Norden Reports First Quarter Net Profit of $62 Million

Results

•NORDEN for the first quarter of 2024 generated a net profit of USD 62 million (USD 150 million)
·EBITDA of USD 92 million (USD 208 million)
·Free cash flow of USD -50 million (USD 111 million)
·Return on invested capital (LTM) 26%
·Earnings per share of DKK 14 (DKK 31)

•While three of the four business activities in NORDEN contributed positively to the Group result, as expected the margins in the
dry cargo activities in Freight Services & Trading was temporarily lower.
·Freight Services & Trading: USD -27 million (USD 67 million)
·Assets & Logistics: USD 89 million (USD 83 million)

•The Net asset value (NAV) of Assets & Logistics increased 5.4% to DKK 372 per share due to underlying positive developments in asset values and value-enhancing effect from shares bought back.

Business highlights

•Freight Services & Trading generated a loss of USD 630 per vessel day in the first quarter compared to a five year average margin
of USD 1,166 per day, with positive contribution from the tanker activities, while the dry cargo activities as expected was impacted by higher charter costs due to a strong market.
•Projects and Parcelling continued the positive development contributing with positive margins to Freight Services & Trading.
•The high earnings coverage in Assets & Logistics across both dry cargo and tankers combined with gains from sale of vessels of USD 55 million added to a stable high profit in the first quarter.
•Based on a structurally positive market outlook, NORDEN has continued to expand its deferred Capesize position, adding 4 newbuildings and 2 modern second-hand vessels, bringing the total owned and leased capesize fleet to 11 vessels.
•By end of the quarter the total contracted fleet of owned and leased vessels was 31 vessels, across dry cargo and tankers compared to 15 vessels end of first quarter 2023.

Guidance

•NORDEN reiterates the full-year guidance for 2024 of a net profit between USD 150 to 250 million, based on a first quarter result that was overall in line with expectations. The guidance for 2024 includes gains from sale of vessels from already signed and agreed transactions of USD 59 million.
•By mid April 2024, NORDEN had a total of 4,171 net open tanker vessel days for 2024 across both business units. In dry cargo, the net exposure was a total of 6,618 open vessel days for 2024, with a neutral position for the remainder of Q2 2024.
•Earnings in Assets & Logistics are expected to remain stable from high earnings coverage in both dry cargo and tankers, combined with an expectation of gradual improvements in margins in Freight Services & Trading towards the end of the year.
•In line with the policy to distribute min. 50% of the full-year profit to shareholders, the Board has decided to return USD 30 million to shareholders for the first quarter of 2024, through an interim dividend of DKK 2 per share and a share buy-back programme of USD 21 million, which will run until the end of July.

‘’NORDEN generated a net profit of USD 62 million in the first quarter and a ROIC of 26% in the last twelve months. Our tanker activities performed well, as did our investments in assets, contributing positively to earnings and higher asset values, while as expected, we faced short-term headwinds from higher charter costs in dry cargo. We maintain our full-year guidance, expecting gradually higher margins in dry cargo during the year, and will return USD 30 million to shareholders for the first quarter.”
CEO Jan Rindbo

COMMENTS ON THE DEVELOPMENT OF THE FIRST QUARTER 2024

Earnings results

The time charter equivalent revenue (TCE) in the first quarter of 2024 decreased by USD 93 million or 15% to USD 542 million (USD 635 million), mainly caused by lower revenue related to high coverage in dry cargo due to expectations of a normal seasonality.

The contribution margin decreased by USD 131 million or 53% to USD 114 million (USD 244 million) related to the lower TCE revenue combined with increasing charter costs primarily related to covering dry cargo capacity in Freight Services & Trading. The gross margin declined from 24% to 12%.

EBITDA was USD 92 million or USD 117 million lower compared to the same quarter in 2023, reflecting a margin of 10% (21%).

Operating profit (EBIT) was USD 72 million or USD 83 million lower compared to same quarter in 2023, partly offset by lower depreciations due to fewer Right-of-use assets, while gains from sale of vessels contributed with USD 55 million compared to USD 42 million in Q1 2023. The conversion ratio, excluding sale gains, was 15% down from 47% in Q1 2023.

Financial items net, amounted to USD -7 million (USD -3 million), impacted by the higher interest and lower cash position.

The net profit for the first quarter of 2024 amounted to USD 62 million (USD 150 million) with a loss of USD 27 million (USD 67 million) in Freight Services & Trading and Assets & Logistics contributing with USD 89 million (USD 83 million).

Cash flows and Capital structure

Cash flow from operating activities decreased to USD -50 million (USD 146 million), negatively affected by the lower profit and higher net working capital of USD 143 million, related to higher bunker prices and increase in number of operated vessels.

Cash flow from investing activities was USD 155 million (USD 113 million) due to investments in assets of USD -86 million (USD -64 million), proceeds from sale of vessels of USD 172 million (USD 164 million) and change in financial investments (deposits) of USD 68 million (USD 40 million).

Free cash flow was USD -50 million (USD 111 million) negatively impacted by the lower earnings and higher net working capital and offset by proceeds from sale of vessels.

Net cash flow was USD -47 million (USD -28 million) impacted by cash distribution to shareholders through dividends of USD 46 million (USD 111 million), share buy-backs of USD 18 million (USD 59 million) and instalments on lease liabilities of USD 82 million (USD 105 million).

During the first quarter of 2024, cash and cash equivalents decreased to USD 442 million (USD 557 million end FY 23). As of 31 March 2024, NORDEN had undrawn committed credit facilities of USD 200 million of which USD 114 million were directly accessible. Net interest-bearing debt increased to USD 128 million compared to USD 45 million by end of 2023.

NORDEN shareholders’ share of equity on 31 March 2024 was USD 1,223 million (USD 1,198 million end of FY 23) reflecting the allocation to shareholders during the quarter and the positive net profit for the period.

The solvency ratio, excluding non-controlling interest, was 53% by the end of March 2024 compared to 51% by the end of full- year 2023.

Update on the Strategic Scorecard

The value creation based on the return on invested capital (ROIC) since Q2 2019 has been 23% per year and 26% in the last twelve months, outperforming our target of average min. 12% per year rolling over five years. It confirms that even though we will recognise short-term fluctuations in earnings the agile business model and invested capital supports the value creation over time.

Growing the business in a profitable way is a core part of our strategy and on average we aim at growing the number of vessel days by 5% CAGR per year. In the last twelve months we have had a CAGR of 4%, slightly below our target of 5%. However, since Q2 2018 the CAGR on average has been 5% and we are thus in line with our long-term target.
During the quarter the profitability in Freight Services & Trading as expected has been under pressure and below our average min. target of USD 500 per day. Measuring the development over the past five years the average margin has been USD 1,166 per day and for the last twelve months USD 235 per day.
On the decarbonisation initiatives we have reduced the EEOI by 10% by end of March 2024 compared to our baseline in 2022, confirming that we are on track to deliver on the 2030-target of min. 16%, despite the current situation in the Red Sea.

We aim at generating a total shareholder returns (TSR) of min. 10% per year on average. While returns in the past twelve months have been negative by 30%, driven by the short-term expected lower margins in dry cargo, NORDEN have in the past five years generated a positive return of 39% per year.
Source: NORDEN