Company Announcement 9/2018

November 21, 2018

NORDIC SHIPHOLDING A/S
Company Announcement: 09/2018


Published via NASDAQ OMX on November 21, 2018
Q3 Result 2018

Summary
The comparison figures for period ended 30 September 2017 are stated in parenthesis.

The Company has previously announced that it had breached certain of its loan covenants.  Following successful negotiations among management, the major shareholder and the lenders, an agreement has been reached which will result in an improved balance sheet structure for the Company.  Documentation of this restructuring is targeted to be finalised by end-2018.

Elements of the re-negotiated financing agreements include but are not limited to (i) the major shareholder of the Company providing additional liquidity in the form of loans, (ii) increase in interest margin, and (iii) covenants and undertakings modified/relieved in order to secure that the Company will have more time - up to September 2020 to finalise the implementation of its various strategies.

The Company is also pleased to announce that the legal dispute with a total value of about USD 1.5 million, disclosed in 2017 Annual Report, was resolved at the end of September 2018.  That dispute was related to a sizeable demurrage and deviation claim and the exit from the pool.  The Group received the full amount of USD 1.5 million by early-November 2018.

The tanker market, however, continued to soften into Q3 2018.  Compounded by higher bunker prices, the average daily Time Charter Equivalent ("TCE") rates earned by the 6 vessels deployed in the three pools came in below their forecasted daily rate in the first 9 months of the financial year. 

Compared to the same period last year, total TCE revenue fell to USD 13.4 million (USD 18.0 million) in 9M 2018.  Further, the TCE revenue from the LR1 vessel deployed in Straits Tankers Pool in 9M 2018 was USD 1.7 million lower than the TCE revenue derived from the 3-year time charter locked in for the LR1 vessel in the same period last year.

For the 9 months ended 30 September 2018, the Group incurred a loss after tax of USD 20.8 million (which included a one-off impairment loss of USD 13.2 million for the vessels), compared to a loss after tax of USD 2.2 million in the same period last year.  Excluding the impairment loss of USD 13.2 million, the Group generated a loss after tax of USD 7.6 million for the 9 months under review (USD    -2.2 million).  Lower tanker TCE revenue from the vessels deployed in the three pools in 2018 contributed to the higher losses in 9M 2018.

Expenses relating to the operation of vessels in 9M 2018 increased slightly to USD 11.2 million as compared to the same period under review of USD 11.1 million.

EBITDA fell to USD 0.7 million (USD 5.4 million) due to the reduction in TCE revenue in 9M 2018.

Including the impairment loss of USD 5.0 million recognised in Q3 2018, the Group recognised a total impairment loss of USD 13.2 million on its vessels during the financial period (9M 2017: NIL). 

After accounting for depreciation, interest expenses and other finance expenses, the loss after tax in 9M 2018 was USD 20.8 million (USD -2.2 million).

Under the loan agreement, cash in excess of USD 6.0 million will be used to pay down the loan facility.  As the cash balance did not exceed USD 6.0 million, there was no cash sweep in the period under review (9M 2017: NIL).

Between 31 December 2017 and 30 September 2018, equity decreased from USD 35.8 million to USD 14.8 million as a result of the cumulative loss during the period and the downward adjustment of USD 239K due to the adoption of IFRS 15, Revenue from Contracts with Customers.  Consequently, the equity ratio decreased from 31.3% to 15.4% between 31 December 2017 and 30 September 2018.

During the financial period, cash flow used in operations was USD 2.9 million (cash flow generated from operations of USD 3.2 million).  In 9M 2018, the Group paid USD 0.8 million for the dry-docking of Nordic Ruth (USD 1.2 million for the dry-docking of Nordic Hanne), which was in dry-dock from late June 2018 to mid-July 2018.  The majority shareholder of the Group has extended a USD 1.0 million shareholder loan to the Group in June 2018 to support the dry-docking of Nordic Ruth.  The Group used previously swept cash to make the repayment (repayment of USD 3.5 million from operating cashflows) on the term loan facility under the scheduled amortisation. 

As at 30 September 2018, cash and cash equivalents stood at USD 0.7 million (USD 3.5 million).

Due to the impairment loss recognised in Q3 2018, the lower than expected income in Q3 2018, and the resulting loss arising from the modification of certain terms under the bank loan, the Board has revised the forecast for 2018 previously indicated in the H1 2018 Interim Report.  Including the impairment loss of USD 5.0 million recognised in Q3 2018 and the estimated loss of USD 2.6 million arising from the modification of certain terms under the bank loan in Q4 2018, the result before tax for 2018 is expected to be between USD -28.0 million - USD -25.0 million, decreased from USD -18.0 million - USD -15.0 million.  The EBITDA (earnings before interest, tax, depreciation and amortisation) is expected to be between USD 1.5 million - USD 4.5 million, unchanged from that indicated in H1 2018 Interim Report.  This outlook for 2018 does not take into account any further impairment of vessels' carrying values, if any.

With a considerably improved balance sheet structure, the Company is in a more favourable position to pursue growth and potential consolidation opportunities that are accretive to the Company. 

For further information please contact:
Knud Pontoppidan, Chairman of the board, Nordic Shipholding A/S: +45 39 29 10 00

Attachment

NSH Q3 18 Financial announcement

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