Dampskibsselskabet Norden A/S

CSE:DNORD

Earnings Call Transcript 2022-Q2

[Jan Rindbo, executive]

Welcome to the presentation of NORDEN's second quarter results. NORDEN achieved a fantastic result of $179 million for the quarter. And for the first half of the year, a result of $296 million, equivalent to return on equity of 47%. We are thereby well on our way to deliver one of the best results in NORDEN's 151-year history, with a full year guidance of $560 million to $640 million.

Assets & Logistics generated a profit of $26 million. The business unit continues to realize excellent dry cargo gains based on cover contracts secured at strong rates and profitable vessel sales. The dry cargo portfolio is now fully covered for both 2022 and 2023 at profitable rates. This ensures downside protection and solid earnings going forward in a weakening dry cargo market.

On the asset trading side, the business unit sold 3 dry cargo vessels at 10-year high price levels and thereby realize significant sales gains, which will benefit results in the second half of the year. This surge in the product tanker market has significantly increased the value of the portfolio. When including NORDEN's net cash position, the net asset value of assets and logistics is $1.9 billion. This means that the net asset value of just this business unit is equivalent to DKK 377 per share, an increase of DKK 100 compared to the first quarter.

Our other business unit, Freight Services and Trading delivered an outstanding result of $153 million. This is equivalent to more than $3,500 in profit margin for each vessel day. The result follows a significant shift in market exposure from dry cargo to product tankers, which began in the second half of last year. This shift ensured a large amount of tanker tonnage at low rates, which the business units subsequently used to match cargoes at much higher rates in an exceptionally strong product tanker market.

Additionally, with the reduced exposure towards dry cargo, Freight Services and Trading is well positioned to benefit from a weakening dry cargo market. This is possible by taking in a considerable amount of cargoes at high rates, anticipating weaker market rates in the second half of the year.

Aside from adapting to market opportunities, the business unit consistently services and ensure stability for our customers amid volatile markets and geopolitical uncertainty.

To sum up, NORDEN generated a fantastic quarterly result of $179 million, following a proactive shift in market exposure. In early August, this led NORDEN to increased guidance, now expecting a profit for the year between $560 million to $640 million. This is a true testament to our business model, being able to actively adjust our exposure and create value in both the rising tanker market and a weakening dry cargo market.

Based on strong cash flows and a favorable earnings outlook, NORDEN's Board of Directors has decided to pay out an interim dividend to our shareholders. And in addition, we're initiating a new share buyback program. Following this stellar first half of the year, we look forward to updating you on our third quarter activities in November. Thank you for watching.