The Group started 2018 on a positive note as the average daily Time Charter Equivalent (“TCE”) rate in January 2018 and February 2018 for the 6 vessels was approximately 25% higher than the average TCE rate in Q4 2017. However, the TCEs earned in March 2018 fell short of expectations and were generally below the average TCEs earned in the previous 2 months. As a result, the average TCEs earned by the 6 vessels in Q1 2018 came in below the forecasted rates.

Compared to the same quarter last year, the softer tanker market led to a decline in TCE revenue to USD 5.9 million (USD 6.8 million) in Q1 2018. Further, the TCE revenue from the LR1 vessel deployed in Straits Tankers Pool in Q1 2018 was lower than the TCE revenue derived from the 3-year time charter locked in for the LR1 vessel in Q1 2017.

For the 3 months ended 31 March 2018, the Group incurred a loss after tax of

USD 0.9 million (loss of USD 0.2 million). The lower tanker TCE revenue from the vessels deployed in the pools and the change in deployment for the LR1 vessel contributed to the higher losses in Q1 2018.

Expenses relating to the operation of vessels in Q1 2018 decreased to USD 3.7 million (USD 4.0 million) as there were certain minor ad-hoc repairs done in Q1 2017.

EBITDA fell to USD 1.7 million (USD 2.3 million) due to the reduction in TCE revenue in Q1 2018.

The Group did not make any impairment nor reversal of impairment during the quarter. The development in rates are being monitored during Q2 2018.

After accounting for depreciation, interest expenses and other finance expenses, the loss after tax in Q1 2018 was USD 0.9 million (loss after tax of USD 0.2 million).

Under the loan agreement, cash in excess of USD 6.0 million will be used to pay down the loan facility. As the cash balance did not exceed USD 6.0 million, there was no cash sweep in Q1 2018 (Q1 2017: NIL).

Between 31 December 2017 and 31 March 2018, equity decreased from USD 35.8 million to USD 34.7 million as a result of the cumulative loss during the period and the downward adjustment of USD 239K due to the adoption of IFRS 15, Revenue from Contracts with Customers. Consequently, the equity ratio decreased from 31.3% to 30.4% between 31 December 2017 and 31 March 2018.

During the financial period, cash flow generated from operations was USD 0.4 million (USD 1.3 million) mainly contributed by earnings from the three pools. During the financial period, the Group paid USD 11K (USD nil) for the preparation of dry-docking for Nordic Ruth in Q2 2018. The Group used previously swept cash to make the repayment (repayment of USD 1.7 million from operating cashflows) on the term loan facility under the scheduled amortisation.

As at 31 March 2018, cash and cash equivalents was USD 3.7 million (USD 4.6 million).

In Q1 2018, the Group has reached an agreement with the lending banks to amend certain loan covenants, in particular, the Minimum Value Covenant under the syndicated facility for the financing of 3 vessels. In consideration of the amendment, the loan margin for this facility was increased by 25 basis points. No change was made to the bilateral facility for the remaining 3 vessels. Further, the following shareholder support was provided:

• USD 3.85 million Banker’s Guarantee as additional security to the syndicated lenders; and

• USD 1.0 million standby line of credit to ease operational and capital expenditure, if need be.

For the rest of 2018, the 5 handysize vessels are expected to remain commercially deployed in the UPT Handy Pool and Hafnia Handy Pool respectively. The LR1 vessel will continue to be deployed in the Straits Tankers Pool.

The TCE generated in the first two months of the year tracked generally the forecasts provided by the respective pool managers. However, the market deteriorated during March 2018. Consequently, the commercial managers for the respective pools revised downwards their forecasts for the remainder of 2018. As a result, the Board has revised downwards the forecast for 2018 previously indicated in the 2017 Annual Report. The EBITDA (earnings before interest, tax, depreciation and amortisation) is expected to be in the range of USD 4.0 million – USD 7.0 million, a reduction from USD 7.0 million – USD 10.0 million. The result before tax is expected to be between USD -6.5 million – USD -4.5 million, decreased from USD -3.5 million – USD -1.5 million. This outlook for 2018 does not take into account any impairment of vessels’ carrying values.

The Board will look at growth and consolidation opportunities that are accretive to the Company.

Source: Nordic Shipholding A/S