Dampskibsselskabet Norden A/S

CSE:DNORD

Earnings Call Transcript 2019-Q1

[Jan Rindbo, Chief Executive Officer]

[Audio Gap]Strong winter markets for tankers. Surprisingly steep decline in the dry cargo market. Those were the characteristics of the first quarter of 2019. NORDEN was well positioned towards a much improved tanker market and navigated through a challenging dry cargo market to come out overall profitable. In total, NORDEN generated an adjusted result for the period of $7 million, corresponding to an EBIT of $6 million. The financial position of NORDEN remains solid. At the end of the quarter, NORDEN's available liquidity amounted to more than $260 million, here of nearly $190 million in cash and securities. Turning to our business units. Our Dry Operator navigated the dry cargo market in which the weak rates seen in the fourth quarter of 2018 deteriorated further with an accelerating pace in the first quarter. On the back of slowing Chinese imports, trade tensions and not least a tragic dam accident leading the Brazilian authorities to shut down a number of iron ore mines, the Dry Cargo market more or less collapsed. Dry Operator had predicated the market to be weak in the first quarter, but not to the extent that it actually played out. Within 3 weeks, Panamax rates were nearly halved and despite quick response from Dry Operator, the adjusted result for the quarter amounted to a loss of $3 million. It is perhaps worth mentioning that over the last four quarters, the Dry Operator has generated an adjusted result of $24 million, despite the first quarter result. In all, we consider this a highly attractive risk adjusted result given the lower capital requirements of this business unit. As the prices in Dry Cargo did not suffer to the same extent as the spot market. Dry Owner utilized this to sell 4 aging vessels in the first quarter as part of the ongoing strategic efforts of becoming more asset-light. We're aiming for a fleet size that is tradeable and at the end of the quarter, NORDEN owned 14.5 Dry Cargo vessels. Dry Owner ended the year with high coverage and was protected against a very weak market. As a result, Dry Owner was able to generate a breakeven result. Since the first quarter, the Dry Cargo market has improved somewhat. However, we are not expecting the market in 2019 to be better than 2018. This is also why Dry Owner for the second quarter has covered more than 90% of the vessel days. The story in tankers is quite different. NORDEN ended 2019 with almost 13,000 open days in tankers, and was thereby well positioned for a strong tanker market. First quarter is usually a strong season due to the demand for heating in the northern hemisphere. And this resulted in a significant improvement in rates. With daily earnings of around $17,000 for Handysize vessels and $16,000 for MRs, NORDEN outperformed the benchmark in the form of the average one-year T/C rate, during the last 12 months was 6%. This corresponds to an extra average daily earning of $715, which is a significant contribution to the tanker result in the first quarter. In total, NORDEN's tanker business generated an adjusted result of $10 million. This is a good start to the year and even though the market has softened in the second quarter, we expect tanker rates to once again pick up in the second half of the year as the industry prepares for the IMO 2020 sulphur regulation. So despite the collapse in the Dry Cargo market in the first quarter, we maintain our expectations for the year at $25 million to $60 million and look forward to delivering. Thank you for watching.