Results
The consolidated net result after tax was USD 50 million first quarter 2005, compared to USD 31 million first quarter 2004. Both the 2005 and 2004 figures include gain on sale of assets of USD 4 million.
Time-charter rates per day first quarter 2005 improved by over 30% compared to the same quarter in 2004. Earnings before interest, taxes, depreciation and amortisation (EBITDA) for first quarter 2005 were USD 80 million, up from USD 57 million first quarter last year. The operating result (EBIT), including a USD 4 million capital gain on assets, was USD 58 million this first quarter 2005, compared to USD 36 million the same period last year.
First quarter operating expenses were higher due to primarily the increased number of owned ships and a weaker on average USD, including a positive result from hedging of USD 4 million. General and administrative expenses were stable, including a positive result from hedging of USD 2 million. Net financial expenses first quarter 2005 were USD 6 million, compared to USD 7 million first quarter 2004.
The average USD/NOK exchange rate first quarter 2005 was 6.28, compared to 6.93 last year. But the USD strengthened against the NOK from 6.04 at year-end 2004 to 6.34 at 31 March 2005. The currency gain was reduced from USD 6 million first quarter last year to USD 1 million this year due to implementation of IFRS. The result of hedging is now included as part of the hedged exposure. Taxes were USD 3 million first quarter 2005, the same level as first quarter 2004.
The first quarter 2005 net result of USD 50 million compares with a net result of USD 5 million fourth quarter 2004, USD 29 million third quarter 2004, USD 25 million second quarter 2004 and USD 31 million first quarter 2004. The fourth quarter 2004 included bonuses and antitrust provisions of altogether USD 32 million. The underlying operating result, adjusted for the above expenses, improved from fourth quarter last year to first quarter this year by about 25%, primarily as a result of improved market rates for deepsea parcel tankers.
Business Segments
Following Odfjell Americas being folded into Odfjell Seachem last year and now that Odfjell Asia, previously a stand-alone unit, will also become a part of Odfjell Seachem, we will adjust our reporting accordingly. As from 1 January 2005 we are presenting results for all shipping activities under the same segment; Parcel Tankers.
Parcel Tankers
EBITDA first quarter 2005 for our parcel chemical tankers strengthened to USD 67 million, compared to USD 42 million in 2004. Operating result (EBIT) increased to USD 45 million in first quarter 2005, compared to USD 26 million in 2004. Time-charter rates expressed in USD per day improved by over 30% in first quarter 2005, compared to the same quarter last year, and by about 15% from fourth quarter last year. The average cost of bunkers in first quarter 2005 was a record high at USD 182 per ton (including compensation related to bunker escalation clauses), compared to USD 153 last year. Operating expenses on a comparable fleet basis were 3% higher in first quarter 2005 than the full year 2004 figure, primarily as a consequence of initial one-time costs related to the takeover of ships previously managed by external ship managers.
M/T Bow Princess (32,362 dwt./built 1976) is now committed to demolition by third quarter this year.
In April 2005 we took delivery of ship no. 4 from Stocznia Szczecinska Nowa, Poland. The ship M/T Bow Sky is of 39,500 dwt. with stainless steel tanks and advanced equipment. We have also secured options for an additional two sister-ships, ship no. 9 and 10, with deliveries in 2009 and 2010.
Odfjell has agreed, as previously announced, to acquire four of the eight 5,870 dwt. chemical tankers operated by the joint-venture company Odfjell Ahrenkiel, Hamburg. The four ships are controlled by the Ahrenkiel Group in Germany and will be delivered to Odfjell second quarter 2005. The purchase price for these sister-ships is about USD 54 million enbloc.
We have entered into further agreements with Japanese interests for the long-term time-chartering of a total of five newbuildings with deliveries in 2007, 2008 and 2009. Three of the ships are about 33,000 dwt. size and two ships are about 19,000 dwt. The initial time-charter periods are seven to ten years, some with our option to extend as well as with purchase options. The ships will have between 16 and 20 cargo tanks each, all of stainless steel. Altogether, we now hold thirteen Japanese newbuildings under long-term contract, of which two ships have been delivered. These ships will primarily replace older ships that will be retiring in the coming years.
Furthermore, Odfjell and Ahrenkiel, Switzerland, have agreed to enter into a pool agreement whereby Ahrenkiel`s four 19,900 dwt. chemical tankers newbuildings with stainless steel cargo tanks to be delivered from Japan during 2006 and 2007 will be pooled with four similar ships controlled by Odfjell.
Tank Terminals
EBITDA for first quarter 2005 was USD 13 million, equal to last year. EBIT for first quarter 2005 was USD 8 million, compared to USD 9 million last year.
EBITDA of Odfjell Terminals (Rotterdam) was USD 6.0 million in first quarter 2005, compared to USD 6.7 million last year. Odfjell Terminals (Houston) showed an EBITDA of USD 4.3 million in first quarter 2005, compared to USD 4.7 million in 2004. Odfjell's share of the terminals in Onsan, Korea, Singapore and in China turned in an EBITDA of USD 2.5 million.
