November 25, 2020
NORDIC SHIPHOLDING A/S
Company Announcement: 10/2020
Published via NASDAQ OMX on November 25, 2020
Q3 Result 2020
The comparison figures for period ended 30 September 2019 are stated in parenthesis.
The very high Time Charter Equivalent (“TCE”) rates arising from the short-term surge in demand for tonnage caused by the COVID-19 pandemic and the oil price war which started in Q1 2020 positively impacted the Group’s earnings in 9M 2020. Despite the downward correction in daily TCE rate from May 2020, the average daily TCE rates earned in Q3 2020 and 9M 2020 by the 5 vessels were approximately 11% and 53% higher than the average TCE rates earned in Q3 2019 and 9M 2019, respectively.
The TCE revenue in Q3 2020 falls short of expectation due to lower than expected daily TCE rates, exacerbated by lower contribution from Nordic Hanne as she was off-hired since 11 September 2020 due to a contact damage during a Ship-to-Ship operation. She resumed trading on 28 October 2020.
For the 9 months ended 30 September 2020, the Group incurred a loss after tax of USD 3.9 million (including a one-off impairment loss of USD 10.7 million on the vessels), compared to a loss after tax of USD 4.7 million in the same period last year. Excluding the impairment loss of USD 10.7 million (USD 0.2 million), the Group generated a profit after tax of USD 6.8 million for the 9 months under review (loss after tax of USD 4.5 million). The improved TCE revenue from the vessels contributed to the improved results in 9M 2020.
Despite the sale of Nordic Ruth in July 2019, TCE revenue rose 57.3% to USD 24.0 million (USD 15.2 million) in 9M 2020 primarily from higher TCE revenue generated by the vessels in the pools compared to the same period last year. Further, the TCE revenue in 9M 2019 were impacted negatively by the dry-dock of 3 vessels (Nordic Anne, Nordic Agnetha and Nordic Amy) in Q3 2019.
Expenses relating to the operation of vessels in 9M 2020 decreased to USD 8.6 million (USD 10.8 million) mainly due to the sale of Nordic Ruth in July 2019.
EBITDA increased significantly to USD 14.2 million (USD 3.3 million) as a result of improved TCE revenue in 9M 2020. Other external costs remained relatively unchanged at USD 1.0 million (USD 1.0 million).
In line with management’s strategy to secure longer term financing in the renegotiation of the Group’s loan facilities, two co-brokers were appointed in May 2020 to officially test the buying interest for one vessel, Nordic Hanne, a handysize tanker. Hence, the Group recognised impairment losses totaling USD 4.2 million in 9M 2020 following the reclassification of Nordic Hanne as an asset held-for-sale in Q2 2020. It is noted that the estimation of Nordic Hanne’s expected sale value is highly uncertain. The Group also recognised impairment losses of USD 6.5 million on the other four vessels in 9M 2020 primarily due to reduced earnings expectations. The Group realised a loss of USD 0.2 million on asset-held-for-sale in 9M 2019 related to the sale of Nordic Ruth in July 2019.
After accounting for depreciation, impairment losses, interest expenses and other finance expenses, the loss after tax was USD 3.9 million in 9M 2020 (loss of USD 4.7 million).
Between 31 December 2019 and 30 September 2020, equity decreased from USD 7.9 million to USD 4.0 million as a result of the cumulative loss during the period. Consequently, the equity ratio declined from 8.1% to 5.1%.
As part of the loan restructuring concluded with the lending banks in Q4 2018, the financial covenants under the original loans such as (i) minimum value (fair market value of vessels as a percentage of outstanding loan) and (ii) minimum equity ratio are waived whilst the minimum liquidity level is reduced. The relief from these financial covenants are provided till and including 30 September 2020. In addition, the quarterly loan instalments due from December 2018 to September 2020 are deferred to December 2020 where all of the Group’s debts to the lending banks mature. The Company, together with its majority shareholder, are in active discussions with the lending banks on securing longer term financing for the Group. Negotiations are ongoing and are expected to be completed during December 2020 when an announcement will be published. It is management’s expectation that the lenders will finance the Company in a period longer than 31 December 2020.
The Group is also subject to a quarterly cash sweep mechanism under which the Group after payment of instalments and interest under the loan agreement, must apply any cash and cash equivalents of the Group in excess of USD 6.0 million towards prepayment of the loan. During 9M 2020, this cash sweep mechanism was activated on 31 March 2020, 30 June 2020 and 30 September 2020, and a total of USD 13.3 million excess cash was used to pay down the loan (USD NIL cash sweep for 9M 2019).
During the financial period under review, cash flow generated from operations was USD 14.1 million (USD 2.0 million) contributed by earnings from the pools.
As at 30 September 2020, cash and cash equivalents stood at USD 6.2 million (USD 6.4 million, including balances held in dry-docking reserve bank accounts).
The outlook for 2020 remains unchanged as indicated in the Company Announcement 09/2020 on 20 November 2020.
For the rest of 2020, the five vessels will continue to be commercially deployed on a pool basis (including the vessel currently earmarked for sale). Barring unforeseen circumstances, the TCE revenue for 2020 is forecasted to be in the region of USD 27.0 million – USD 29.0 million.
After accounting for operating expenditure budgeted by the respective technical managers, the Group’s expected EBITDA (earnings before interest, tax, depreciation and amortisation) for 2020 is in the range of USD 13.0 million – USD 15.0 million. The result before tax is expected to be a loss between USD 5.0 million – USD 7.0 million including impairment loss.
For further information please contact:
Knud Pontoppidan, Chairman of the board, Nordic Shipholding A/S: +45 39 29 10 00
NSH Q3 2020 Financial announcement
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