TORM plc third quarter 2016 report

"TORM delivered a small profit for the third quarter despite operating in a soft product tanker market. A strong fundamental oil demand was not enough to sustain the freight market, as continued inventory drawdowns and low naphtha exports to the Far East limited the transportation requirements," says Executive Director Jacob Meldgaard.

In the third quarter of 2016, TORM realized a positive EBITDA of USD 40m and a profit before tax of USD 2m.

• The EBITDA for the third quarter of 2016 was USD 40m (2015, same period, pro forma: USD 105m)^[1]. The profit before tax for the third quarter of 2016 was USD 2m (2015, same period, pro forma: USD 72m). Cash flow from operating activities was positive with USD 38m in the third quarter of 2016 and earnings per share (EPS) was USD 0.0.
   
• During the third quarter of 2016, the product tanker freight rates softened compared to the previous quarter, and freight rates were well below the levels in the same period in 2015. In general, the soft market can be attributed to high gasoline and diesel stocks globally and a limited demand for transportation of naphtha from the Atlantic Basin to the Far East. TORM's product tanker fleet realized average TCE earnings of USD/day 14,391 and realized a gross profit of USD 50m (2015, same period, pro forma: USD 114m) in the third quarter of 2016.
   
• On 15 September 2016, TORM distributed an interim dividend payment of USD 25m, equivalent to 0.4 USD/share, as reported on 16 August 2016 in the second quarter release. Further, TORM has repurchased own shares for a total consideration of USD 2.3m during the third quarter. TORM may continue to conduct limited share repurchases in the market.
   
• The carrying value of the fleet including prepayments was USD 1,577m as of 30 September 2016 excluding outstanding installments on the LR2 newbuildings of USD 158m. Based on broker valuations, TORM's fleet including newbuildings had a market value of USD 1,541m as of 30 September 2016. Compared to the broker valuations as of 30 June 2016, the fleet value has decreased by USD 73m (~4.5%). TORM estimates the fleet's total long-term earning potential each quarter based on future discounted cash flows in accordance with IFRS requirements. The estimated value for the fleet as of 30 September 2016 supports the book value.
   
• Net interest-bearing debt amounted to USD 610m as of 30 September 2016.
• On 11 November 2016, TORM signed a term sheet with Danish Ship Finance (DSF) providing USD 30m of new financing with six-year maturity against collateral in TORM Loke and TORM Troillus. The loan agreement will be a new tranche on the Company's existing DSF loan agreements.
   
• The Board of Directors is pleased to announce that Senior Vice President Christian Søgaard-Christensen has been appointed Chief Financial Officer (CFO) and will take up the position as of today. Christian Søgaard-Christensen has been with TORM since 2010. He is currently acting CFO & Head of Corporate Support and has been part of the Senior Management Team since 2013.
   
• TORM had undrawn credit facilities and cash of approx. USD 267m at the end of the third quarter of 2016. TORM's order book stands at four LR2 newbuildings with expected delivery in 2017 and 2018. Outstanding CAPEX relating to the order book amounted to USD 158m and is fully financed.
   
• Based on broker valuations as of 30 September 2016, TORM's net asset value (NAV), excluding charter commitments, is estimated at USD 798m, equivalent to a NAV/share of USD 12.8 or DKK 85.5.
   
• Equity amounted to USD 963m as of 30 September 2016, equivalent to a book equity/share of USD 15.5 or DKK 103.1 excluding treasury shares and outstanding warrants, giving TORM an equity ratio of 55%.
   
• For the full year 2016, TORM expects a positive EBITDA in the range of USD 185 - 205m (revised from USD 210 - 250m) and a profit before tax in the range of USD 30 - 50m (revised from USD 50 - 90m). As 5,680 earning days in 2016 are unfixed as at 30 September 2016, a change in freight rates of USD/day 1,000 will impact the profit before tax by USD 5.7m.

ABOUT TORM
TORM is one of the world's leading carriers of refined oil products. The Company operates a fleet of approximately 80 modern vessels with a strong commitment to safety, environmental responsibility and customer service. TORM was founded in 1889. The Company conducts business worldwide. TORM's shares are listed on Nasdaq Copenhagen (ticker: TRMD A). For further information, please visit www.torm.com.

SAFE HARBOR STATEMENTS AS TO THE FUTURE
Matters discussed in this release may constitute forward-looking statements. Forward-looking statements reflect our current views with respect to future events and financial performance and may include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and statements other than statements of historical facts. The words "believe," "anticipate," "intend," "estimate," "forecast," "project," "plan," "potential," "may," "should," "expect," "pending" and similar expressions generally identify forward-looking statements.

The forward-looking statements in this release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Although the Company believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies that are difficult or impossible to predict and are beyond our control, the Company cannot guarantee that it will achieve or accomplish these expectations, beliefs or projections.

Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of the world economy and currencies, changes in charter hire rates and vessel values, changes in demand for "ton miles" of oil carried by oil tankers, the effect of changes in OPEC's petroleum production levels and worldwide oil consumption and storage, changes in demand that may affect attitudes of time charterers to scheduled and unscheduled dry-docking, changes in TORM's operating expenses, including bunker prices, dry-docking and insurance costs, changes in the regulation of shipping operations, including requirements for double hull tankers or actions taken by regulatory authorities, potential liability from pending or future litigation, domestic and international political conditions, potential disruption of shipping routes due to accidents, political events or acts by terrorists.

In light of these risks and uncertainties, you should not place undue reliance on forward-looking statements contained in this release because they are statements about events that are not certain to occur as described or at all. These forward-looking statements are not guarantees of our future performance, and actual results and future developments may vary materially from those projected in the forward-looking statements.

Except to the extent required by applicable law or regulation, the Company undertakes no obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.

^[1] )     On 13 July 2015, TORM A/S, its lenders and Oaktree Capital Management ("Oaktree") completed a restructuring. In return for a vessel contribution by means of the shares in OCM (Gibraltar) Njord Midco Ltd. ("Njord"), Oaktree obtained a controlling equity stake in TORM A/S. Njord is considered the accounting acquirer of TORM A/S and the continuing reporting entity. Reported comparative figures in the first two quarters of 2015, presented in the Consolidated Interim Financial Statements, reflect the activity of Njord only, whereas for the full year 2015 the period from the date of the completion of the Restructuring reflects the combined activities of TORM and Njord in the name of the legal parent, TORM A/S. Comparative pro forma figures presented in this report for 2015 present TORM as if the Restructuring had been undertaken as of 1 January 2015.