Caution has long been a trademark for shipping company Norden, and caution is yet again the reason for the large dry bulk- and tank shipping company’s quarterly results, which are positive in light of expectations. The coverage of shipping days in dry bulk is at 81 percent for the rest of the year, and with increasing daily rates for tank ships up to around USD 15,000, Norden CEO Carsten Mortensen is optimistic.
The cash balance is also bringing out the smiles at the headquarters in Copenhagen. Even after paying the shareholders last month, Norden still has considerable reserves to draw on: USD 450 million in the bank, and USD 150 million in untouched reserves. Subtract from this the USD 180 million to pay for ships ordered until 2013. But the many millions still left could form the basis for entering the market again as buyers, and that decision could be made very soon, says Carsten Mortensen to ShippingWatch.
“I think we are going to spend some of the money on buying ships again. The time for contracting ships is rapidly approaching,” says Carsten Mortensen, though he won’t say whether he believes this optimal time to come before or after the summer break.
In a weak market, Norden had an operational result of USD 50 million for the first quarter of 2012, against USD 62 million for the fourth quarter of 2011, and USD 48 million in the first quarter of 2011, and they maintain their expectations for an EBITDA of USD 110-150 million for the whole year.
The large coverage of deals makes Norden less vulnerable to the fluctuating – and currently low – dry bulk rates. However, Carsten Mortensen believes that the underlying tendency in, for instance, China is still favorable to the shipping company, even though the growth rates of the country are not as sky high as last year.
“The consumption of iron ore goes up by six percent a year. That is a sign of solid growth. I don’t believe there is anything wrong with demand. The imbalance comes from the fact that there is still too much tonnage on the market,” he says.
The results are better than analysts’ expectations. According to SME Direct, the consensus was an EBITDA result of USD 33 million and an EBIT of USD 9 million. That, though, is before a massive impairment of USD 300 million on ships, which lowers the bottom line.
Carsten Mortensen says of the impairment:
“That is due to big drops in prices over the past weeks, and with our volume, it might look huge. But we have evaluated the situation carefully and we believe the impairment to be the right decision.”
The shipping company’s turnover was USD 532.6 million for the quarter, compared to USD 548 million for the same period in 2011, and the result after tax fell to minus USD 255.9 million from USD 69 million the year before. In this case, market consensus according SME Direct was a turnover of USD 469 million and a net profit of USD p million.