Tuesday, May 22, 2012

Bulk Freight Giant Announces Strategy for Dry and Product Tanker Sector

Norden Q1 Figures Prompt Comment from CEO
Shipping News Feature

DENMARK – WORLDWIDE – Bulk freight specialist Norden A/S fully expects rates to fall for the next few months according to CEO Carsten Mortensen who delivered a generally upbeat statement regarding the company’s performance in the first quarter of the year. Norden released the figures last week showing earnings of $50 million, $2 million up on the same period last year. The most worrying aspect for shareholders was the decrease in the market value of tankers and dry bulk carriers causing a need for write downs of $300 million, a situation precipitated by overcapacity as much as plummeting rates.

Norden was quick to point out that the depreciation does not affect operating earnings, cash flows or loan agreements, stating that Norden still holds a very strong financial position with an equity ratio of 85% and cash and securities of $450 million. According to a Bloomberg survey Norden has booked 121% of the company’s Panamax capacity, a segment which represents 35% of its fleet. Norden states that at the end of March the Dry Cargo Department had covered 81% of its capacity for the rest of 2012 and 40% for 2013 at ‘reasonable rates’.

Mr Mortensen says the Dry Cargo Department remains focused on increasing coverage with reputable partners which is also the strategy for tankers but admits now is not a good time for tankers saying:

“During the first quarter, rates in the product tanker market were on average 2% above the rates in the same period last year, and in general, the tanker market looks reasonable. Excellent business talent and fleet optimisation were again keywords for Tankers in the first quarter, and it is our perception that rates have nearly bottomed out. Therefore, time is not for long-term contracts within Tankers. We would rather pursue the upsides to be gained from being relatively uncovered in terms of ship days.

“And how will the rest of the year go? Well, as earlier announced, we expect a challenging year. Maybe – maybe 2012 will be the year when we in earnest will see the beginning of the end of the poor times. If you act in a cyclical market such as shipping – well, then fluctuations are your friend if you have the power and ability to benefit from these.

“This can be achieved by focusing on the core business and being able to generate a positive cash flow in difficult times. We maintain expectations for EBITDA for the full-year of 2012 to be in the amount of $110-150 million. After the solid performance in the first quarter, we do expect that earnings in the coming quarters will be at a somewhat lower level both in Dry Cargo and Tankers.”

The Baltic Dry Index, having risen steadily from the slough of despond it reached in February when it fell to the mid 600’s, has reached a more reasonable plateau this month at 1100 plus and by taking on long term contracts in the sector Norden has the flexibility to shed or employ charter vessels whilst ensuring its own fleet remains fully occupied through an uncertain period despite the vagaries of rates in this particular side of the market.