I.M. Skaugen SE 3Q Result 2011
(Thomson Reuters ONE) -
IMSK- 3Q result 2011
The I.M. Skaugen Group (IMSK) today announces
The pre-tax result for 3Q11 was negative USD2 mill compared to zero result for
3Q10. The result of the 3Q11 on an EBITDA basis was USD8.4 mill compared to
USD7.9 mill for the 3Q10. The pre-tax result was negative USD6 mill YTD 3Q11
compared to negative USD8.6 mill for the YTD 3Q10. The result of the YTD 3Q11 on
an EBITDA basis was USD22.5 mill compared to USD14.6 mill for the YTD3Q10.
Our views of the performance of the company in the third quarter of 2011
Despite the mounting signs of a synchronized global slowdown due to financial
stress imposed by the debt crisis in Europe, our core business segment (being
the long haul petrochemical gas carrier trades of Norgas Carriers) have held up
well with no signs of demand being affected. Norgas continued its positive trend
seen from mid-2010, and the 3Q performance was more or less similar to 2Q with
high volumes under our COA contracts. The China activities improved its result
from higher sales compared to the second quarter. Our SPT business was stung by
lower support jobs combined with continued weakness in the tanker markets, and
ended the quarter negatively compared to the second one.
We experience that the global economic environment has become more uncertain
during the past quarter. The advanced economies are experiencing much slower
growth compared to the beginning of this year mainly due to increased fiscal and
financial uncertainties caused by lack of sufficient political support in the US
and the Euro area. We have seen a slowdown in Emerging Markets especially in the
industrial production growth of the BRICs except from China and its neighboring
emerging countries. Nevertheless, we believe that the Emerging Markets has the
"tool box" to boost the economic growth as their monetary tightening on
inflationary pressures will end soon. In the long run they will sustain a
higher growth rate than the OECD countries. Hence we should continue to benefit
from our strategic focus on business in markets "East of Suez".
In third quarter we took delivery of the last of the three vessels in the
Wintergas series-"Norgas Camilla" with the unique ability of carrying a
combination of gas and chemicals.
The delivery of this vessel generated USD 33.5 mill in liquidity which has been
utilized in improving our liquidity as well as the equity ratio from reduction
of working capital and associated debt related to construction of the
newbuilding vessels. The delay of this vessel has caused direct losses of about
USD 10 million from May 2010 when the vessel was ready to sail. Going forward
this should directly improve our profitability. Norgas Camilla loaded her first
cargo shortly after delivery and she is now operating in intra-Asia trades.
Although Norgas Camilla has been delivered, we are still proceeding with the
arbitration process at HKIAC (Hongkong International Arbitration Centre) to
recover for the economic loss we suffered from the delayed delivery.
The other two Multigas vessels Norgas Vision (12 000cbm) and Norgas Conception
(10 000cbm) with the capability of carrying both LNG and petrochemical gases
have completed their sea trials and both vessels are under final stage of
construction and scheduled for delivery in October of 2011. Over the past 10
years the Company has built 18 gas carriers in China at a gross investment of
USD570 mill. This newbuilding program makes the Norgas fleet the most efficient
and modern fleet of all gas carrier operator in the world. At the end of 2011
the fleet will have an average age of 8 years and the fleet is much harmonized
in its average size and design especially for long-haul trades which is made to
focus on our core markets. We wish now to proceed to build the remaining four
vessels based on a strategy of building up to 10 Multigas carriers before the
completion of the current newbuilding program. This will require some further
work on securing proper financing and construction facilities in China or
elsewhere given the challenging financial markets for the time being.
IMS focus on transportation of energy commodities
The emerging markets have become the major growth engines of the global economy
and are developing at an impressive speed. They are early in the
industrialization cycle, and combined with large populations the appetite for
more food and energy commodities is demonstrated by significant growth in
demand. Despite the high growth, the GDP per capita in these countries remains
significantly lower than the advanced economies. Thus their demand is more
inelastic to pricing, and a small increase in GDP per capita contributes
substantially to overall commodity demand.
The rapid rise of the emerging markets has created a shortage of energy
resources such as fuel, electricity and gas; this has further created
bottlenecks for industrial productions such as steel, chemicals, fertilizer,
etc. causing pressure for near-term economic growth, and a slowdown of
infrastructure investments which give support to the economy. As an important
energy commodity, crude oil is also the key component in petrochemical industry.
The rise in the crude oil price increases the cost of petrochemical products;
except for the Middle Eastern producers who continue on supply of cheaper feed
stock due to the cost advantage in the region.
On the other hand, based on the decoupled price developments in crude oil and
nature gas, the natural gas will become the perfect substitute for crude oil,
diesel and heavy fuel oil with the perspective on both environment and cost
level, due to limited substitution alternatives for oil both in terms of density
and supply. Due to lack of infrastructure the implementation process of LNG as
fuel for marine transportation remains slow. But the LNG markets are expected to
show strong activity growth ahead driven by a wave of new projects in Asia
Pacific, where we aim to push ahead more involvement of our unique Small-Scale
LNG concept.
