Nordic Tankers: Weak Rates Drive Revenues Down
In its summary of interim report Q3 2011, Nordic Tankers said that in the third quarter of 2011 the time charter equivalent (TCE) revenue dropped back to the low levels of the first quarter of 2011. The main reason was the continued weak freight rates, a result of low general market activity combined with a slow summer market in the first two months of the quarter. EBITDA was $0.7 million in Q3 2011, down from $4.8 million in Q2 2011. Nevertheless compared to the first nine months of 2010 both revenue and EBITDA have developed positively, the primary reason being an improved leverage of the cost base.
Year to date the TCE revenue in Nordic Tankers increased by $23.5 million to $74.1 million compared to the same period in 2010 ($50.6 million). EBITDA was $7.0 million year to date (2010: $2.8 million), and result before before tax was a deficit of $28.2 million (2010: $-22.2 million). The Q3 result includes a write-down in the chemical segment on vessels and attached goodwill of $16.6 million. The write-down stems from decreasing vessel values, and is based on both external broker valuations and an impairment test made by the Company. The net result further includes an upwards revaluation of $5.2 million, which was made in Q1 2011 and is related to the acquisition of the remaining vessels from Zacchello Group.
Year to date the cashflow was $-4.2 million, which primarily derives from low freight rates, partly counteracted by an improved level of working capital. The comparable figure for Q3 2010 was an increase of $18.1 million mainly as a result of the cash generated from the transaction with Clipper Group in January 2010 and the rights issue in May 2010. Net cash flow was $–6.1 million in Q1 2011, however, the increase in freight rates as well as improvements in working capital resulted in a positive net cash flow of $4.3 million in Q2 2011, before Q3 caused negative cashflow of $-2.4 million. The cashflow from operating activities year to date increased by $5.7 million compared to the same period last year.
For the year 2011 Nordic Tankers maintains the expectations to TCE revenue, whereas the expectations to the result before tax, write-ups, write-downs, and exchange rate adjustments is narrowed down to between $-20 and -25 million, from previously between $-15 and -25 million. Expectations to cashflow are narrowed down to between $-2 and -6 million from previously between $0 and -10 million. Expectations to EBITDA is changed from $10-20 million to $6-12 million.
As described in the prospectus from 2010 and in Nordic Tankers’ two latest annual reports, the agreements regarding deferred payments on a significant part of the financial debt between Nordic Tankers and its banks will expire on 31 December 2011. Over the previous months, management and the banks have discussed a potential extension of the agreements. These discussions are still ongoing and a solution is expected within the foreseeable future. In order to allow sufficient time to create the right long-term solution the banks have agreed to extend the existing agreements to 31 March 2012.
“We have to acknowledge that both the chemical- and product tanker segments – similar to the larger tanker segments where Nordic Tankers is not present – still remain in an unprofitable and difficult situation, with very little activity and resulting historically low freight rates. The period with much too low freight rates has prevailed longer than we or most industry participants expected, and no signs of a recovery are visible in the immediate future. Management continues its determined efforts to lead the Company through these challenging times best possible” says CEO Tommy Thomsen.
