Dampskibsselskabet Norden A/S

CSE:DNORD

Earnings Call Transcript 2021-Q1

[Jan Rindbo, Chief Executive Officer]

During a quarter that was heavily focused on building value for the rest of the year, NORDEN realized an adjusted result of minus $6 million. However, Q1 was actually a great quarter for NORDEN, and the results should be seen in light of the substantial value built during the quarter, which NORDEN will benefit from during the rest of the year. NORDEN is benefiting from soaring dry cargo market, which is reflected in a significant increase in the value of the owned and leased fleet while expectations for the full year results are revised up again. This value creation more than offsets weak tanker markets, and NORDEN expects its quarterly earnings from Q2 onwards to be significantly higher compared to Q1. This quarter is a good example that NORDEN's value creation should always be viewed over a longer time period. Looking closer at our business units. Asset Management delivered an adjusted result of $2 million during the first quarter. As dry cargo asset prices and period rates gained momentum during the early parts of the year, NORDEN continued to increase exposure in dry cargo while reducing in tankers, and took advantage of attractive asset and lease opportunities. This increased exposure to the dry cargo market as well as raised market expectations beyond 2021, have significantly lifted the value of Asset Management's portfolio of owned and leased vessels. The estimated market value of our portfolio has increased by $106 million since the beginning of the year. Furthermore, the business unit has started to exercise some of the many period extension options on the lease fleet, which highlights the potential value of optionality in the portfolio. Turning to Dry Operator. The surprisingly strong market start to the year, prompted a quick readjustment of the position by swiftly expanding the fleet during the quarter, capitalizing on attractive period rates. Dry Operator generated a breakeven result during Q1, but the quick portfolio adjustment during the quarter will significantly benefit earnings from Q2 onwards. We now expect the full year result for Dry Operator to be significantly better than the record result for 2020. Dry Operator is also benefiting from high activity growth in a very strong dry cargo market. During the quarter, the unit operated an average of 322 vessels, which is an increase of 31% over the same period last year, reflecting strong demand from customers for our service. Moving to Tanker Operator. The tanker market continued to be challenging in Q1 due to the low global oil demand. Although Tanker Operator ended Q1 with relatively high coverage on its fleet, the business unit was not immune to the extremely low freight rates. This is reflected in the adjusted result of minus $8 million. Q1 is usually the strongest period of the year, yet product tanker rates remained extremely low due to weak oil demand and pressure from the crude market. However, we expect the market to have bottomed out, allowing for gradual improvements in the future. Tanker operator has, therefore, prepared for increased activity later in the year, creating an optimal vessel portfolio for the second half of 2021 and beyond.So looking ahead, we expect the value build in Q1 to be reflected in significantly higher quarterly earnings from Q2 onwards. This is based on a very strong performance in Dry Operator, where we are well positioned to capitalize on the strong dry cargo market during the rest of 2021. We are, therefore, lifting our group guidance for the annual adjusted result. Lastly, NORDEN will continue to use its agile platform to optimize the portfolio and capitalize on market opportunities that we will see throughout the year. Thank you for watching.