TORM recognized a loss before tax of USD 63 million in the
third quarter of 2012 before special items of USD
-15 million. "The financial results in the third quarter of 2012
were again negatively affected by the challenging
market conditions as well as TORM's financial situation.
Looking forward, the recently completed
restructuring agreement will enable TORM to become
cash flow positive even at the current rate levels," says
CEO Jacob Meldgaard.
- The financial results in the third quarter of 2012 continued to
be adversely affected by TORM's financial situation. EBITDA for the
third quarter of 2012 was a loss of USD 11 million including
positive mark-to market non-cash adjustments of USD 6 million,
compared to an EBITDA loss of USD 17 million in the third quarter
of 2011. In addition, financial expenses for the third quarter of
2012 included USD 15 million in restructuring costs. The result
before tax for the third quarter of 2012 was a loss of USD 78
million, compared to a loss of USD 70 million in the same period of
2011.
- The product tanker freight rates were in the third quarter of
2012 at seasonally low levels. In the West, MR freight rates were
negatively affected by planned refinery maintenance and limited
transatlantic arbitrage. In the East, the freight rates for LR2 and
LR1 vessels were supported by e.g. jet fuel cargoes from the
Arabian Gulf to Brazil and the naphtha trade in general. The LR1
and LR2 freight rates also benefited from distillate arbitrage from
the Middle East to the West. The MR freight rates in the East were
positively impacted by imbalances within the Asia-Pacific region.
- The freight rates in all bulk segments suffered in the third
quarter of 2012 as the US grain harvest was affected by drought
giving the lowest yield in six years. The Pacific spot market
struggled as expected due to slower Indian activity during the
monsoon season and the partly enforced commodity export ban by the
Indonesian authorities.
- As stated in announcement no. 31 dated 2 October 2012, TORM has
signed a Restructuring Agreement with its banks and time charter
partners that secures the Company deferral of bank debt, new
liquidity and substantial savings from the restructured time
charter book. As stated in announcements no. 32 and 33 dated 5
November 2012, TORM has finalized the technical completion of the
restructuring including the planned changes to the share capital.
- TORM's cost program has led to a reduction of administration
costs to USD 15 million in the third quarter of 2012, equivalent to
a reduction of 11% compared to the same period of 2011 and 34%
compared to 2008.
- The book value of the fleet excluding financial lease vessels
as of 30 September 2012 was USD 2,167 million. Based on broker
valuations, TORM's fleet excluding financial lease vessels had a
market value of USD 1,316 million as of 30 September 2012. TORM
estimates the fleet's total long-term earning potential each
quarter based on future discounted cash flows, in accordance with
IFRS requirements. The estimated value for the fleet as at 30
September 2012 supports the book value.
- Net interest-bearing debt amounted to USD 1,858 million in the
third quarter of 2012 compared to USD 1,852 million as at 30 June
2012.
- Cash totaled USD 13 million at the end of the third quarter of
2012 and the Company had no available credit lines. TORM has no
order book and therefore no CAPEX related hereto. As at 6 November
2012 the cash and available credit lines totaled USD 65 million as
planned.
- Book equity amounted to USD 358 million as at 30 September
2012, equivalent to USD 5.2 per share (excluding treasury shares),
giving TORM an equity ratio of 14%.
- By 30 September 2012, TORM had covered 15% of the remaining
tanker earning days in 2012 at USD/day 13,944 and 6% of the earning
days in 2013 at USD/day 15,063. 103% of the remaining bulk earning
days in 2012 are covered at USD/day 10,694 and 57% of the 2013
earning days at USD/day 14,621.
- TORM maintains a forecasted loss before tax of USD 350-380
million for 2012 excluding accounting effects from the execution of
the restructuring, further vessel sales and potential impairment
charges. Due to the complexity, TORM has asked the Danish
Securities Council for a ruling on the accounting effects of the
restructuring.
Announcement no. 35 / 7 November 2012 Third quarter
report 2012 2 of 23
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.
Tuborg Havnevej 18, DK-2900 Hellerup, Denmark
Tel.: +45 39 17 92 00 / Fax: +45 39 17 93 93
www.torm.com
Jacob Meldgaard, CEO, tel.: +45 39 17 92 00
Roland M. Andersen, CFO, tel.: +45 39 17 92 00
Christian Soegaard-Christensen, IR, tel.: +45 30 76
12 88
Key figures
*) Gains/losses from sale of vessels and the
mark-to-market adjustments of 'Other financial assets' are not
annualized when calculating the return on equity.
**) Gains/losses from sale of vessels are not
annualized when calculating the Return on Invested Capital.
Q1-Q3 Q1-Q3
Million USD Q3 2012 Q3 2011
2012 2011 2011
Income statement
Revenue 256.0 331.8 838.9 937.9 1,305.2
Time charter equivalent earnings (TCE) 109.8 148.1
364.4 474.4 644.3
Gross prof it 3.1 2.3 31.0 69.2 81.0
EBITDA -11.2 -17.0 -41.2 16.6 -43.8
Operating prof it (EBIT) -46.4 -53.1 -186.0 -92.6
-388.6
Prof it/(loss) before tax -77.6 -70.1 -288.2 -138.7
-451.4
Net prof it/(loss) -78.5 -70.4 -289.3 -140.0
-453.0
Balance sheet
Total assets 2,507.4 3,118.9 2,507.4 3,118.9
2,779.2
Equity 358.3 957.9 358.3 957.9 643.8
Total liabilities 2,149.1 2,161.0 2,149.1 2,161.0
2,135.4
Invested capital 2,204.4 2,781.8 2,204.4 2,781.8
2,425.1
Net interest bearing debt 1,858.2 1,836.1 1,858.2
1,836.1 1,786.8
Cash flow
From operating activities 5.6 -20.6 -70.5 -61.9
-74.8
From investing activities -7.9 10.4 3.2 103.8
168.1
Thereof investment in tangible fixed assets -8.0
-4.4 -56.5 -106.8 -118.5
From financing activities -1.9 -41.1 -5.7 -66.1
-127.8
Total net cash f low -4.2 -51.3 -73.0 -24.2
-34.5
Key financial figures
Gross margins:
TCE 42.9% 44.6% 43.4% 50.6% 49.4%
Gross prof it 1.2% 0.7% 3.7% 7.4% 6.2%
EBITDA -4.4% -5.1% -4.9% 1.8% -3.4%
Operating profit -18.1% -16.0% -22.2% -9.9%
-29.8%
Return on Equity (RoE) (p.a.)*) -62.7% -27.2%
-75.9% -17.9% -51.5%
Return on Invested Capital (RoIC) (p.a.)**) -8.0%
-7.5% -10.5% -4.3% -14.4%
Equity ratio 14.3% 30.7% 14.3% 30.7% 23.2%
Exchange rate USD/DKK, end of period 5.77 5.51 5.77
5.51 5.75
Exchange rate USD/DKK, average 5.95 5.28 5.80 5.31
5.36
Share related key figures
Earnings per share, EPS USD -1.1 -1.0 -4.2 -2.0
-6.5
Diluted earnings per share, EPS USD -1.1 -1.0 -4.2
-2.0 -6.5
Cash f low per share, CFPS USD 0.1 -0.3 -1.0 -0.9
-1.1
Share price, end of period (per share of DKK 5
each) DKK 2.8 7.3 2.8 7.3 3.7
Number of shares, end of period Million 72.8 72.8
72.8 72.8 72.8
Number of shares (excl. treasury shares), average
Million 69.6 69.6 69.6 69.5 69.6
Announcement no. 35 / 7 November 2012 Third quarter
report 2012 3 of 23
Results
In general, TORM's financial results continued to
be negatively affected by the combination of adverse market
conditions and the uncertainty about the Company's difficult
financial situation. The result before tax for the third quarter of
2012 was a loss of USD 78 million, compared to a loss of USD 70
million in the same period of 2011. The result before depreciation
(EBITDA) for the third quarter of 2012 was a loss of USD 11
million, compared to a loss of USD 17 million in the same period of
2011. The result was positively impacted by mark-to-market non-cash
adjustments of USD 6 million in total, compared to a loss of USD 5
million in the same period of 2011. The results for the third
quarter of 2012 and also 2011 were not impacted by sale of
vessels.
