2013-08-15 18:32:04 -
The I.M. Skaugen Group (IMSK) achieved a pre-tax result for 1H13 of USD20.7
mill, compared to a negative USD5.1 mill in 1H12. The EBITDA for the Norgas
segment for 1H13 was USD7.2 mill, compared to USD14.6 in 1H12.
2Q13 result was negative USD4.5 mill, compared to USD25.1 mill in 1Q13. The
EBITDA for the Norgas segment was USD3.0 mill for 2Q13 compared to USD4.2 mill
The performance of our core business, liquefied gas transportation, in 2Q13 was
in many ways similar to 1Q13. GCC Region (Bahrain, Kuwait, Oman, Qatar, Saudi
Arabia and United Arab Emirates) crackers that were shut down in 1Q13, gradually
came back on-stream, and lead to the GCC Region export volumes increasing with
more than 30% compared to 1Q13. Despite these additional export volumes
still not back on previous levels and are seeing 35% less volumes from this
region in 1H13 than in same period last year. The result of this shortfall in
long-haul volumes has been growing short-haul trades and this has contributed to
less ton-miles for the global fleet of such gas carriers. The other significant
contributor to the globally reduced ton-miles has been the negative development
of the global butadiene trades.
Our portfolio of contract customers provides us with a solid contract base to
optimise the scheduling of our fleet. Over time these contracted customers has
shown to keep about 60% of our fleet capacity occupied. In 1H13 these customers
required less shipping capacity and we were thus more dependent upon the
prevailing soft spot markets where many ships within our sized range suffer from
significant idle time. We were not able to compensate for this shortfall in the
spot markets. In 2Q13 we also had four dry-dockings versus only one in 2Q12.
Market rates, both time charter and spot (expressed as time charter equivalent,
TCE), as reported by various ship broker sources have shown a declining trend
this year. We have, however, managed to hold our ground reasonably well for our
mix of contract and spot volumes. Less commercial idle time in 2Q13 for our
ships, as compared to 1Q13, helped to marginally improve the TCE rate we
achieved during 2Q13 vs. 1Q13.
With oil prices staying on its current levels, the cost advantage for the GCC
Region based producers of petrochemicals, who use low cost ethane as feedstock,
will remain and thus support the region as the key hub for long-haul trade of
petrochemicals. The same cost advantage will probably be valid for the expanding
US petrochemical industry that now has access to more low cost feedstock ethane
coming from the boom in shale- oil and gas production (Fig.2)). A number of
large ethylene cracker additions are scheduled for start-up in the US in the
coming 5 years, potentially adding more than 30-40% to the current capacity of
about 27 mill tons per year. This capacity should lead to increased long-haul
exports from the US to the rest of the world. In addition, the change in
feedstock to ethane will also lead to structural shortages of propylene and
butadiene (an ethane based cracker produces no butadiene and little propylene),
which could lead to further need for imports into US of these products.
The demand for the key products we transport, ethylene, butadiene, propylene
and VCM, is mainly driven by industrial production. These are the intermediate
products that in the end will become the plastic and rubber products we use in
our everyday life, which are also integral parts of most industrial products.
Global industrial production is starting to pick up and is forecasted to
continue increasing in 2H13. Normally there is a good correlation between global
GDP growth and growth in demand for the products we carry. The latest research
shows that the demand grows equally to or more than GDP (range between 1 and
1.5 times GDP growth) and we expect the GDP growth to be between 3 - 4% going
forward as of now. We believe however that the ton-miles could grow at levels
above this and partly due to the changing trade patterns and partly as a result
of the new US based low cost export of products for our ships.
The global fleet of long-haul gas carriers (8-22.000 cbm) for the transport of
petrochemical gas products is expected to grow with an average of about 5% per
year over the coming years. The growth could be lower should many of the largest
semi-refrigerated vessels being built (capable of cooling and thus carrying
ethylene) be pre-dominantly used in the expected new LPG or ethane exports from
the US. These growth rates in the fleet supply are in line with the expected
trend for growth in demand for the products we carry going forward.
There is currently a fleet of 9 gas carriers of abt. 89,000 cbm in total
capacity that has been engaged in the Iran trade that is sanctioned by the US
and EU. Most of these ships will probably never be seen again in the competitive
trades outside of Iran. So far these ships have not carried much Iran products
for export and have been employed more for storage. The effect is a reduction of
the competitive fleet of carriers to the benefit of the global supply/ demand
We continue to re-focus our business around our core business of Norgas,
liquefied gas transportation. In 2Q13 we expanded on our joint venture in the
GCC Region, and the vessel, Norgas Sonoma, was sold to our strategic partner and
associated company Skaugen Gulf Petchem Carriers B.S.C. (SGPC) of which IMS owns
35%. The other two local partners are nogaholding (www.nogaholding.com) with
35% and Elaf bank (www.elafbank.net) with 30%. The GCC Region is central to
IMS' core business of gas transportation and thus adding ownership of a fleet
for the SGPC will help to further strengthen our presence in the region and the
base for further expansion.
In 2Q13, we also sold our oldest vessel Norgas Chief (built 1983).
Our pursuit of improving our balance sheet capacity continues to generate
tangible results and the equity ratio now stands at 26.6%. All the projects
initiated by the Board will remain the key focus areas for the company and we
expect to see further effects during the course of the year. This includes the
full effect of the head-count reduction of shore based staff initiated in 2010
by the "centralize & simplify" program. So far the headcount reduction is close
to the target of 50%.
We have made effective use of our excess liquidity during 2Q13 and we have been
able to buy back bonds with a nominal value of NOK107.5 mill from the market.
