Speak from the film third quarter of 2011 in 5 minutes
Below please find translated speak (from Danish) from NORDEN's film, where CEO Carsten Mortensen presents third quarter of 2011 results.
For 4 years now, Europe and the USA are struggling with a financial crisis, economic crisis, debt crisis – and it would be fair to say – also a political crisis. And the situation is not improving. These past months, the barometer has moved from ”bad” to ”worse”... Nothing comes on a silver platter for any company these days; not for NORDEN either.
This is why I am even more pleased that we are now able to raise expectations for 2011. We have performed a bit better than expected so far – and we expect to end the year with a fairly solid fourth quarter.
Expectations for the full year are now operating earnings before depreciation of USD 160-180 million – just below DKK one billion. And for the profit from operations, we are now aiming for USD 80-100 million – approximately DKK half a billion.
Simply put, these figures express the fact that we are narrowing the expectation range and raising the centre of the range by 15 million dollars – 80 million Danish kroner. We are thus not just delivering as promised – we are delivering a little more than promised.
In the quarter which has just come to an end, there were several things to be pleased about. Not least the fact that operatings earnings before depreciation came in at USD 36 million. That was USD 14 million more than last year, even though it is only fair to mention that last year, we incurred some expenses related to the repositioning of several Dry Cargo vessels.
In Dry Cargo, we managed once again in the third quarter to outperform the market. Our earnings per ship day were 25% above market rates because we entered the quarter with high coverage and the vast majority of vessels employed at sound rates.
At the same time, we continue to grow at a higher rate than the market. This year, in terms of volumes, we have transported 32% more cargo – in a market where volumes are growing by 5-6%. This means that we are gaining market shares – and are in every way living up to our goal of growing cargo volumes by 15% per year. The good performance also had a spill-over effect on Dry Cargo’s operating earnings before depreciation. These went up to USD 35 million during the quarter.
Tankers performed reasonably well in the third quarter when market conditions are taken into account. In Europe and the USA, demand is difficult to come by, and therefore rates are record low.
This is how it is – and we are not able to change it. But it is no good blaming the market for all that goes wrong. There is only one thing to do – that is get to work – show good craftsmanship, position the vessels right, keep costs low and quality high – and optimise the business. We are striving to do all this.
Therefore, in spite of everything, we have earned USD 3 million on operations in the third quarter – and USD 22 million, year-to-date.
Let me wrap up the total results with the bottom line: a loss of USD 21 million compared to a decent profit last year.
How is this compatible with my talk of an upward revision? Well, first of all, we are expanding the fleet. So there are no profits from the sale of vessels, whereas last year, we generated USD 32 million on vessel sales. And at the same time, a larger number of vessels means higher depreciation. All as expected.
Secondly, we have had negative value adjustments of hedging instruments of USD 29 million. This is pure accounting technique. Sometimes adjustments are negative, sometimes they are positive; and in the third quarter, they were very negative, BUT – and this is important: adjustments will even out over time, and they say nothing about NORDEN’s operations.
So a loss – yes. But only because of accounting technique. Operating earnings – which create the real profit – are healthy and, as mentioned, developing better than expected.
As touched upon before, there are many challenges in shipping today, and to all appearances there will be next year as well. Look at the prospects in Europe and the USA, and you will know that the times are not for champagne, but rather for a strong cup of coffee and an energy drink.
NORDEN is in a better position than many others because most of our business takes place in the markets, where despite everything there is growth: China, India, Asia, South and Central America as well as parts of Africa. But in a globalised world, all markets are – to a higher or lesser degree – influenced by the growth, or lack of same, of the world economy. And as we also know that deliveries to the global dry cargo fleet will peak in 2012, we are preparing for yet another challenging year.
In Dry Cargo, our coverage provides good support. At the end of the quarter, 57% of next year’s ship days were employed – at reasonable rates. We are constantly increasing coverage a little, and several large cargo projects are in the pipeline. So we are confident that we will reach the level that we are aiming for. In Tankers, coverage is lower as we are expecting that currently there is more upside in waiting and locking in coverage at a later stage.
In both Dry Cargo and Tankers – well, in NORDEN as a whole – strict focus is on avoiding unnecessary risks, keeping costs down and on constantly improving the way we work. The devil is in the detail, is what I usually say. There is always something that can be done in a simpler, better and more efficient way. That is how we proceed – and improve.
With this approach, good coverage, decreasing fleet costs and a smart organisation, we are ready for whatever 2012 may bring. But first we have to carry through this year’s work of course – and deliver the upward revision that I promised to begin with.
Thank you for listening.
Forward looking statements
This text contains certain forward-looking statements reflecting the management’s present judgment of future events and financial results. Statements relating to the remainder of 2011 and subsequent years are subject to uncertainty, and NORDEN’s actual results may therefore differ from the projections.
Factors that may cause such variance include, but are not limited to, changes in macro-economic and political conditions, particularly in the Company’s principal markets; changes to the Company’s rate assumptions and operating costs; volatility in rates and tonnage prices; regulatory changes; any disruptions to traffic and operations as a result of external events, etc.
NORDEN's third quarter of 2011 in 5 minutes - in Danish
President & CEO Carsten Mortensen presents NORDEN's third quarter of 2011 in a short film - available in Danish only.