The Tanker Division reported an operating loss of
USD 42 million in the third quarter of 2012, compared to an
operating loss of USD 34 million in the same period last year. The
Bulk Division had an operating loss in the third quarter of 2012 of
USD 4 million, compared to a loss of USD 16 million in the third
quarter of 2011.
Other (not allocated) activities include financial
expenses of USD 15 million in costs related to the restructuring of
the Company's capital structure.
The activity in TORM's 50% ownership in FR8 Holding
Pte. Ltd. is included in "not-allocated"
Profit/(loss) by segment
Million USD
Tanker Bulk Not Tanker Bulk Not
Division Division allocated Total Division Division
allocated Total
Revenue 214.0 42.0 0.0 256.0 698.0 140.9 0.0
838.9
Port expenses, bunkers and commissions -128.9 -25.3
0.0 -154.2 -404.6 -83.4 0.0 -488.0
Freight and bunkers derivatives 0.4 7.6 0.0 8.0
-0.1 13.6 0.0 13.5
Time charter equivalent earnings
85.5 24.3 0.0 109.8 293.3 71.1 0.0
364.4
Charter hire -39.4 -25.0 0.0 -64.4 -134.3 -75.1 0.0
-209.4
Operating expenses -41.6 -0.7 0.0 -42.3 -121.6 -2.4
0.0 -124.0
Gross profit (Net earnings from shipping
activities) 4.5 -1.4 0.0 3.1 37.4 -6.4
0.0 31.0
Prof it from sale of vessels 0.0 0.0 0.0 0.0 -15.9
0.0 0.0 -15.9
Administrative expenses -13.0 -1.9 0.0 -14.9 -42.7
-5.3 0.0 -48.0
Other operating income 0.4 0.0 0.0 0.4 1.2 0.1 0.0
1.3
Share of results of jointly controlled entities 0.3
0.0 -0.1 0.2 -5.1 0.0 -4.5 -9.6
EBITDA -7.8 -3.3 -0.1
-11.2 -25.1 -11.6 -4.5 -41.2
Impairment losses on jointly controlled entities
0.0 0.0 0.0 0.0 0.0 0.0 -41.5 -41.5
Amortizations and depreciation -34.4 -0.8 0.0 -35.2
-101.2 -2.1 0.0 -103.3
Operating profit (EBIT) -42.2 -4.1
-0.1 -46.4 -126.3 -13.7 -46.0 -186.0
Financial income - - 1.3 1.3 - - 8.1 8.1
Financial expenses - - -32.5 -32.5 - - -110.3
-110.3
Profit/(loss) before tax - - -31.3
-77.6 - - -148.2 -288.2
Tax - - -0.9 -0.9 - - -1.1 -1.1
Net profit/(loss) for the period -
- -32.2 -78.5 - - -149.3 -289.3
Q3 2012 Q1-Q3 2012
Announcement no. 35 / 7 November 2012 Third quarter
report 2012 4 of 23
Outlook and coverage
TORM forecasts a loss before tax of USD 350-380
million for the financial year 2012 excluding accounting effects
from the execution of the restructuring, further vessel sales and
potential impairment charges. The guidance includes special items
of USD -107 million derived from impairment losses of USD 42
million related to FR8 and USD 65 million in restructuring costs -
primarily fees to advisors to the Company's creditors and TORM. Due
to the complexity, TORM has asked the Danish Securities Council for
a ruling on the accounting effects of the restructuring.
With 6,046 earning days for 2012 open as at 30
September 2012, a change of USD/day of 1,000 in freight rates will
currently impact the profit before tax by approx. USD 6
million.
As at 30 September 2012, TORM had covered 15% of
the remaining earning days in 2012 in the Tanker Division at
USD/day 13,944 and 103% of the remaining earning days in the Bulk
Division at USD/day 10,694. The table below shows the figures for
the period from 1 October to 31 December 2012. 2013 and 2014 are
full year figures.
Covered and chartered-in days in
TORM
Data as of 9/30/2012
2012 2013 2014 2012 2013 2014
Ow ned days
LR2 799 2,824 2,904
LR1 637 2,509 2,509
MR 3,427 14,037 14,075
Handysize 1,001 3,975 3,944
Tanker Division 5,864 23,344 23,432
Panamax 180 726 694
Handymax - - -
Bulk Division 180 726 694
Total 6,044 24,070 24,126
T/C-in days at fixed rate T/C-in costs, USD/day
LR2 - - - - - -
LR1 785 75 - 17,914 11,000 -
MR 242 1,049 726 13,188 14,046 15,145
Handysize - - - - - -
Tanker Division 1,027 1,124 726 16,800 13,843
15,145
Panamax 573 1,964 1,817 14,216 12,880 12,386
Handymax 339 - - 12,509 - -
Bulk Division 912 1,964 1,817 13,581 12,880
12,386
Total 1,939 3,088 2,543 15,286 13,230
13,174
T/C-in days at floating rate
LR2 182 726 725
LR1 - - -
MR 91 363 363
Handysize - - -
Tanker Division 273 1,089 1,088
Panamax 91 726 411
Handymax 147 363 363
Bulk Division 238 1,089 774
Total 511 2,178 1,862
Total physical days Covered days
LR2 981 3,550 3,629 176 391 337
LR1 1,422 2,584 2,509 236 365 175
MR 3,760 15,449 15,164 634 743 -
Handysize 1,001 3,975 3,944 30 - -
Tanker Division 7,164 25,557 25,246 1,076 1,499
512
Panamax 844 3,416 2,922 1,007 990 25
Handymax 486 363 363 365 1,167 869
Bulk Division 1,330 3,779 3,285 1,372 2,157 895
Total 8,494 29,336 28,531 2,448 3,656
1,407
Coverage rates, USD/day
LR2 18% 11% 9% 15,687 16,650 16,617
LR1 17% 14% 7% 14,228 15,666 15,666
MR 17% 5% 0% 13,759 13,932 -
Handysize 3% 0% 0% 5,378 - -
Tanker Division 15% 6% 2% 13,944 15,063 16,292
Panamax 119% 29% 1% 11,387 15,380 20,436
Handymax 75% 321% 240% 8,781 13,978 16,725
Bulk Division 103% 57% 27% 10,694 14,621 16,831
Total 29% 12% 5% 12,122 14,803
16,634
Fair value of freight rate contracts that are
mark-to-market in the income statement (USD m):
Contracts not included above 0.0
Contracts included above 6.5
Notes
This coverage table took effect per 5 November 2012
upon technical completion of the restructuring. Actual no. of days
can vary f rom projected no. of days primarily due to vessel sales
and delays of vessel deliveries. T/C-in days at fixed rate do not
include effects f rom prof it split arrangements. T/C-in days at
floating rate determine rates at entry of each quarter, and then
TORM will recieve approx. 10% profit/loss compared to this
rate.
Covered, %
Announcement no. 35 / 7 November 2012 Third quarter
report 2012 5 of 23
Tanker Division
The product tanker freight rates were in the third
quarter of 2012 at seasonally low levels as expected. The freight
markets did not improve mainly due to mixed macroeconomic growth
signals and a supply overhang of tonnage.
In the West, the third quarter of 2012 was impacted
by planned refinery maintenance in Europe, reducing demand for
gasoline from Europe to the USA. Likewise the arbitrage for diesel
from the US Gulf to Europe only saw limited activity and the
tropical storm Isaac hampered product supply. The combination of
these factors affected the MR freight rates negatively. The LR2
market was positively affected by the naphtha arbitrage from the
West to the East as a result of Indian refinery maintenance
closures.
