Odfjell Reports First Quarter 2004 Results

  • Tragic loss of M/T Bow Mariner
  • Strong market rebound
  • EBITDA up 30% over same period last year
  • Time-charter earnings 9% higher than first quarter 2003
  • Continued high bunker cost
  • Strong results from tank terminal activities


  • Results

    Odfjell's consolidated net result after tax was USD 34 million the first quarter 2004 compared to USD 18 million first quarter 2003. The first quarter 2004 figure includes capital gains on assets of USD 9 million.

    Time-charter results per day improved by 9% compared to first quarter 2003 and to the full year 2003. Increased voyage expenses reflect the increased number of ships in the fleet. Earnings before interest, taxes, depreciation and amortisation (EBITDA) for first quarter 2004 were USD 53 million, up from USD 41 million first quarter 2003. Operating result (EBIT), including capital gain on assets, was USD 38 million in the first quarter 2004, compared to USD 19 million in the first quarter 2003.

    Operating expenses as well as general and administrative expenses were higher than first quarter 2003, mainly due to increased activity level. Net interest expenses for the first quarter 2004 were USD 6 million compared to USD 5 million first quarter 2003.

    The USD 9 million capital gain on assets in the first quarter 2004 include insurance proceeds from the loss of M/T Bow Mariner (39,821 dwt./built 1982), the sale of M/T Bow Queen (32,363/1975) for demolition and the sale of M/T Bow Apollo (6,291/1981) previously controlled by us through a bareboat charter with charterer's purchase option.

    The average USD/NOK exchange rate for the first quarter 2004 was 6.93 compared to 7.06 for the first quarter 2003. The USD strengthened against the NOK from 6.68 at year-end 2003 to 6.86 at 31 March 2004. The currency gain, primarily from hedging, was USD 6 million compared to USD 7 million the same period last year. Taxes were USD 3 million in first quarter 2004 compared to USD 1 million in the first quarter 2003.

    Business segments

    Global trade

    EBITDA for the first quarter 2004 was up 35% to USD 35 million compared to USD 26 million in the first quarter 2003. Operating profit (EBIT) was USD 27 million in the first quarter 2004, compared to USD 10 million in the first quarter 2003. Improved market conditions led to time-charter income expressed in USD per day being about 9% higher in first quarter 2004 compared to first quarter 2003. The average cost of bunkers in first quarter 2004 was USD 153 per ton (after bunker clause compensations), compared to USD 163 per ton last year. Operating expenses on a comparable fleet basis were 5% lower in first quarter 2004 than the full year 2003 figure.

    On 20 February 2004, we took delivery of the 39,900 dwt. newbuilding M/T Bow Star from Stocznia Szczecinska Nowa in Poland. M/T Bow Star is the second ship in a series of six to eight newbuildings from the Polish yard.

    Regional trade

    EBITDA for the first quarter 2004 was USD 3 million, the same result as corresponding period last year. EBIT for the first quarter 2004 was USD 2 million, compared to USD 1 million in the first quarter 2003.

    Odfjell Ahrenkiel Europe became operational 1 January 2004 and is initially operating eight modern chemical tankers in inter-European trade.

    During the first quarter 2004, Odfjell Asia took delivery of two 9,900 dwt. time-charter newbuildings, the M/T Bow Asia and M/T Bow Singapore.

    Tank terminals

    EBITDA for the first quarter 2004 was USD 13 million, an improvement from USD 11 million in the same period last year. EBIT for the first quarter 2004 was USD 8 million up from USD 7 million in the first quarter 2003.

    The EBITDA of Odfjell Terminals (Houston) was USD 5 million the first quarter 2004, in line with first quarter 2003. Odfjell Terminals (Rotterdam) showed an EBITDA of USD 7 million first quarter 2004 compared to USD 5 million first quarter 2003. Our share of the terminals in Onsan, Korea, Singapore and the two terminals in China made an EBITDA of USD 2 million.

    Together with Oiltanking in Germany we have acquired 35% each of a tank terminal in Bandar Iman Khomeini, Iran. The terminal, currently under construction, is a small but strategically important investment.

