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TheStreet Open House

Second Quarter Report 2012

Stock quotes in this article: TORM, TRMD

COPENHAGEN, Denmark, Aug. 21, 2012 (GLOBE NEWSWIRE) -- TORM recognized a loss before tax of USD 59 million in the second quarter of 2012 before special items of USD -73 million. "The financial results in the second quarter of 2012 were negatively affected by the challenging market conditions as well as TORM's difficult financial situation. TORM experiences full support for a final restructuring agreement from all involved parties," says CEO Jacob Meldgaard.

  • The financial results were adversely affected by TORM's financial situation. EBITDA for the second quarter of 2012 was a loss of USD 23 million including negative mark-to-market non-cash adjustments of USD 8 million and loss from sale of vessels of USD 5 million in a jointly controlled company, compared to an EBITDA gain of USD 30 million in the second quarter of 2011. Impairment losses from FR8 accounted for USD 42 million in the second quarter of 2012, compared to no impairment losses in the same period of 2011. In addition, financial expenses for the second quarter of 2012 include USD 18 million in restructuring costs. The result before tax for the second quarter of 2012 was a loss of USD 132 million, compared to a loss of USD 24 million in the same period of 2011.
  • The product tanker freight rates continued to be under pressure in the second quarter of 2012, as global economic indicators were sluggish. In the West, MR freight rates were negatively affected by weaker US East Coast product demand and higher US refinery utilization. In the East, the freight markets for LR2 and LR1 vessels saw an increase in activity in June mainly due to the effects of the jet oil arbitrage from the Arabian Gulf to Europe. In general, the markets are still suffering from tonnage oversupply.
  • The bulk market experienced positive freight rate movements in April 2012 as a result of the South American grain season, which was replaced by a negative market sentiment due to the macroeconomic uncertainty and events like the Indonesian commodity export ban. The second quarter of 2012 continued to see a high influx of newbuildings in all main segments.
  • As stated in announcement no. 14 dated 4 April 2012 and further elaborated in announcement no. 20 dated 23 April 2012, TORM is still working closely with its banks and time charter partners on a financing and restructuring plan.
  • The completion of a restructuring agreement is a prerequisite for TORM's continued operation.
  • TORM's cost program has led to a reduction of administration costs to USD 17 million in the second quarter of 2012, equivalent to a reduction of 7% compared to the same period of 2011.
  • In the second quarter of 2012, TORM sold its shares in a JV entity which main asset was the 2007-built LR1 vessel, TORM Ugland. This led to a loss of USD 5 million which is booked under results from jointly controlled entities.
  • The book value of the fleet excluding financial lease vessels as of 30 June 2012 was USD 2,193 million. Based on broker valuations, TORM's fleet excluding financial lease vessels had a market value of USD 1,370 million as of 30 June 2012. TORM estimates the fleet's total long-term earning potential each quarter based on future discounted cash flows. The estimated value for the fleet as at 30 June 2012 supports the book value.
  • Net interest-bearing debt amounted to USD 1,852 million in the second quarter of 2012 compared to USD 1,838 million as at 31 March 2012.
  • Cash totalled USD 17 million at the end of the second quarter of 2012 and the Company has no available credit lines. TORM has no order book and therefore no CAPEX related hereto. As at 20 August 2012 the cash totalled USD 33 million.
  • Booked equity amounted to USD 435 million as at 30 June 2012, equivalent to USD 6.2 per share (excluding treasury shares), giving TORM an equity ratio of 17%.
  • As at 30 June 2012, TORM had covered 12% of the remaining tanker earning days in 2012 at USD/day 14,300 and 4% of the earning days in 2013 at USD/day 15,005. 119% of the remaining bulk earning days in 2012 are covered at USD/day 12,148 and 27% of the 2013 earnings days at USD/day 17,454.
  • The financial result for 2012 is subject to considerable uncertainty given TORM's financial situation and the changes to the Company's business model that may follow. Consequently, TORM has decided not to provide earnings guidance for 2012 until the comprehensive, long-term financing solution is in place.

Teleconference

Contact TORM A/S

TORM will be holding a teleconference for financial analysts and investors at 15:00 Danish time today. Please call 10 minutes before the conference is due to start on +45 3271 4607 (from Europe) or +1 887 491 0064 (from the USA). The presentation documents can be downloaded from TORM's website.

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