In the East, the freight rates for LR2 and LR1
vessels were supported by e.g. jet fuel cargoes from the Arabian
Gulf to Brazil and the naphtha trade in general. In addition, the
European refinery closures widened the distillate arbitrage from
the Middle East to the West and positively impacted the LR1 and LR2
freight rates. The MR freight rates were positively impacted by
imbalances within the Asia-Pacific region, exacerbated by refinery
issues, boosting intra-regional product flows. The closure of the
Richmond refinery in California, USA, and a subsequent shortage of
clean products gave way for a series of MR transpacific
fixtures.
The global product tanker fleet grew by less than
1% in the third quarter of 2012 (source: SSY). The Tanker
Division's results were to a significant degree adversely affected
by TORM's financial situation. However, the Company outperformed
spot benchmarks across all segments in the third quarter of 2012.
TORM achieved LR2 spot rates of USD/day 13,581 in the third quarter
of 2012, which was 25% higher than in the third quarter last year.
The LR1 spot rates were at USD/day 13,512, up by 37% year-on-year,
whereas TORM's largest segment (MR) was at USD/day 10,612, down by
10% year-on-year. The Handysize spot rates were at USD/day 11,263,
up by 6% year-on-year. The Tanker Division's operating loss for the
third quarter of 2012 was USD 42 million, compared to a loss of USD
34 million in the same period of 2011. Mark-to-market effects were
positive with USD 1 million.
Q4 11 Q1 12 Q2 12 Q3 12 Change
Q3 11
- Q3 12
LR2 (Aframax, 90-110,000 DWT)
Available earning days 1,158 1,092 899 854 989
-15%
Spot rates1) 10,836 11,959 10,814 10,206 13,581
25%
TCE per earning day2) 12,423 15,647 7,865 14,157
11,082 -11% 12,313
Operating days 1,196 1,121 1,001 1,001 1,012
-15%
Operating expenses per operating day3) 6,721 6,133
5,976 7,001 6,800 1% 6,468
LR1 (Panamax 75-85,000 DWT)
Available earning days 2,208 2,081 2,076 1,879
1,716 -22%
Spot rates1) 9,841 7,678 12,515 11,237 13,512
37%
TCE per earning day2) 9,467 9,020 12,977 11,747
12,723 34% 11,561
Operating days 644 644 637 637 644 0%
Operating expenses per operating day3) 6,481 6,419
6,389 5,798 6,136 -5% 6,186
MR (45,000 DWT)
Available earning days 4,511 4,477 4,681 4,362
4,176 -7%
Spot rates1) 11,749 14,080 14,363 11,510 10,612
-10%
TCE per earning day2) 12,910 13,335 14,082 11,418
9,843 -24% 12,236
Operating days 3,496 3,496 3,557 3,549 3,588 3%
Operating expenses per operating day3) 6,732 5,929
6,743 6,756 6,825 1% 6,566
Handysize (35,000 DWT)
Available earning days 992 978 989 981 1,007 1%
Spot rates1) 10,582 9,483 12,823 10,939 11,263
6%
TCE per earning day2) 12,020 9,809 13,122 12,189
10,873 -10% 11,498
Operating days 1,012 1,012 1,001 1,001 1,012 0%
Operating expenses per operating day3) 5,436 6,919
5,577 5,686 6,165 13% 6,089
Tanker Division Q3 11 12 month
avg.
1) Spot rates = Time Charter Equivalent Earnings
for all charters with less than 6 months duration = Gross freight
income less bunker, commissions and port expenses.
2) TCE = Time Charter Equivalent Earnings = Gross
freight income less bunker, commissions and port expenses.
3) Operating expenses are related to owned
vessels.
Announcement no. 35 / 7 November 2012 Third quarter
report 2012 6 of 23
Bulk Division
The freight rates in all bulk segments suffered in
the third quarter of 2012 as the US grain harvest was affected by
drought giving the lowest yield in six years. This was combined
with the continued macroeconomic crisis including e.g. the European
debt issues as well as a supply overhang of tonnage.
In the Atlantic spot market, the freight rates for
Panamax dropped to USD/day 11-12,000 on front haul voyages and to
USD/day 2-3,000 on round voyages. The main reasons were an
oversupply of tonnage ballasting inbound, the weak US grain season
and logistical disruptions from the tropical storm Isaac. The
Handymax segment was also affected by the lack of grain activity
and the freight rates dropped by USD/day 6-7,000 on front haul
voyages to USD/day 12-13,000.
The Pacific spot market struggled as expected due
to the slower Indian activity in the monsoon season and the partly
enforced commodity export ban by the Indonesian authorities. The
freight rates for Panamax and Handymax dropped to USD/day 3-4,000
on round voyages.
The number of newbuilding deliveries in the third
quarter of 2012 declined compared to the first two quarters of 2012
with 41 Capesize, 81 Panamax and 62 Handymax vessels being
delivered (source: SSY).
TORM continued to experience a continued high
number of waiting days in the third quarter of 2012 due to the
adverse effects of the Company's financial situation. TORM's
Panamax time charter equivalent (TCE) earnings in the third quarter
of 2012 were USD/day 7,793 or 36% below the same period in 2011.
The realized TCE earnings for Handymax during the third quarter of
2012 were USD/day 9,051, which is 28% lower than in the same period
of 2011.
The Bulk Division's operating loss for the third
quarter of 2012 was USD 4 million, compared to a loss of USD 16
million in the same period of 2011. Unrealized non-cash
mark-to-market effects were positive with USD 4 million.
Q3 12 Change
Q3 11
- Q3 12
Panamax (60-80,000 DWT)
Available earning days 2.279 3.127 1.848 1.447
1.205 -47%
TCE per earning day1) 12.140 14.357 9.670 9.647
7.793 -36% 11.291
Operating days 184 184 182 182 184 0%
Operating expenses per operating day2) 5.126 3.896
3.934 5.130 4.212 -18% 4.292
Handymax (40-55,000 DWT)
Available earning days 1.152 1.361 642 260 757
-34%
TCE per earning day1) 12.510 13.403 11.763 4.353
9.051 -28% 11.185
Operating days - - - - - -
Operating expenses per operating day2) - - - - - -
-
12 month avg.
Bulk Division Q3 11 Q4 11 Q1 12 Q2
12
1) TCE = Time Charter Equivalent Earnings = Gross
freight income less bunker, commissions and port expenses.
2) Operating expenses are related to owned
vessels.
Announcement no. 35 / 7 November 2012 Third quarter
report 2012 7 of 23
Fleet development
No sale or purchase of vessels was concluded in the
third quarter of 2012, and TORM did not order any new vessels in
the third quarter of 2012. TORM's owned fleet consists of 66
product tankers and two dry bulk vessels.
TORM does not have any newbuildings on order. At
the end of the third quarter of 2012, outstanding CAPEX relating to
the order book was thus zero, compared to USD 167 million in the
same period of 2011.
TORM's operated fleet as at 30 September 2012 is
shown in the table below. In addition to the 68 owned vessels, TORM
had chartered-in 17 product tankers and nine bulk vessels on longer
time charter contracts (minimum one year contracts) and eight bulk
vessels on shorter time charter contracts (less than one year
contracts). Another 20 product tankers were either in pool or under
commercial management with TORM.
