels are expected to amount to
approximately USD 55 million.
• EBIT (the operating profit) is expected to be in the range of USD 110-160
million against expected USD 85-325 million in March and USD 100-325 million on
15 April.
The expectations have been calculated on the basis of the capacity which is at
NORDEN's disposal today. Any rulings by court or arbitration in NORDEN's favour
in pending cases may affect expectations positively. On the other hand, it
should be noted that the uncertainties in relation to the expectations continue
to remain higher than usual due to the world economic crisis.
NORDEN will further qualify the expectations in the interim report for the
first quarter, which will be presented on 26 May 2009.
Kind regards,
Dampskibsselskabet NORDEN A/S
Mogens Hugo Carsten Mortensen
Chairman President & CEO
Contact at tel. +45 3315 0451: Carsten Mortensen, President & CEO, Martin
Badsted, Senior Vice President, and Hans Bøving, Head of Corporate
Communication.
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Dampskibsselskabet NORDEN A/S
52, Strandvejen
DK-2900 HELLERUP
www.ds-norden.com
