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Board Of Directors' Report At TORM A/S' Annual General Meeting On 11 April 2013

TORM incurred a loss after tax of USD 581 million, compared with a loss of USD 453 million in 2011, resulting in negative earnings per share (EPS) of USD 3.3 in 2012, against negative EPS of USD 6.5 in 2011.

The result for 2012 is clearly unsatisfactory.

Balance sheet and cash flow

TORM's total assets decreased by USD 424 million to USD 2,355 million from USD 2,779 million in 2011. The decrease was primarily due to impairment losses of USD 116 million relating to FR8 and vessels held for sale, depreciation of USD 138 million and a change in working capital.

The Company's recorded equity decreased by USD 377 million to USD 267 million calculated according to a going concern assumption. The decrease in equity was mainly due to the loss for the year of USD 581 million and the USD 200 million capital increase in connection with the restructuring. The equity at 31 December 2012 gave TORM an equity ratio of 11%.

TORM estimates the fleet's total long-term earning potential each quarter, based on discounted future cash flow, in accordance with IFRS requirements. The estimated value of the fleet as of 31 December 2012 supports the carrying amount. It should be emphasized that, in case of a forced sale, the recoverable amount of the fleet will be significantly lower (USD 789 million at year end 2012) than under the going concern assumption, as stated in the Annual Report.

The Group's net interest-bearing debt for 2012 was USD 1,868 million, up 5% relative to 2011, when it stood at USD 1,787 million. The increase was primarily a result of the new working capital facility (USD 58 million) and the effects of the termination of swaps in connection with the restructuring (approximately USD 30 million).

TORM's operating activities in 2012 generated a cash flow of USD -100 million as compared to a cash flow of USD -75 million in 2011. The decline was due to the lower freight rates. Cash flow from investing activities amounted to USD 0 million, compared to a cash flow of USD 168 million in 2011, affected by USD 284 million from sales of vessels. Cash flow from financing activities was a cash flow of USD 42 million in 2012, against a cash flow of USD -128 million in 2011. The change was explained by deferral of installments on mortgage debt as well as a new working capital facility.

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