Major Drybulk Ship Operator Lowers 2014 Expectations

Danish shipping company D/S Norden, one of the biggest dry bulk shipping companies in the world, said it would not make a profit this year after posting a loss in the second quarter due to low freight rates and falling demand in Asia.

The firm's loss before interest, tax, depreciation and amortisation (EBITDA) increased to $7 million against $3.9 million in losses a year ago and compared to the $19.3 million-loss expected by analysts polled by Reuters.

The company lowered its EBITDA forecast for 2014 to range of a loss of $60 million and breaking even, from a previous guidance of a loss of $40 million loss to a profit of $60 million.
"The market situation went from bad to worse in the quarter. Currently it cannot be worse in the spot market," Executive Vice President Martin Badsted told Reuters by telephone.

As other shipping companies, D/S Norden was hit hard by an Indonesian export ban of bauxite and nickel while China reduced its transportation needs by drawing on its mineral stocks.

China also increased its hydroelectric generation and increased coal production for its steel industry -- both factors reducing the country's needs for coal imports that companies such as D/S Norden would have benefitted from.

"The good progress Norden experienced at the start of 2014 won't repeat soon as the weakness in the market continues in third quarter. But it has adjusted its short-term strategy by reducing its fleet size, which is a sign of common-sense and moderation," Sydbank analyst Jacob Pedersen said.

The bulk of the company's fleet of 255 vessels is comprised of small and mid-range ships in segments such as handysize, supramax and Panamax and many vessels are located in the Atlantic. Freight rates have fallen the most for small and mid-range ships and in the Atlantic.
D/S Norden operates with a large share of short-term charters, which has allowed it to cut the fleet size by 25 vessels in the quarter.

The downward adjustment of outlook for the full year is mainly due to the weak development in the dry cargo unit. The company's tanker business is expected to deliver EBITDA of between $15 and $45 million for the year.

Norden's shares were down 2.7 percent at 164.60 Danish crowns at 0748 GMT, underperforming the main Copenhagen blue-chip index which is up 0.4 percent.

(By Ole Mikkelsen)