    Tank containers

    EBITDA for first quarter 2004 was USD 1 million, the same level as last year. EBIT for the first quarter 2004 was USD 1 million, stable from last years level.

    Key figures

    Return on equity was 20% and return on total assets was 8.1%. Return on capital employed (ROCE) was 9.7% in first quarter 2004.

    Earnings per share amounted to USD 1.56 (NOK 10.81) in the first quarter 2004 compared to USD 0.84 (NOK 5.94) in the first quarter 2003. Cash flow per share was USD 2.65 (NOK 18.35) compared to USD 1.87 (NOK 13.22).

    As per 31 March 2004 the Price/Earnings ratio (P/E) was 4.8 and the Price/Cash flow ratio was 2.8. Based on book value the Enterprise Value (EV)/EBITDA multiple is 6.2 while, based on market value as per 31 March 2004, the EV/EBITDA multiple is 6.7. Interest coverage ratio (EBITDA/Net interest expenses) improved in first quarter 2004 to 8.2 compared to 7.7 in the first quarter 2003.

    Finance

    Cash and bonds as of 31 March 2004 increased to USD 223 million from USD 203 million as of 31 December 2003. Additionally, undrawn credit facilities equalled USD 60 million as per 31 March 2004. Interest bearing debt increased from USD 944 million as per year-end 2003 to USD 979 million per 31 March 2004 as a consequence of investments. Net interest bearing debt was USD 756 million as per 31 March 2004. The equity ratio was 33% as per 31 March 2004 and the current ratio was 2.8.

    Long-term financing is established for the remaining four to six newbuildings from the Stettin yard in Poland at attractive terms through Polish export credit arrangements.

    Shareholder information

    At 31 March 2004 the Odfjell A-shares were trading at NOK 205 (USD 29.9) up 38.5% from NOK 148 (USD 22.1) year-end 2003. The B-shares were trading at NOK 200 (USD 29.2) at 31 March 2004, up 39.4% from NOK 143.50 (USD 21.5) year-end 2003. By way of comparison, the Oslo Stock Exchange benchmark index rose 13.3% and the transportation index improved by 20.2% during the same period. The A-shares traded between NOK 149 (USD 22.3) and NOK 220.50 (USD 31.6) during the period whilst the corresponding figures for the B-shares were NOK 144.5 (USD 21.6) and NOK 217 (USD 31.1).

    The Annual General Meeting will be held later today and the Board recommends a dividend of NOK 6 (USD 0.90) per share for 2003, equal to NOK 130.2 million (USD 19.5 million). If approved, the dividend will be paid out on 24 May 2004 to the registered shareholders as per 5 May 2004. Based on the average share price in 2003 the direct yield, through dividends equals about 4.6%.

    Legal Matters

    We have previously reported extensively on the investigations by US and European competition authorities of antitrust violations in the parcel tanker industry. From Odfjell Seachem's perspective, there are no further significant developments to report.

    Tragic Loss of M/T Bow Mariner

    Odfjell is deeply saddened that lives were lost when M/T Bow Mariner sank in international waters outside the coast of Virginia on 28 February 2004. The ship had a crew of 27 whereof 24 Filipino and 3 Greek. Six crewmembers survived the accident while the remaining 21 crewmembers died or are missing.

    M/T Bow Mariner sank after a fire and several explosions. The ship's flag state authority, Singapore, asked the US Coast Guard to carry out investigation on their behalf. Odfjell as owner and Ceres Hellenic Shipping Enterprises Ltd. as manager of the ship hope that the cause of the accident will be fully established. An independently administered memorial fund is being set up to support the educational needs of the children of the M/T Bow Mariner crew.

    Prospects

    The world economy is recovering, and there is strong growth in China and the US as well as continued economic growth elsewhere in Asia. Volume and spot rates in the chemical tanker market started to improve late 2003. We believe such trend will continue the next few years, the more so since new ships are becoming more expensive and delivery lead times are becoming steadily longer.

    Further enhanced by continued strong results in our tank terminal business we fully expect an improved operating result for 2004 as compared to 2003.
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