No. of vessels
Q2 2012 Changes Q3 2012 2012 2013 2014
Owned vessels
LR2 9.0 - 9 .0
LR1 7.0 - 7 .0
MR 39.0 - 39.0
Handysize 11.0 - 11.0
Tanker Division 66.0 - 66.0 - - -
Panamax 2.0 - 2 .0
Handymax - -
Bulk Division 2 .0 - 2 .0 - - -
Total 68.0 - 68.0 - - -
T/C-in vessels with contract period >= 12
months
LR2 2.0 - 2 .0
LR1 13.0 -2.0 11.0
MR 10.0 -6.0 4.0
Handysize - -
Tanker Division 25.0 -8.0 17.0 - - -
Panamax 9.0 -2.0 7.0 1 .0
Handymax 2.0 - 2 .0
Bulk Division 11.0 -2.0 9.0 - 1 .0 -
Total 36.0 - 10.0 26.0 - 1 .0 -
T/C-in vessels with contract period < 12
months
LR2
LR1
MR
Handysize
Tanker Division - - -
Panamax 3.0 -2.0 1.0
Handymax 2.0 5 .0 7 .0
Bulk Division 5 .0 3 .0 8 .0
Total 5.0 3 .0 8 .0
Pools/commecial management 18.0 2.0 20.0
Total fleet 127.0 -5.0 122.0
Current fleet
New buildings and T/C-in deliveries
with a period >= 12 months
Announcement no. 35 / 7 November 2012 Third quarter
report 2012 8 of 23
Notes on the financial
reporting
Accounting policies
The interim report for the period 1 January - 30
September 2012 is presented in accordance with IAS 34 "Interim
Financial Reporting" as adopted by the EU and additional Danish
disclosure requirements for interim reports of listed companies.
The interim report has been prepared using the accounting policies
as for the Annual Report for 2011. The accounting policies are
described in more detail in the Annual Report for 2011. As from 1
January 2012, TORM has implemented the amendment to IFRS 7
regarding disclosures about transfer of financial assets. The
amended standard has not affected the recognition and measurement
in TORM's interim report for the first nine months of 2012. The
interim report of the third quarter of 2012 is unaudited, in line
with the normal practice.
Income statement
The gross profit for the third quarter of 2012 was
USD 3 million, compared to USD 2 million for the corresponding
period in 2011.
The third quarter of 2012 was not impacted by sale
of vessels, as also was the case for the third quarter of 2011.
Administrative costs in the third quarter of 2012 were USD 15
million, compared to USD 17 million in the third quarter of 2011,
as a result of the Company's cost program.
The result before depreciation (EBITDA) for the
third quarter of 2012 was a loss of USD 11 million, compared to a
loss of USD 17 million for the corresponding period of 2011.
Depreciation in the third quarter of 2012 was USD
35 million, USD 1 million lower than in the third quarter of 2011.
This decrease was due to fewer vessels.
The primary operating result for the third quarter
of 2012 was a loss of USD 46 million, compared to a loss of USD 53
million in the same quarter of 2011.
The third quarter of 2012 was positively impacted
by mark-to-market non-cash adjustments of USD 6 million in total:
Positive USD 4 million in connection with FFA/bunker derivatives
and a positive net effect from other financial derivatives
amounting to USD 2 million. The third quarter of 2011 had negative
mark-to-market non-cash adjustments of USD 5 million.
Financial expenses of USD 33 million include USD 15
million in restructuring costs - primarily fees to advisors to the
Company's creditors and TORM.
The result after tax was a loss of USD 79 million
in the third quarter of 2012, as against a loss of USD 70 million
in the third quarter of 2011.
Assets
Total assets were down from USD 2,779 million as at
31 December 2011 to USD 2,507 million as at 30 September 2012. The
book value of the fleet excluding financial lease vessels as of 30
September 2012 was USD 2,167 million. Based on broker valuations,
TORM's fleet excluding financial lease vessels had a market value
of USD 1,316 million as of 30 September 2012. TORM estimates the
fleet's total long-term earning potential each quarter based on
future discounted cash flows in accordance with IFRS requirements.
The estimated value for the fleet as at 30 September 2012 supports
the book value. During third quarter of 2012, it was decided to
initiate wind down of the jointly controlled entity, FR8. The book
value of TORM's 50% share in FR8 is USD 0 million.
Debt
Net interest-bearing debt was USD 1,858 million as
at 30 September 2012, compared to USD 1,852 million as at 30 June
2012. As at 30 September 2012, TORM was in breach of its financial
covenants under the existing loan agreements. As at 30 September
2012, TORM did not have a standstill agreement with the bank group
and therefore the Company no longer had the right to defer payments
until such time as the final Restructuring Agreement had been
entered into. On 5
Announcement no. 35 / 7 November 2012 Third quarter
report 2012 9 of 23
November 2012 TORM finalized the technical
completion of its restructuring after which the bank debt will be
reclassified as non-current liabilities.
Equity
Equity declined in the third quarter of 2012 from
USD 435 million as at 30 June 2012 to USD 358 million as at 30
September 2012 primarily due to the loss during the period. Equity
as a percentage of total assets was 14% as at 30 September 2012,
compared to 23% as at 31 December 2011.
TORM held 3,230,432 treasury shares as at 30
September 2012, equivalent to 4.4% of the Company's share capital.
This is the same level as of 30 June 2012. Following the
restructuring on 5 November 2012, TORM today holds 6,970,272
treasury shares, equivalent to 1.0% of the Company's share
capital.
Liquidity
TORM had cash of USD 13 million at the end of the
third quarter of 2012 and no credit lines available. TORM has no
order book and therefore no CAPEX related hereto. As at 6 November
2012 and following the restructuring, the cash and available credit
lines totaled USD 65 million as planned.
Post balance sheet events
As stated in announcement no. 31 dated 2 October
2012, TORM has signed a Restructuring Agreement with its banks and
time charter partners that secures the Company deferral of bank
debt, new liquidity and substantial savings from the restructured
time charter book.
As stated in announcements no. 32 and 33 dated 5
November 2012, TORM has finalized the technical completion of the
restructuring with its banks and time charter partners. In
connection with the restructuring, the Board of Directors in TORM
A/S completed the decrease of TORM's share capital decided at the
Annual General Meeting held on 23 April 2012. The nominal amount
per share was decreased from DKK 5.00 to DKK 0.01 by transfer of
the reduction amount to a special reserve fund. Subsequently, the
Board of Directors decided to exercise the authorization in article
2.14 of the Articles of Association and increase the share capital
of TORM A/S by issuing
665.2 million new shares by conversion of debt of
totally DKK 1.174.100.581 (approximately USD 200 million) to TORM's
banks and time charter partners or their assignees. The new shares
issued correspond to 90% of TORM's registered share capital and
votes registered with the Danish Business Authority.
As stated in announcement no. 34 dated 5 November
2012, TORM has received notification that the following
shareholders now hold more than 5% of the share capital in the
Company: HSH Nordbank AG, Danske Bank,
Nordea Bank Danmark A/S, Deutsche Bank AG and DBS
Bank Ltd.
Please refer to "note 6 - Post balance sheet date
events" for more details.
Financial calendar
TORM's Annual Report for 2012 will be published on
28 February 2013. TORM's financial calendar can be found
at www.torm.com/investor-relations.
Announcement no. 35 / 7 November 2012 Third quarter
report 2012 10 of 23
About TORM
TORM is one of the world's leading carriers of
refined oil products as well as a significant player in the dry
bulk market. The Company operates a fleet of approximately 120
modern vessels in cooperation with other respected shipping
companies sharing TORM's commitment to safety, environmental
responsibility and customer service.
TORM was founded in 1889. The Company conducts
business worldwide and is headquartered in Copenhagen, Denmark.
TORM's shares are listed on NASDAQ OMX Copenhagen (ticker: TORM)
and on NASDAQ in New York (ticker: TRMD). For further information,
please visit www.torm.com.
Safe Harbor statements as to the
future
Matters discussed in this release may constitute
forward-looking statements. Forward-looking statements reflect our
current views with respect to future events and financial
performance and may include statements concerning plans,
objectives, goals, strategies, future events or performance, and
underlying assumptions and statements other than statements of
historical facts. The forward-looking statements in this release
are based upon various assumptions, many of which are based, in
turn, upon further assumptions, including without limitation,
management's examination of historical operating trends, data
contained in our records and other data available from third
parties. Although TORM believes that these assumptions were
reasonable when made, because these assumptions are inherently
subject to significant uncertainties and contingencies which are
difficult or impossible to predict and are beyond our control, TORM
cannot guarantee that it will achieve or accomplish these
expectations, beliefs or projections.
