TORM reports Q2 2014 results
“In the second quarter of 2014, TORM has continued to deliver competitive results and positive cash flow from operations after full interest payment even though the product tanker market was weaker than expected,” says CEO Jacob Meldgaard, and adds: “I am pleased that we have reached an agreement in p rinciple to extend our working capital facility to support the ongoing efforts to recapitalize TORM.”
In the second quarter of 2014, TORM realized a positive EBITDA of USD 14m and a loss before tax of USD 24m.
EBITDA for the second quarter of 2014 was a gain of USD 14m (Q2 2013: USD 25m). The result before tax for the second quarter of 2014 was a loss of USD 24m (USD - 30m). Cash flow from operating activities after full interest payment was positive by USD 15m in the second quarter of 2014 (USD 28m).
In the second quarter of 2014, the product tanker market saw continued strong US export volumes, but this was partly offset by shorter transport distances. TORM’s largest segment, MRs, achieved spot rates of USD/day 13,130 in the second quarter of 2014, which is down 23% year-on-year. The Tanker Division reported an EBITDA of USD 13m in the second quarter of 2014 (USD 34m).
The spot freight rates for the relevant bulk segments re mained under pressure throughout the second quarter of 2014. TORM’s largest segment, Panamax, achieved freight rates of USD/day 12,286, which is up 51% compared to the second quarter of 2013. The Bulk Division reported an EBITDA in the second quarter of 2014 of USD 1m (USD -9m).
TORM has reached an agreement in principle with the Co-ordinating Committee of Lenders regarding an extension of the existing Super Senior Working Capital Facility by six months until 31 March 2015 to facilitate the completion of the recapitalization process. Given the current limited draw, TORM has requested that the facility be reduced from USD 100m to USD 50m. The ex tension is subject to continued progress in the recapitalization process. Final implementation of the extension is expected before 30 September 2014.
The book value of the fleet was USD 1,243m as of 30 June 2014. Based on broker valuations, TORM’s fleet had a market value of USD 931m as of 30 June 2014. In accordance with IFRS, TORM estimates the product tanker fleet’s total long-term earning potential each quar ter based on discounted future cash flow. The estimated value of the fleet as of 30 June 2014 supports the carrying amount.
Net interest-bearing debt amounted to USD 1,367m as at 30 June 2014, compared to USD 1,662m as at 31 March 2014. The decrease in the second quarter of 2014 is primarily a result of repayment of debt in connection with the delivery of vessels held for sale.
As of 30 June 2014, TORM’s available liquidity was USD 119m consisting of USD 43m in cash and USD 76m in undrawn credit facilities. There are no newbuildings on order or CAPEX commitments related hereto.
The equity is negative by USD 125m as at 30 June 2014.
By 30 June 2014, TORM had covered 14% of the remain ing tanker earning days in 2014 at USD/day 15,731. 46% of the remaining bulk earning days in 2014 were covered at USD/day 11,116.
For the full year 2014, TORM adjusts the forecasts to a positive EBITDA of USD 50-70m and a loss before tax of USD 290-310m. As at 30 June 2014, 8,146 earning da ys for 2014 were unfixed, meaning that a change in freight rates of USD/day 1,000 will impact the forecasts by USD 8m. TORM expects to be operational cash flow positive after full interest payments. By 30 June 2014, TORM was in compliance with its financial covenants. With the requested extension of the working capital facility, TORM expects to comply with the financial covenants when tested as at 30 September 2014.