Nordic Shipholding: Poor First Half Results Due to Low Tonnage Demand
The Group performed poorly in the first six months of this year as the Time Charter Equivalent (“TCE”) rates were largely depressed due to low tonnage demand caused by the COVID-19 pandemic coupled with excessive tonnage in the market. As a result, the average daily TCE rate earned in H1 2021 by the vessels was 58% lower than the average daily TCE rate earned in H1 2020.
For the 6 months ended 30 June 2021, the Group incurred a loss after tax of USD 6.0 million (including one-off impairment losses totalling USD 4.8 million on the vessels), compared to a profit after tax of USD 5.7 million (including one-off impairment loss of USD 2.0 million on the vessels) for the same period last year. The significant decline in TCE rates coupled with the loss of earnings resulting from the sale of two vessels, Nordic Hanne and Nordic Pia, in April 2021 drove the loss incurred in H1 2021.
Expenses relating to the operation of vessels in H1 2021 is lower at USD 5.2 million (USD 5.7 million) due primarily to the sale of Nordic Hanne and Nordic Pia in April 2021.
EBITDA decreased significantly to USD 0.8 million (USD 13.0 million) due to the lower TCE revenue generated in H1 2021. Other external costs remained unchanged at USD 0.7 million (USD 0.7 million).
As stated in the Company Announcement 12/2021, the merger discussions with potential merger partners have stalled. The Company, however, is keeping its options open in its continued search for suitable merger partners. In accordance with the agreement with the lenders, management has put in place a process to sell the remaining three vessels in an orderly fashion. Hence, the Group recognised an impairment loss of USD 4.5 million in H1 2021 (USD 2.0 million) following the re-classification of the three remaining vessels, Nordic Agnetha, Nordic Amy and Nordic Anne, as assets held-for-sale (re-classification of Nordic Hanne as asset held-for-sale). Due to the volatile market, it is noted that the estimation of these vessels’ expected sale value is highly uncertain.
The Group recognised a further impairment loss of USD 0.4 million in H1 2021 (USD NIL) due to the recognition of certain incremental expenses relating to the sale of Nordic Hanne and Nordic Pia which took place in April 2021.
After accounting for depreciation, impairment losses, interest expenses and other finance expenses, the loss after tax was USD 6.0 million in H1 2021 (profit of USD 5.7 million).
Between 31 December 2020 and 30 June 2021, equity decreased from negative USD 8.5 million to negative USD 14.5 million as a result of the cumulative loss incurred during the period. The Board is in discussions with the Group’s various stakeholders to ensure the proper winding down of the Group in a responsible manner.
Following successful negotiations between the major shareholder of the Group, management and the lenders in December 2020, an agreement was reached with the lenders for an extension of the Company’s loan facility by another year to 30 December 2021. Terms of the re-negotiated financing agreements include but are not limited to (i) the sale of two vessels, Nordic Hanne and Nordic Pia, within the first half of 2021, (ii) extension of the existing USD 3.85 million banker’s guarantee provided by the majority shareholder until early 2022, (iii) reinstatement of quarterly loan instalments from December 2020, and (iv) new financial covenants such as revised minimum liquidity level and minimum value clauses. The loan extension was to give the Company more time to explore various sustainable scenarios, including the possibility of a merger.
The Group is also subject to a quarterly cash sweep mechanism under which the Group, after payment of instalments and interest under the loan agreement, must apply any cash and cash equivalents of the Group in excess of USD 6.0 million towards prepayment of the loan. There was no cash sweep in H1 2021 (cash sweep of USD 11.1 million was used to pay down the loan in H1 2020).
During the financial period under review, cash flow from operations was a net cash outflow of USD 0.4 million (net cash inflow of USD 11.9 million) after payment of periodic interest expenses on the term loan. Apart from the quarterly loan instalments totalling USD 2.1 million, the net proceeds from the sale of Nordic Hanne and Nordic Pia were applied towards the prepayment of bank loans in H1 2021. As a result, cash and cash equivalents was reduced to USD 2.6 million as at 30 June 2021 from USD 5.4 million as at 31 December 2020.
Nordic Hanne and Nordic Pia were committed for sale when the Sale and Purchase Memorandum of Agreements were signed in January 2021 and February 2021, respectively. Nordic Hanne exited from the Hafnia Handy Pool on 31 March 2021 and was subsequently delivered to her new owner on 19 April 2021. Nordic Pia was delivered to her new owner on 20 April 2021.
Assuming the remaining three vessels remain in the Hafnia Handy Pool and Hafnia LR Pool respectively until they are sold in Q4 2021, the TCE revenue for 2021 is forecasted to be in the region of USD 9.0 million – USD 11.0 million. After accounting for operating expenditure budgeted by the respective technical managers, the Group’s expected EBITDA (earnings before interest, tax, depreciation and amortisation) for 2021 is in the range of USD NIL million – USD 2.0 million, and the result before tax is expected to be a loss between USD -4.5 million – USD -2.5 million including impairment loss. The outlook for 2021 does not take into account any further impairment or write-back of impairment of the vessels’ carrying values.
The outlook for 2021 remains unchanged as indicated in the Company Announcement 12/2021 on 24 August 2021.Full Report
Source: Nordic Shipholding