Important factors that, in our view, could cause
actual results to differ materially from those discussed in the
forward- looking statements include the strength of the world
economy and currencies, changes in charter hire rates and vessel
values, changes in demand for "tonne miles" of oil carried by oil
tankers, the effect of changes in OPEC's petroleum production
levels and worldwide oil consumption and storage, changes in demand
that may affect attitudes of time charterers to scheduled and
unscheduled dry-docking, changes in TORM's operating expenses,
including bunker prices, dry-docking and insurance costs, changes
in the regulation of shipping operations, including requirements
for double hull tankers or actions taken by regulatory authorities,
potential liability from pending or future litigation, domestic and
international political conditions, potential disruption of
shipping routes due to accidents and political events or acts by
terrorists.
Risks and uncertainties are further described in
reports filed by TORM with the US Securities and Exchange
Commission, including the TORM Annual Report on Form 20-F and its
reports on Form 6-K. Forward-looking statements are based on
management's current evaluation, and TORM is only under an
obligation to update and change the listed expectations to the
extent required by law.
Announcement no. 35 / 7 November 2012 Third quarter
report 2012 11 of 23
Statement by the Board of Directors and
Executive Management
The Board and Management have today discussed and
adopted this interim report for the period 1 January - 30 September
2012. In this respect, we refer to note 1 and note 6 in this third
quarter report 2012. This interim report is unaudited and was
prepared in accordance with the International Financial
Reporting
Standards for Interim Financial Reporting, IAS 34,
as adopted by the EU and additional disclosure of listed Danish
companies.
We believe the accounting practices used are
reasonable, and that this interim report gives a true and accurate
picture of the Group's assets, debt, financial position, results
and cash flows.
Copenhagen, 7 November 2012
Executive Management
Board of Directors
Jacob Meldgaard, CEO
Roland M. Andersen, CFO
Niels Erik Nielsen, Chairman
Christian Frigast, Deputy Chairman
Jesper Jarlbaek
Kari Millum Gardarnar
Rasmus Johannes Hoffmann
Announcement no. 35 / 7 November 2012 Third quarter
report 2012 12 of 23
Consolidated income statement
Million USD Q3 2012 Q3 2011 Q1-Q3
2012 Q1-Q3 2011 2011
Revenue 256.0 331.8 838.9 937.9 1,305.2
Port expenses, bunkers and commissions -154.2
-182.8 -488.0 -472.5 -675.0
Freight and bunkers derivatives 8.0 -0.9 13.5 9.0
14.1
Time charter equivalent earnings
109.8 148.1 364.4 474.4 644.3
Charter hire -64.4 -103.5 -209.4 -279.7 -398.3
Operating expenses -42.3 -42.3 -124.0 -125.5
-165.0
Gross profit (Net earnings from shipping
activities) 3.1 2.3 31.0 69.2 81.0
Prof it f rom sale of vessels 0.0 0.0 -15.9 1.4
-52.6
Administrative expenses -14.9 -16.8 -48.0 -51.6
-71.2
Other operating income 0.4 0.4 1.3 2.9 3.2
Share of results of jointly controlled entities 0.2
-2.9 -9.6 -5.3 -4.2
EBITDA -11.2 -17.0 -41.2 16.6
-43.8
Impairment losses on jointly controlled entities
0.0 0.0 -41.5 0.0 -13.0
Impairment losses on tangible and intangible assets
0.0 0.0 0.0 0.0 -187.0
Amortizations and depreciation -35.2 -36.1 -103.3
-109.2 -144.8
Operating profit (EBIT) -46.4
-53.1 -186.0 -92.6 -388.6
Financial income 1.3 -0.5 8.1 1.5 9.9
Financial expenses -32.5 -16.5 -110.3 -47.6
-72.7
Profit/(loss) before tax -77.6
-70.1 -288.2 -138.7 -451.4
Tax -0.9 -0.3 -1.1 -1.3 -1.6
Net profit/(loss) for the period
-78.5 -70.4 -289.3 -140.0 -453.0
Earnings/(loss) per share, EPS
Earnings/(loss) per share, EPS (USD) -1.1 -1.0 -4.2
-2.0 -6.5
Earnings/(loss) per share, EPS (DKK)* -6.7 -5.3
-24.1 -10.7 -34.9
Diluted earnings/(loss) per share, (USD) -1.1 -1.0
-4.2 -2.0 -6.5
Diluted earnings/(loss) per share, (DKK)* -6.7 -5.3
-24.1 -10.7 -34.9
*) The key figures have been translated f rom USD
to DKK using the average USD/DKK exchange change rate for the
period in question.
Announcement no. 35 / 7 November 2012 Third quarter
report 2012 13 of 23
Consolidated income statement per
quarter
Million USD Q3 12 Q2 12 Q1 12 Q4 11 Q3 11
Revenue 256.0 272.3 310.6 367.3 331.8
Port expenses, bunkers and commissions -154.2
-161.6 -172.2 -202.5 -182.8
Freight and bunkers derivatives 8.0 -8.1 13.6 5.1
-0.9
Time charter equivalent earnings
109.8 102.6 152.0 169.9 148.1
Charter hire -64.4 -60.6 -84.4 -118.6 -103.5
Operating expenses -42.3 -41.4 -40.3 -39.5
-42.3
Gross profit (Net earnings from shipping
activities) 3.1 0.6 27.3 11.8 2.3
Profit from sale of vessels 0.0 0.0 -15.9 -54.0
0.0
Administrative expenses -14.9 -16.5 -16.6 -19.6
-16.8
Other operating income 0.4 0.4 0.5 0.3 0.4
Share of results of jointly controlled entities 0.2
-7.4 -2.4 1.1 -2.9
EBITDA -11.2 -22.9 -7.1 -60.4
-17.0
Impairment losses on jointly controlled entities
0.0 -41.5 0.0 -13.0 0.0
Impairment losses on tangible and intangible assets
0.0 0.0 0.0 -187.0 0.0
Amortizations and depreciation -35.2 -34.1 -34.0
-35.6 -36.1
Operating profit (EBIT) -46.4
-98.5 -41.1 -296.0 -53.1
Financial income 1.3 3.2 3.6 8.4 -0.5
Financial expenses -32.5 -36.8 -41.0 -25.1
-16.5
Profit/(loss) before tax -77.6
-132.1 -78.5 -312.7 -70.1
Tax -0.9 0.0 -0.2 -0.3 -0.3
Net profit/(loss) for the period
-78.5 -132.1 -78.7 -313.0 -70.4
Earnings/(loss) per share, EPS
Earnings/(loss) per share, EPS (USD) -1.1 -1.9 -1.1
-4.5 -1.0
Diluted earnings/(loss) per share, (USD) -1.1 -1.9
-1.1 -4.5 -1.0
Announcement no. 35 / 7 November 2012 Third quarter
report 2012 14 of 23
Consolidated statement of comprehensive
income
Million USD Q3 2012 Q3 2011
Q1-Q3 2012 Q1-Q3 2011 2011
Net profit/(loss) for the period
-78.5 -70.4 -289.3 -140.0 -453.0
Other comprehensive income:
Exchange rate adjustment arising on translation
of entities using a measurement currency
different
f rom USD 0.1 -0.3 0.4 -0.3 -0.4
Fair value adjustment on hedging instruments -2.5
-18.0 -11.6 -28.1 -29.7
Value adjustment on hedging instruments
transferred
to income statement 4.2 0.0 14.1 0.8 1.7
Fair value adjustment on available for sale
investments 0.2 9.1 -0.1 9.2 8.7
Other comprehensive income after
tax 2.0 -9.2 2.8 -18.4 -19.7
Total comprehensive income -76.5
-79.6 -286.5 -158.4 -472.7
Announcement no. 35 / 7 November 2012 Third quarter
report 2012 15 of 23
Consolidated balance sheet -
Assets
30 September 30 September 31
December