The bonds were bought below par value and generated a gain of USD2.6 mill.
Since the beginning of 2013, our outstanding bond debt has been reduced with
USD31.1 mill, which would translate to a reduction of our financial costs with
about USD3 mill on an annualized basis.
Our consolidated mortgage debt now stands at USD76.7 mill.
We have no refinancing needs until 2015, no material capital commitments and
remain fully financed.
In May the last two of our crew members detained in Indonesia were found not
guilty by the local courts and when finally released went home to their families
in China and the Philippines. We can now close the chapter of the detention and
captivity of the crew, the ship and the cargo.
The fatalities on the ferry KM Bahuga Jaya - all from drowning that was caused
by the sinking of the ferry - are a tragedy. However, none died due to the
collision itself. I.M. Skaugen has continuously and repeatedly expressed its
regret at the loss of life as a result of the sinking of the ferry and we truly
regret the role our ship played in the incident.
A primary concern is how the situation played out in its entirety. A collision
between a not-at-fault foreign vessel and an arguably unseaworthy domestic
vessel saw the foreign vessel detained for more than six months, causing
substantial business disruption, multiple millions in costs incurred, and a
strong perception that without paying the out-of-court settlement to the ferry's
owners for their baseless claims, the situation would remain unresolved to this
day. The legal and administrative processes faced by I.M. Skaugen were costly,
lengthy, difficult and often opaque - especially in the sense that government
institutions were not open towards I.M. Skaugen, and also the precedent it sets
for the future.
Hopefully all parties can learn from this tragic incident to prevent such
avoidable tragedies in the future. The most important issue to address is the
lack of adequate maritime laws, specifically addressing the situation in cases
of accidents. This is required to enable the Indonesian government, and private
interests, to secure financial security for their claims and would ensure that
claims would be settled by way of due process in a proper court of law while the
vessels are allowed to continue their operations so as not to unduly disrupt
The Norgas Carriers teams have been working 24 hours a day to fighting for the
release of the crew and the ship with its cargo. The crew and the ship suffered
during the detention but the ship itself was in great shape when the cargo was
delivered to a somewhat surprised client. All the cargo was intact and in good
condition. This is a ship that was truly well - built and well - kept by its
crew during detention. As of June, Norgas Cathinka is back operating in the
Norgas Pool after a regular maintenance overhaul in dry-dock in China. The
shortfall in EBITDA earnings due to the Norgas Cathinka accident due to off-hire
and expenses was about USD1.7 mill in 2Q13 adding to the previously reported
shortfall. Since September the shortfall for our company was in total USD6.7
mill for this unfortunate event.
NON-STRATEGIC JOINT VENTURES AND ASSOCIATES
Our non-strategic investments, including SPT and our China activities, delivered
an EBIT of USD1.3 mill in 2Q13 which was a continuation of the positive trend we
have seen this year and also an improvement compared to a negative EBIT of
USD2.6 mill in 2Q12.
The process of monetizing the investment in the manufacturing company Shenghui
Gas & Chemical Systems continues and with the aim that our shares will be sold
at a gain compared to book value of the investment. The Shenghui company gross
revenue in 1H13 was RMB338 mill compared to RMB407 mill in 1H12, but achieved
EBITDA margins of 13.3% compared to 11.7% in 2012. The improved margins are
mostly a result of lower cost of steel in China. The reduced revenues are mostly
a result of engineering challenges that have delayed the production and delivery
of products sold and also to some extent management's decision to decline low-
or no margin business and focus on products and business segments with better
As part of our restructuring and continued focus on our core business, we have
sold our 49% share in the Chinese joint venture TNGC during the quarter.
We remain cautiously optimistic about improvements in the outlook for the rest
of the year. The global headwinds are easing and we see a continuing improvement
in the US economy, signs of improvement in Europe and now also in China. We
therefore expect a modest recovery in world GDP growth as well as industrial
production. This increased growth should impact the demand for our services.
We do also see signs of increasing ton-miles in our markets going forward. We
expect a continuing growth in the low cost export of petrochemicals from the GCC
Region which in combination with emerging low cost US exports will support this
trend. These additional ton-miles are needed to absorb the excess capacity of
ships within our field of business.
Oslo, 15th August 2013
I.M. Skaugen SE
Board of Directors
I.M. Skaugen SE
If you have any questions, please contact:
Bente Flø, Chief Financial Officer, on telephone
+47 23 12 03 30/+47 91 64 56 08 or by e-mail: firstname.lastname@example.org
. This press
release is also available on the Internet at our website: www.skaugen.com.
I.M. Skaugen SE is a Marine Transportation Service Company, with a focus on
Innovative Maritime Solutions. Our core activity is the seaborne transport and
logistics of liquefied gases, such as petrochemical gases, LPG and now also LNG.
The I.M. Skaugen Group of companies (IMS) currently operates a fleet of 31
vessels worldwide of which 18 are gas carriers within the core business area. We
are also capable to provide on- and off-shore LNG terminal management as well as
ship to ship transfer services of LNG/LPG and on a global basis. We have in-
house capabilities for the development and design of specialized high quality
gas carriers for our niche markets and we recruit, train and employ our own team
IMS employs approximately 2,000 people globally out of which 700 are within our
core gas activity, and with 23 nationalities represented. We manage and operate
our activities and service our clients from our offices in Singapore, Oslo,
Shanghai, St. Petersburg, Houston, Sunderland and Bahrain.
This information is subject of the disclosure requirements pursuant to section
5-12 of the Norwegian Securities Trading Act.
IMSK 1H Report 2013:
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