Torm lost 27m dollar in Q3 2010
SHIPPING: Torm posted a loss before tax of 27m dollar for Q3, compared to a profit of USD 4 million in the same period of 2009. The management says, that the result in Q3 2010 is not satisfactory and slightly below expectations.
"Market conditions were difficult in the third quarter and the rates for product tankers continue to be weak as the signs of recovery seen during the summer months have not materialised into better rates. Our long-term view of the product tanker market, however, remains positive", syas CEO Jacob Meldgaard.
The result before tax for the first nine months of 2010 was a loss of USD 49 million and included a profit of USD 18 million from sale of vessels.
Torm still forecasts a loss before tax of 75-85m dollar for 2010.
At 30 September 2010, Torm had covered 30% of the remaining earning days for 2010 in the Tanker Division at USD/day 16,173 and 87% of the remaining earning days in the Bulk Division at USD/day 19,791.
Tanker Division
The division realised an operating loss of 14m dollar for the third quarter of 2010, compared to a result of 0m in the same period in 2009.
Rates continued at a low level in the third quarter of 2010 and we did not see signs of improvement in rates during the quarter. Compared to the second quarter 2010 and the same period a year ago, rate levels have improved as the world economy is regaining strength.
The continued influx of newbuildings, limited usage of vessels for floating storage and continued negative market sentiment have influenced freight rates negatively.
In the third quarter of 2010, the net fleet grew by about 2%, resulting in a fleet growth of approx. 4% year-to-date. The significant delay seen in deliveries of new tonnage continued in the third quarter, with slippage for the first nine months of the year of 40%.
MR freight rates were negatively impacted during the third quarter of 2010 as the demand for gasoline in the USA remained low. In late June and early July, a rate strengthening in the transatlantic trading route was experienced due to a combination of the wide opening of gasoline arbitrage from Europe to the USA, disruptions in the Brazilian refinery sector and few available vessels on the European continent. Rates, however, levelled off as vessels having sought alternative cargoes returned to the European continent.
For the LR segment, the Far East demand for naphtha remained stable during the third quarter of 2010. However rates weakened, as tonnage was added from newbuildings and the use of floating storage remained at a low level. The weak market for transport of crude oil added to the tonnage supply as no vessels sought occupation in the crude market.
The level of floating storage did not change during the third quarter of 2010. At the end of September, floating storage occupied approximately 3% of the total fleet. Movements in floating storage are volatile and impacted by the forward curve for the various refined products.
Bulk division
Operating profit for the third quarter of 2010 was 4m compared to 25m for the third quarter of 2009. Profit for the third quarter of 2009 includes a profit of 21m dollar from sale of vessels.
The number of earning days for the Bulk Division was 5% lower in the third quarter of 2010 than in the same period last year due to the sale of vessels.
The dry bulk market continued to be volatile during the third quarter of 2010. The decline in rates that commenced in mid-May continued until the end of July when rates bottomed out at USD/day 16,000. Then rates increased until mid-September, peaking at USD/day 27,300 with a subsequent levelling off to USD/day 22,200 by the end of the quarter.
Chinese demand for coal and iron ore continued to be the main driver in the dry bulk market. The rate decrease experienced at the end of the second and going into the third quarters was driven by uncertainty surrounding future Chinese demand for iron ore. Subsequently, this concern eased off, which in combination with the Russian grain export ban, implying longer ton mileage, supported the freight rates.
The dry bulk fleet grew by net 4% during the third quarter, bringing fleet growth to net 12% year-to-date. As TORM seeks coverage of earning days for the Bulk Division, the volatility in bulk spot rates has limited impact on TORM's earnings in 2010.
Planned fleet changes
No vessels were contracted in the third quarter of 2010, and at the end of the quarter the order book thus comprised seven MR vessels and four Kamsarmax vessels. Capex relating to the order book amounted to 310m dollar.
In late October 2010, Torm took delivery of the MR vessel TORM Almena from the Chinese shipyard GSI Guangzhou.
On 16 November Torm acquired 50% of the vessel Torm Marina for 27m dollar corresponding to a vessel value of 26m dollar.
Torm has during the fourth quarter, as announced on 1 November in announcement no. 10, entered into an agreement to sell the two Kamsarmax dry bulk newbuildings with planned delivery to Torm in Q1 2011. The newbuildings have been sold for a total consideration of 90m dollar with a total net loss of 16m dollar. The newbuildings are expected to be delivered to the new owner in the first quarter of 2011, where the effect of the transaction will be recognised in the financial statements.
Source: Torm / maritimedanmark.dk