Million USD 2012 2011 2011
NON-CURRENT ASSETS
Intangible assets
Goodwill 0.0 89.2 0.0
Other intangible assets 1.8 1.9 1.9
Total intangible assets 1.8 91.1 1.9
Tangible fixed assets
Land and buildings 1.6 2.0 2.0
Vessels and capitalised dry-docking 2,233.6 2,453.0
2,258.6
Prepayments on vessels 0.0 138.1 69.2
Other plant and operating equipment 6.9 8.3 8.1
Total tangible fixed assets 2,242.1 2,601.4
2,337.9
Financial assets
Investment in jointly controlled entities 0.9 66.4
50.3
Loans to jointly controlled entities 0.0 8.7
8.2
Other investments 12.1 12.2 11.6
Total financial assets 13.0 87.3 70.1
TOTAL NON-CURRENT ASSETS 2,256.9
2,779.8 2,409.9
CURRENT ASSETS
Bunkers 66.2 62.2 84.6
Freight receivables 122.9 132.8 140.2
Other receivables 27.3 17.6 26.0
Other financial assets 0.0 0.9 0.0
Prepayments 21.6 29.8 11.8
Cash and cash equivalents 12.5 95.8 85.5
250.5 339.1 348.1
Non-current assets held for sale 0.0 0.0 21.2
TOTAL CURRENT ASSETS 250.5 339.1
369.3
TOTAL ASSETS 2,507.4 3,118.9
2,779.2
Announcement no. 35 / 7 November 2012 Third quarter
report 2012 16 of 23
Consolidated balance sheet - Equity and
liabilities
30 September 30 September 31
December
Million USD 2012 2011 2011
EQUITY
Common shares 61.1 61.1 61.1
Treasury shares -17.3 -17.3 -17.3
Revaluation reserves 6.1 6.7 6.2
Retained profit 331.6 932.7 620.0
Proposed dividends 0.0 0.0 0.0
Hedging reserves -27.4 -29.1 -29.8
Translation reserves 4.2 3.8 3.6
TOTAL EQUITY 358.3 957.9 643.8
LIABILITIES
Non-current liabilities
Deferred tax liability 53.3 53.9 53.7
Mortgage debt and bank loans 0.0 1,664.5 0.0
Finance lease liabilities 27.4 74.4 29.4
Deferred income 5.5 0.0 6.4
TOTAL NON-CURRENT LIABILITIES 86.2
1,792.8 89.5
Current liabilities
Mortgage debt and bank loans 1,793.7 189.6
1,794.6
Finance lease liabilities 49.6 3.4 48.3
Trade payables 111.1 74.8 115.6
Current tax liabilities 1.0 1.1 1.2
Other liabilities 106.3 90.9 85.0
Acquired liabilities related to options on vessels
0.0 0.5 0.0
Deferred income 1.2 7.9 1.2
TOTAL CURRENT LIABILITIES 2,062.9
368.2 2,045.9
TOTAL LIABILITIES 2,149.1 2,161.0
2,135.4
TOTAL EQUITY AND LIABILITIES
2,507.4 3,118.9 2,779.2
Announcement no. 35 / 7 November 2012 Third quarter
report 2012 17 of 23
Consolidated statement of changes in equity
as at 1 January - 30
September 2012
Consolidated statement of changes in equity
as at 1 January - 30
September 2011
Common Treasury Retained Proposed Revaluation
Hedging Translation Total
shares shares prof it dividends reserves reserves
reserves
Million USD
Equity at 1 January 2012 61.1
-17.3 620.0 0.0 6.2 -29.8 3.6 643.8
Comprehensive income for the
year:
Net profit/(loss) for the year - - -289.3 - - - -
-289.3
Other comprehensive income for the year - - - -
-0.1 2.5 0.4 2.8
Total comprehensive income for the year - -
-289.3 - -0.1 2.5 0.4 -286.5
Disposal treasury shares, cost - - - - - - -
0.0
Loss from disposal of treasury shares - - - - - - -
0.0
Share-based compensation - - 1.0 - - - - 1.0
Total changes in equity Q1-Q3 2012
0.0 0.0 -288.3 0.0 -0.1 2.5 0.4 -285.5
Equity at 30 September 2012 61.1
-17.3 331.7 0.0 6.1 -27.3 4.0 358.3
Common Treasury Retained Proposed Revaluation
Hedging Translation Total
shares shares prof it dividends reserves reserves
reserves
Million USD
Equity at 1 January 2011 61.1
-17.9 1,072.3 0.0 -2.5 -1.8 4.1 1,115.3
Comprehensive income for the
year:
Net profit/(loss) for the year - - -140.0 - - - -
-140.0
Other comprehensive income for the year - - - - 9.2
-27.3 -0.3 -18.4
Total comprehensive income for the year - -
-140.0 - 9.2 -27.3 -0.3 -158.4
Disposal treasury shares, cost - 0.6 - - - - -
0.6
Loss from disposal of treasury shares - - -0.6 - -
- - -0.6
Share-based compensation - - 1.0 - - - - 1.0
Total changes in equity Q1-Q3 2011
0.0 0.6 -139.6 0.0 9.2 -27.3 -0.3 -157.4
Equity at 30 September 2011 61.1
-17.3 932.7 0.0 6.7 -29.1 3.8 957.9
Announcement no. 35 / 7 November 2012 Third quarter
report 2012 18 of 23
Consolidated statement of cash
flows
Q1-Q3 Q1-Q3
Million USD Q3 2012 Q3 2011
2012 2011 2011
Cash flow from operating
activities
Operating prof it -46.4 -53.1 -186.0 -92.6
-388.6
Adjustments:
Reversal of prof it/(loss) f rom sale of vessels
0.0 0.0 15.9 -1.4 52.6
Reversal of amortizations and depreciation 35.2
36.1 103.3 109.2 144.8
Reversal of impairment of jointly controlled
entities 0.0 0.0 41.5 0.0 13.0
Reversal of impairment of tangible and intangible
assets 0.0 0.0 0.0 0.0 187.0
Reversal of share of results of jointly controlled
entities -0.2 2.9 9.6 5.3 4.2
Reversal of other non-cash movements -4.0 5.7 -2.3
-6.3 -6.8
Dividends received 0.0 0.0 0.4 0.0 0.0
Dividends received f rom jointly controlled
entities 0.0 0.2 0.0 1.2 1.4
Interest received and exchange rate gains 0.1 -1.3
0.1 5.2 5.0
Interest paid and exchange rate losses -0.8 -13.8
-21.7 -47.5 -67.0
Advisor fees related to financing and restructuring
plan -15.4 0.0 -55.4 0.0 0.0
Income taxes paid/repaid -0.2 -1.1 -0.7 -2.3
-2.7
Change in bunkers, accounts receivables and
payables 37.3 3.8 24.8 -32.7 -17.7
Net cash flow from operating activities
5.6 -20.6 -70.5 -61.9 -74.8
Cash flow from investing
activities
Investment in tangible fixed assets -8.0 -4.4 -56.5
-106.8 -118.5
Investment in equity interests and securities 0.0
-0.1 0.0 -0.1 0.0
Loans to jointly controlled entities 0.0 0.5 8.2
1.6 2.1
Sale of equity interests and securities 0.1 0.0 1.9
0.0 0.0
Sale of non-current assets 0.0 14.4 49.6 209.1
284.5
Net cash flow from investing activities
-7.9 10.4 3.2 103.8 168.1
Cash flow from financing
activities
Borrow ing, mortgage debt 0.0 0.0 22.5 87.0
87.0
Borrow ing, finance lease liabilities 0.0 0.0 0.0
46.8 46.8
Repayment/redemption, mortgage debt 0.0 -38.5 -26.4
-194.7 -254.1
Repayment/redemption, finance lease liabilities
-1.9 -2.6 -1.8 -5.2 -7.5
Net cash flow from financing activities
-1.9 -41.1 -5.7 -66.1 -127.8
Net cash flow from operating, investing and
financing activities -4.2 -51.3 -73.0 -24.2 -34.5
Cash and cash equivalents, beginning balance 16.7
147.1 85.5 120.0 120.0
Cash and cash equivalents, ending balance
12.5 95.8 12.5 95.8 85.5
Announcement no. 35 / 7 November 2012 Third quarter
report 2012 19 of 23
Consolidated quarterly statement of cash
flows
Million USD Q3 12 Q2 12 Q1 12 Q4
11 Q3 11
Cash flow from operating
activities
Operating prof it -46.4 -98.5 -41.1 -296.0
-53.1
Adjustments:
Reversal of prof it/(loss) from sale of vessels 0.0
0.0 15.9 54.0 0.0
Reversal of amortizations and depreciation 35.2
34.1 34.0 35.6 36.1
Reversal of impairment of jointly controlled