Key Figures
Return on equity was 27.0% and return on total assets was 11.2%. Return on capital employed (ROCE) was 15.1% first quarter 2005.
Earnings per share amounted to USD 1.14 (NOK 7.24) first quarter 2005, compared to USD 0.72 (NOK 4.96) in 2004. Cash flow per share was USD 1.75 (NOK 11.06), compared to USD 1.30 (NOK 9.00).
As per 31 March 2005 the Price/Earnings ratio (P/E) was 9.0 and the Price/Cash flow ratio was 5.9. Based on book value the Enterprise Value (EV)/EBITDA multiple is 4.6 while, based upon market value as per 31 March 2005, the EV/EBITDA multiple is 7.8. Interest coverage ratio (EBITDA/Net interest expenses) stayed high in the first quarter 2005 at 14.2, compared to 8.9 the corresponding quarter last year.
Finance
Cash and bonds as of 31 March 2005 increased to USD 277 million from USD 233 million as of 31 December 2004. Additionally, undrawn credit facilities equalled USD 20 million as per 31 March 2005. Interest bearing debt decreased from USD 1,026 million year-end 2004 to USD 1,004 million per 31 March 2005. Net interest bearing debt was USD 728 million as per 31 March 2005. The equity ratio was 38% as per 31 March 2005 and the current ratio was 1.8.
In February 2005 we launched a bond issue in the Norwegian market with a maximum amount of NOK 600 million. The first tranche became NOK 300 million (USD 47 million). DnBNOR Markets was the sole lead manager for this, for Odfjell inaugural participation in the Norwegian bond market, with a tenor of three years and with a coupon based upon the 3 month NIBOR + 1.10%. The bonds are listed on the Oslo Stock Exchange.
Shareholder Information
At the end of first quarter 2005 the A-shares were trading at NOK 257 (USD 41), up 21% compared to NOK 212 (USD 35) year-end 2004. The B-shares were trading at NOK 230 (USD 37) at year-end, up 12% from NOK 206 (USD 34) year-end 2004. By way of comparison, the Oslo Stock Exchange benchmark index rose by 8%, the marine index rose 15% and the transportation index improved by 14% during the year.
The market capitalisation of Odfjell was
NOK 10.9 billion (USD 1.7 billion) as per 31 March 2005.
The Annual General Meeting will be held later today, at 16:00 hours at the Company's headquarter. The Board recommends a dividend of NOK 4 (USD 0.63) per share payable 24 May 2005, equal to NOK 173.5 million (USD 27.4 million). In line with the dividend policy in place, the Board aims for another dividend later this year. Based on the average share price in 2004 the direct yield, through dividend payments in 2004, equals about 4.3%. Furthermore, the Board recommends to split the shares two for one with effect from 6 May 2005.
Implementation of IFRS
The financial statements for 2005 are prepared according to International Financial Reporting Standards (IFRS). In order to present comparable figures, the 2004 figures have been adjusted to IFRS. A comprehensive reconciliation between the IFRS-figures and Norwegian GAAP figures for 2004 has been presented in Odfjell's annual report for 2004 and can also be found on http://www.odfjell.com. The IFRS standards IAS 32 "Financial instruments: disclosure and presentation" and IAS 39 "Financial instruments: recognition and measurement" was effective as from 1 January 2005 and was adopted by Odfjell from that date. In this respect we have documented hedge relationships and effectiveness between the derivative instruments and the hedged exposures, and we have designated each of the derivative instruments to exposures that are hedged. Upon initial application, all derivatives shall be stated in the balance sheet as either assets or liabilities measured at fair value. As part of the implementation of IAS 32 and 39, we will, as from 1 January 2005 account for the result of the hedging of currency as part of the hedged exposure (i.e. Operating and General and administration expenses) and not as currency gains/losses. The effect on implementation at
1 January 2005 was an increase in equity of USD 28 million and the effect as per 31 March 2005 is positive USD 18 million.
President/CEO
The Board is pleased to announce the permanent appointment of Terje Storeng as President/CEO.
Prospects
The world economy, helped by growth in the BRIC-countries (Brazil, Russia, India and China), continues to be reasonably strong. A continued high oil price may however have a negative effect on the growth of the world economy.
We believe recently introduced legislation from the European Union and from the International Maritime Organisation (IMO) will favourably impact the supply/demand balance of parcel tankers going forward. Furthermore, new-building orders have been relatively limited due to the fact that fewer yards are keen to build specialized chemical tankers, and those that are quote significantly higher prices with long lead times. Accordingly, we expect strong parcel tanker markets the next few years as well as a continued solid result from our tank terminal business.
Based on the above assumptions, we anticipate continued strong operating results in 2005.
Bergen, 4 May 2005
THE BOARD OF DIRECTORS
OF ODFJELL ASA
