Dampskibsselskabet Norden A/S

CSE:DNORD

Earnings Call Transcript 2020-Q1

[Jan Rindbo, Chief Executive Officer]

With the transition into a data-driven and trading-focused company continuing, NORDEN delivers an adjusted result of $29 million for the first quarter of 2020. So despite the challenging environment and extreme market conditions, NORDEN has delivered the strongest first quarter result since 2015. The quarter saw profit from all 3 business units. And NORDEN raises its guidance to $30 million to $80 million for the full year.Looking at our business units. Asset Management delivered a result of $7 million for the quarter. The business unit is now benefiting from the many actions taken during the last 2 years, where we have shifted market exposure towards Tankers while increasing our cover in Dry Cargo. The diversification benefit of operating in both Dry Cargo and Tankers is enabling active management of cyclical market exposures, not just within, but also across the 2 segments, which is key to superior long-term returns in the Asset Management business unit. Asset Management maintains a significant cover portfolio and has, therefore, limited market exposure for the rest of the year.Dry Operator showed the strength of its business model, generating a result for the quarter of $4 million. Despite a very weak Dry Cargo market, Dry Operator captured good value from short-term trading activity and was well positioned to benefit from a declining market. Additionally, NORDEN is seeing that during these uncertain times, customers and tonnage providers are giving preference to NORDEN as we are considered a safe and strong counterpart.Looking ahead, the macroeconomic weakness driven by the global lockdown is expected to continue to hamper commodity demand. Both time charter rates and asset values are expected to recover, but there may not be any meaningful recovery before 2021 where infrastructure spending by governments could boost Dry Cargo activity. In a strong spot market, Tanker Operator got off to a strong start and delivered a result of $18 million. The result was generated by a combination of strong spot rates and active management of the position where the tank operator benefited from chartering in additional tonnage in the previous quarters. Spot rates are expected to remain supported by storage demand through the second quarter where a tanker operator is well positioned to exploit a strong market. However, with very weak underlying demand fundamentals, the market is expected to decline later in the second half year as a combination of demand headwinds and declining storage requirement. Amid these uncertain and extraordinary markets, NORDEN increases expectations to the full year adjusted result to the range of $30 million to $80 million, which is up from $30 million to $70 million previously. We anticipate a good result from Tanker Operator in the second quarter, but with a weaker Tanker market in the second half of the year. Moreover, the Dry Cargo market is expected to remain challenging. Overall, there is a high degree of uncertainty attached to our outlook due to the unprecedented nature of COVID-19. Thank you for watching.