Although there may be near near-term downward pressure in commodity markets, the
cost on energy commodities are expected to rise in the long run due to above
mentioned long term demand trends and limited supply responses. Therefore the
IMS group has a strategic focus on transportation of gas as energy commodities
such as petrochemicals and LNG.
Norgas Carriers
The results in Norgas Carriers were better as the EBITDA during the third
quarter of 2011 increased by USD 0.8 mill compared to the second quarter of
2011. We experienced good utilization and earnings due to high volumes in the
Middle East, a positive trend seen since mid-2010. A large percentage of our
volumes were dedicated to broad contract coverage which has created some
limitations for Norgas to profit from a firm spot market. However, coverage at
70% of the fleet on COA and T/C basis for the remainder of 2011 mitigates market
risks and thus contributes to more steady earnings.
The reported spot markets rates for seaborne transportation of ethylene by gas
carriers on average reached USD 652k per vessel/month for the 8 000 cbm segment
during 2Q. In 3Q the spot rates increased to USD 690k per month on average with
one year T/C being reported at USD 563k compared to USD 550k in 2Q. Business
conditions remain challenging for olefins (ethylene, propylene, etc.) producers
in Asia, mainly due to a slowdown in demand for polyolefins (raw material of
plastic production) in China. While the volatility in crude oil prices directly
affected buying sentiment for polyolefins, the value of olefins themselves was
more stable. The supply side shortened due to a busy period of maintenance at
derivative units coupled with extensive unplanned outages at several large
complexes. The Middle Eastern exporter on the other hand experienced an increase
in competitive advantage on short olefin supply and high crude oil prices.
The short-haul chemical tanker markets continue to be quite depressed, and this
has slowed the implementation of the Wintergas concept. Nevertheless, Norgas
Cathinka managed to improve the utilization rate on average for the quarter.
The order book for gas carriers and the recycling of ships
The current Semi-Refrigerated (SR) fleet consists of 254 vessels (2 572 128
cbm). The order book for semi refrigerated vessels with cargo capacity above
4 000 cbm is currently at 22 vessels (total 215 100 cbm) and equal to about 8 %
of current capacity. 16 of the SR vessels (168 600 cbm) have the capacity of
carrying ethylene. These are for both long haul and short haul transportation.
For long-haul transportation (above 8 000 cbm) the fleet for ethylene carriers
stands at 72 vessels or 801 673 cbm capacity by the end of 2011, while the
order book for the long-haul ethylene carriers is at 8 vessels (90 000 cbm).
Concerning the age of the world SR ethylene fleet, the normal age for recycling
of such vessels has been between 27 and 30 years of age. However at about 25
years of age it is quite normal for such ships to cease carrying ethylene and
concentrate on other less demanding products to trade. There will be total of
39 SR carriers (328 288 cbm) equals to 13% of the total SR fleet and 12 ethylene
carriers (80 177 cbm) equals to 7% of the total Ethylene fleet over 25 years by
the end of 2011.
China activities
The result from Skaugen China Activities contributed with a positive EBITDA of
USD 2 mill in 3Q2011. The Shenghui Gas Chemical System Company (50% owned by
IMS) has now improved its profitability and approaching its target of net profit
after tax (NPAT) for and delivering a NPAT rate of 8.3% on average for the third
quarter. Shenghui has gradually changed its focus from significant IMS related
orders to other new business as the newbuilding projects are approaching
completion. IMS continues to consider the opportunities within the Chinese (IPO
or PE) market in order to visualize the values created in Shenghui since we
became the largest shareholder in 2006.
SPT - Marine Transfer Activities
SPT delivered a negative result of USD 0.7 mill on EBITDA basis (IMS share of
the result with a 50% ownership) for the third quarter of 2011. SPT continue to
be affected by the supply demand balance in the crude oil tanker markets and the
pressure from additional newbuildings is still keeping a lid on rates. During
the third quarter, SPT experienced weaker ship-to-ship transfer activities, and
this part of the business was not able to offset the negative result from the
crude tanker market.
Financial issues
In July, the remaining NOK39M of the bond named IMSK08 was repaid upon maturity.
In September we repurchased NOK 150 mill of the IMSK09 bond on par in an
exchange offer where NOK75 mill of was swapped over into a new bond with
maturity in March 2013 on the same covenants as the other IMSK bond issues. The
new note carries a coupon rate of 3MNibor plus 8% margin. The remaining NOK75
mill was repurchased with a cash settlement. In addition a total NOK 20.5 mill
was repurchased from IMSK04. The debt reduction has contributed to improve the
Group's equity ratio towards our goal of 30% at all time.
The IMSK share
The global equity markets continued to show high volatility during the quarter
caused by the financial turmoil in especially Europe, which has also influenced
the IMSK share price.
IMSK-3Q result 2011 :
http://hugin.info/179/R/1555040/479489.pdf
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Source: I. M. Skaugen SE via Thomson Reuters ONE
[HUG#1555040]
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Datum: 14.10.2011 - 17:30 Uhr
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