Dampskibsselskabet Norden A/S

CSE:DNORD

Earnings Call Transcript 2020-Q3

[Jan Rindbo, Chief Executive Officer]

During a period that is still marked by the ongoing COVID-19 pandemic, NORDEN continues to deliver strong results with an adjusted result of $27 million for the third quarter of 2020. This is based on an outstanding performance from Dry Operator, which is well on its way to deliver a record result. For the first 9 months of 2020, NORDEN has realized an adjusted result of $85 million, and we, once again, raised our guidance for the full year. Looking closer at our business units. Asset Management delivered an adjusted result of $6 million for the quarter. During the period, Asset Management shifted exposure from Tankers to Dry Cargo as part of reducing NORDEN's cyclical market exposure towards the challenged tanker market. The Dry Cargo acid market continued to be weak, and NORDEN utilized this to acquire 3 Dry Cargo vessels: 1 secondhand and 2 new buildings. These ships are purchased not as a long-term investment but because we think prices are low enough that we expect to make a good return on them as an asset trader investment. A clear example of this is that we, after the end of Q3, sold 3 vessels, of which one tanker was in our ownership for just 10 months, delivering a great return while we owned it. In Dry Operator, Q3 showed the business unit's significant ability to create value based on its asset-light operations, delivering an outstanding result of $31 million for the quarter. It is important to note here that this result is not primarily due to favorable market conditions but rather the sum of many right decisions made in a volatile market. This includes regional positioning of vessels chartered in during Q2 as well as growing the business to a record-high activity level and benefiting from an increasing number of customers seeking a solid partner during uncertain times. Moving to Tanker Operator. The market was very challenged during Q3, as we already anticipated at the end of the last quarter. This is reflected in the adjusted result of minus $10 million for the Q3 period. The result is impacted by very weak spot rates even for the Q3 season. As this was expected, Tanker Operator started reducing its market exposure already in Q2. To further protect our earnings in the near term, the business unit has entered into a number of contracts to increase its cover. However, even with reduced exposure, we expect the tanker market to continue to be challenging moving into 2021. To sum up, the third quarter brought a strong overall result for NORDEN with record-high activity levels and with Dry Operator proving its agile capabilities. For the rest of the year, we expect Dry Operator to continue its strong performance. And on that basis, we, once again, raised our guidance for the adjusted full year result. This would be the best result for NORDEN since 2010 and really showing the benefits of our trading-oriented strategy. We are committed to returning cash to our shareholders in line with our dividend policy, whereby we will return at least 50% of the annual adjusted net result. In addition, we are initiating a new share buyback program, returning cash to our shareholders. Thank you for watching.