Dampskibsselskabet Norden A/S

CSE:DNORD

Earnings Call Transcript 2024-Q3

[Jan Rindbo, executive]

Today, I'm happy to announce NORDEN's third quarter results for 2024. Despite continued geopolitical uncertainties and the tanker market impacted by weaker rates, NORDEN delivered a solid result with a net profit of $25 million in the third quarter, this brings the profit for the first 9 months to $133 million.

In Freight Services & Trading, we saw a net loss of $18 million and a negative margin of $427 per day. As expected, margins in our dry cargo operator activities improved throughout the quarter, but this was offset by weaker tanker spot rates caused by crude tankers switching over to trade clean products, which created an excessive supply of vessels in the clean market.

Asset & Logistics generated strong earnings with a net profit of $43 million, driven by high earnings coverage and positive contribution from sublease gains of $14 million. The continued high asset prices supported the value of NORDEN's owned and leased fleet repurchase options and an estimated net asset value of Assets & Logistics was DKK 433 per share by the end of the quarter.

Over the past 12 months, NORDEN have created a return on invested capital of 15%, confirming the long-term value creation from our activities despite the short-term headwinds in the Freight Services & Trading unit.

Now let me give a brief update on the business performance and the strategic progress during the quarter. Following the strong development in asset values, we are focusing on optimizing our vessel portfolio. In the third quarter, we have entered into agreements to sell further vessels, some from declared purchase options at significant future sales gains that will be realized in the coming quarters as we realize net asset values.

Of the current portfolio, 48 purchase options can be declared before the end of 2025 at average strike prices that are currently 23% below market value, adding value upside and agility to the business. Furthermore, last quarter, we announced the agreement to acquire Norlat Shipping with the ambition to further grow and access new competencies and customers to NORDEN.

In early September, the acquisition was approved by authorities, and the business activities will be integrated into Freight Services & Trading. This is a great addition that will allow us to offer our customers fully flexible solutions as a global provider of ocean-based freight services for bulk and project cargo of all sizes. Overall, we are delivering on all KPIs set out in our strategic scorecard, confirming that we are on track to deliver on our long-term strategic commitments.

Now let's turn to the outlook. On the back of a weaker tanker market, we are narrowing our full year guidance, expecting a net profit in the range of $160 million to $210 million compared to $160 million to $240 million previously. This includes gains from sale of vessels.

In Freight Services & Trading, the margins in the dry cargo activities are expected to continue to improve whereas margins in the tanker activities are expected to decline as a result of weaker tanker rates.

Assets & Logistics earnings, will continue to benefit from high coverage. The high newbuilding prices and low order book are expected to support asset values, and we will continue to focus on realizing this value.

The high asset prices and charter rates continue to benefit the owner part of the business. But at the same time, the weaker spot market is challenging for the operator part of the business. It is the diversity of our business model that enable us to generate good returns overall.

Finally, we are continuing to distribute a large part of our profits to our shareholders through a combination of a dividend and a new share buyback program. Thank you for watching.