entities 0.0 41.5 0.0 13.0 0.0
Reversal of impairment of tangible and intangible
assets 0.0 0.0 0.0 187.0 0.0
Reversal of share of results of jointly controlled
entities -0.2 7.4 2.4 -1.1 2.9
Reversal of other non-cash movements -4.0 11.2 -9.5
-0.5 5.7
Dividends received 0.0 0.4 0.0 0.0 0.0
Dividends received f rom jointly controlled
entities 0.0 0.0 0.0 0.2 0.2
Interest received and exchange rate gains 0.1 -0.2
0.2 -0.2 -1.3
Interest paid and exchange rate losses -0.8 -2.9
-18.0 -19.5 -13.8
Advisor fees related to financing and restructuring
plan -15.4 -18.0 -22.0 0.0 0.0
Income taxes paid/repaid -0.2 0.0 -0.5 -0.4
-1.1
Change in bunkers, accounts receivables and
payables 37.3 5.5 -18.0 14.9 3.8
Net cash flow from operating activities
5.6 -19.5 -56.6 -13.0 -20.6
Cash flow from investing
activities
Investment in tangible fixed assets -8.0 -4.4 -44.1
-11.6 -4.4
Investment in equity interests and securities 0.0
0.0 0.0 0.1 -0.1
Loans to jointly controlled entities 0.0 8.2 0.0
0.5 0.5
Sale of equity interests and securities 0.1 1.8 0.0
0.0 0.0
Sale of non-current assets 0.0 0.3 49.3 75.4
14.4
Net cash flow from investing activities
-7.9 5.9 5.2 64.4 10.4
Cash flow from financing
activities
Borrow ing, mortgage debt 0.0 0.0 22.5 0.0 0.0
Borrow ing, finance lease liabilities 0.0 0.0 0.0
0.0 0.0
Repayment/redemption, mortgage debt 0.0 0.0 -26.4
-59.4 -38.5
Repayment/redemption, finance lease liabilities
-1.9 0.9 -0.8 -2.3 -2.6
Net cash flow from financing activities
-1.9 0.9 -4.7 -61.7 -41.1
Net cash flow from operating, investing and
financing activities -4.2 -12.7 -56.1 -10.3 -51.3
Cash and cash equivalents, beginning balance 16.7
29.4 85.5 95.8 147.1
Cash and cash equivalents, ending balance
12.5 16.7 29.4 85.5 95.8
Announcement no. 35 / 7 November 2012 Third quarter
report 2012 20 of 23
Notes
Note 1 - Impairment test
As at 30 September 2012, Management performed a
review of the recoverable amount of the assets by assessing the
recoverable amount for the significant assets within the Tanker
Division, the Bulk Division and the investment in 50% of FR8.
Based on the review, Management concluded that:
- Assets within the Tanker Division were not further impaired as
of 30 September 2012 as the value in use exceeds the carrying
amount
- Assets within the Bulk Division were not impaired as the fair
value less costs to sell exceeded the carrying amount
- To maintain the impairment of the investment in FR8 of USD 42
million to zero recognized in Q2 2012 in addition to the impairment
losses recognized in previous years
Tanker Division
The methodology used for calculating the value in
use is unchanged compared to the Annual Report for 2011 and
accordingly the freight rate estimates in the period 2012 to 2015
are based on the Company's business plans, which in 2014 and 2015
assume a gradual increase towards the 10-year historic average spot
freight rate. The freight rates from 2016 are based on the 10-year
historic average spot freight rates from Clarksons adjusted by the
inflation rate.
The WACC of 8.0% (30 September 2011: 8.2%) is
unchanged compared to 31 December 2011.
The 10-year historic average spot freight rates as
of 30 September 2012 are as follows:
- LR2 USD/day 26,709 (30 September 2011: USD/day 27,811)
- LR1 USD/day 22,493 (30 September 2011: USD/day 23,293)
- MR USD/day 19,892 (30 September 2011: USD/day 20,227)
Management believes that these major assumptions
are reasonable.
The calculation of value in use is very sensitive
to changes in the key assumptions which are considered to be
related to the future development in freight rates, the WACC
applied as discounting factor in the calculations and the
development in operating expenses. The sensitivities have been
assessed as follows, all other things being equal:
- A decrease in the tanker freight rates of USD/day 500 would
result in a further impairment of USD 135 million for the
Tanker
Division
- An increase of the WACC of 1.0% would result in a further
impairment of USD 181 million for the Tanker Division
- An increase of the operating expenses of 5.0% would result in a
further impairment of USD 90 million for the Tanker Division
In case the market conditions do not improve in
order to sustain the current 10-year historic average spot freight
rates, the Company may have to make further impairments of the
assets. It should be emphasized that in a forced sale the
recoverable amount of the vessels would be significantly lower than
the carrying amount under a going concern assumption.
Based on broker valuations, TORM's fleet excluding
financial lease vessels had a market value of USD 1,316 million as
of 30 September 2012.
Announcement no. 35 / 7 November 2012 Third quarter
report 2012 21 of 23
Note 2 - Vessels and capitalized
dry-docking
30 September 30 September 31
December
USD million 2012 2011 2011
Cost:
Balance at 1 January 2,999.3 3,113.9 3,113.9
Additions 13.4 10.7 20.7
Disposals -49.6 -249.0 -334.6
Transferred to/from other items 102.9 199.3
199.3
Transferred to non-current assets held for sale 0.0
0.0 0.0
Balance 3,066.0 3,074.9 2,999.3
Depreciation and impairments:
Balance at 1 January 740.7 553.8 553.8
Disposals -8.7 -54.3 -67.8
Depreciation for the year 100.4 106.1 140.6
Impairment loss 0.0 0.0 97.8
Transferred to/from other items 0.0 16.3 16.3
Balance 832.4 621.9 740.7
Carrying amount 2,233.6 2,453.0 2,258.6
Note 3 - Prepayments on
vessels
30 September 30 September 31
December
USD million 2012 2011 2011
Cost:
Balance at 1 January 69.2 243.3 243.3
Additions 41.7 94.1 94.8
Disposals -8.0 0.0 -7.8
Transferred to/from other items -102.9 -199.3
-199.3
Transferred to non-current assets held for sale 0.0
0.0 -61.8
Balance 0.0 138.1 69.2
Depreciation and impairments:
Balance at 1 January 0.0 16.3 16.3
Disposals 0.0 0.0 0.0
Depreciation for the year 0.0 0.0 0.0
Transferred to/from other items 0.0 -16.3 -16.3
Balance 0.0 0.0 0.0
Carrying amount 0.0 138.1 69.2
Announcement no. 35 / 7 November 2012 Third quarter
report 2012 22 of 23
As at 30 September 2012, TORM's equity ratio of
14.3% and cash at bank of USD 12.5 million resulted in a breach of
its financial covenants under the existing loan agreements. As at
30 September 2012, TORM therefore does not have an unconditional
right to defer payments on the loans for more than 12 months and
the mortgage debt and bank loans are in principle payable on
demand. Accordingly the mortgage debt and bank loans are classified
as current liabilities in the balance sheet.
Please refer to "note 6 - Post balance sheet date
events" for an outline of the restructuring of TORM.
Note 4 - Mortgage debt and bank
loans
30 September 30 September 31
December
Million USD 2012 2011 2011
Mortgage debt and bank loans
To be repaid as follows:
Falling due within one year 1,793.7 189.6
1,794.6
Falling due between one and two years 0.0 281.8
0.0
Falling due between two and three years 0.0 154.1
0.0
Falling due between three and four years 0.0 737.3
0.0
Falling due between four and five years 0.0 111.2
0.0
Falling due after five years 0.0 380.1 0.0
Carrying amount 1,793.7 1,854.1 1,794.6
Note 5 - Segment information
Million USD
Tanker Bulk Not Tanker Bulk Not
Division Division allocated Total Division Division
allocated Total
Revenue 698.0 140.9 0.0 838.9 721.6 216.3 0.0
937.9
Port expenses, bunkers and commissions -404.6 -83.4
0.0 -488.0 -377.0 -95.5 0.0 -472.5
Freight and bunkers derivatives -0.1 13.6 0.0 13.5
4.1 4.9 0.0 9.0
Time charter equivalent earnings
293.3 71.1 0.0 364.4 348.7 125.7 0.0
474.4
Charter hire -134.3 -75.1 0.0 -209.4 -148.1 -131.6
0.0 -279.7
Operating expenses -121.6 -2.4 0.0 -124.0 -123.0
-2.5 0.0 -125.5
Gross profit (Net earnings from shipping
activities) 37.4 -6.4 0.0 31.0 77.6 -8.4
0.0 69.2
Prof it f rom sale of vessels -15.9 0.0 0.0 -15.9
1.8 -0.4 0.0 1.4
Administrative expenses -42.7 -5.3 0.0 -48.0 -42.2
-9.4 0.0 -51.6
Other operating income 1.2 0.1 0.0 1.3 2.8 0.1 0.0
2.9
Share of results of jointly controlled entities
-5.1 0.0 -4.5 -9.6 2.1 0.0 -7.4 -5.3
EBITDA -25.1 -11.6 -4.5
-41.2 42.1 -18.1 -7.4 16.6
Impairment losses on jointly controlled entities
0.0 0.0 -41.5 -41.5 0.0 0.0 0.0 0.0
Amortizations and depreciation -101.2 -2.1 0.0
-103.3 -106.8 -2.4 0.0 -109.2
Operating profit (EBIT) -126.3
-13.7 -46.0 -186.0 -64.7 -20.5 -7.4
-92.6
Financial income - - 8.1 8.1 - - 1.5 1.5
Financial expenses - - -110.3 -110.3 - - -47.6
-47.6
Profit/(loss) before tax - -
-148.2 -288.2 - - -53.5
-138.7
Tax - - -1.1 -1.1 - - -1.3 -1.3
Net profit/(loss) for the period - - -149.3
-289.3 - - -54.8 -140.0
BALANCE SHEET
Total non-current assets 2,207.3 37.4 12.2 2,256.9
2,599.7 102.5 77.6 2,779.8
The activity in TORM's 50% ownership of FR8 Holding
Pte. Ltd. is included in 'Not-allocated'.
Q1-Q3 2012 Q1-Q3 2011
During the year, there have been no transactions
between the Tanker Division and the Bulk Division, and therefore
all revenue derives from external customers.
Announcement no. 35 / 7 November 2012 Third quarter
report 2012 23 of 23
Note 6 - Post balance sheet date
events
As stated in announcement no. 31 dated 2 October
2012, TORM has signed a Restructuring Agreement with its banks and
time charter partners that secures the Company deferral of bank
debt, new liquidity and substantial savings from the restructured
time charter book. The highlights of the restructuring include:
- Current shareholders retain 10.0% ownership, compared to 7.5%
communicated earlier
- USD 100 million in new working capital facility available until
30 September 2014
- Maturities for the existing bank debt of USD 1.8 billion are
extended until 31 December 2016 with new uniform covenants and
terms and divided into three tranches
- Deferral of installments on the entire bank debt until 30
September 2014 and reduced repayments until 31 December 2016
- Interest on existing debt is only paid if TORM has sufficient
liquidity until at least 30 June 2014 with potential extension to
30 September 2014
- Mark-to-market savings estimated at approximately USD 270
million from amended time charter agreements
- TORM expects to be cash flow positive even at the current rate
levels
- As part of the restructuring, certain specific option rights
have been agreed that may result in a sales process for up to 22
vessels and repayment of the related debt.
As stated in announcements no. 32 and 33 dated 5
November 2012, TORM has finalized the technical completion of the
restructuring with its banks and time charter partners. In
connection with the restructuring, the Board of Directors in TORM
A/S completed the decrease of TORM's share capital decided at the
Annual General Meeting held on 23 April 2012. The nominal amount
per share was decreased from DKK 5.00 to DKK 0.01 by transfer of
the reduction amount to a special reserve fund. Subsequently, the
Board of Directors decided to exercise the authorization in article
2.14 of the Articles of Association and increase the share capital
of TORM A/S by issuing 665.2 million new shares by conversion of
debt of totally DKK 1.174.100.581 (approx. USD 200 million) to
TORM's banks and time charter partners or their assignees. The new
shares issued correspond to 90% of TORM's registered share capital
and votes registered with the Danish Business Authority.
The Company's group of banks has through the
implementation of the restructuring aligned key terms and
conditions and financial covenants across all existing debt
facilities, and all maturities on existing credit facilities have
been adjusted to 31 December 2016. Interest on the existing debt
will only be paid if the Company has sufficient liquidity, and
otherwise the remainder will be rolled up until at least 30 June
2014 with potential extension until 30 September 2014. On average
the interest margin is increased to approximately 240 basis points
across the existing bank debt. The Company will pay interest on the
new working capital facility until 30 September 2014.
The new financing agreements provide for a deferral
of installment on the existing bank debt until 30 September 2014,
in which period rescheduled principal amortizations will only fall
due if the Company has sufficient liquidity. Provided that the
Company generates sufficient cash, certain cash sweep mechanisms
will apply. Annualized minimum amortizations of USD 100 million
will commence with effect from 30 September 2014 until 31 December
2016. If vessels are sold, the related debt will fall due. New
financial covenants apply uniformly across the bank debt
facilities.
If the difficult conditions in the tanker and bulk
markets during 2012 will continue to prevail for a longer period,
the Company anticipates to be in breach with the new financial
covenants during the course of 2013. However, in market conditions
where the most current pick-up in product tanker freight rates will
prove sustainable over the coming years, the Company will be in
compliance with its financial covenants and be able to service
interest and installment obligations on the bank debt as they
become due.
With effect from the restructuring dated 5 November
2012, TORM's future time charter liabilities as per the original
charter parties are reduced by approx. USD 590 million from USD 818
million to USD 228 million by aligning rates to current market
level or by redelivering time charter vessels.
As stated in announcement no. 34 dated 5 November
2012, TORM has received notification that the following
shareholders now hold more than 5% of the share capital in the
Company: HSH Nordbank AG, Danske Bank, Nordea Bank Danmark
A/S, Deutsche Bank AG, and DBS Bank Ltd.
Note 7 - Accounting policies
The interim report for the period 1 January - 30
September 2012 is presented in accordance with IAS 34 "Interim
Financial Reporting" as adopted by the EU and additional Danish
disclosure requirements for interim reports of listed companies.
The interim report has been prepared using the accounting policies
as for the Annual Report for 2011. The accounting policies are
described in more detail in the Annual Report for 2011. As from 1
January 2012, TORM has implemented the amendment to IFRS 7
regarding disclosures about transfer of financial assets. The
amended standard has not affected the recognition and measurement
in TORM's interim report for the first nine months of 2012. The
interim report of the third quarter of 2012 is unaudited, in line
with the normal practice.
Attachments:
No. 35 2012 - Third Quarter Report 2012.pdf