The Group started 2019 on a positive note as the average daily Time Charter Equivalent (“TCE”) rate in Q1 2019 for the six vessels was approximately 23% higher than the average daily TCE rate in Q4 2018. Despite the decline in daily TCE rate from May 2019, the average daily TCE earned by the vessels in 9M 2019 was 34% higher than the average daily TCE earned in 9M 2018.
The dry-dockings for Nordic Anne, Nordic Agnetha and Nordic Amy were expected to have a negative impact on earnings in Q3 2019. The loss of USD 3.4 million incurred in Q3 2019 (USD 4.0 million excluding impairment loss of USD 5.0 million) came in at the lower end of the Group’s expected performance as (i) the dry-dockings took longer than expected due to installation of the ballast water treatment systems and (ii) actual TCE rates earned were lower than forecasted rates.
TCE earnings rose 14% to USD 15.2 million (USD 13.4 million) in 9M 2019.
Expenses relating to the operation of vessels in 9M 2019 decreased marginally to USD 10.8 million (USD 11.2 million).
EBITDA increased significantly to USD 3.3 million (USD 0.7 million) as a result of improved TCE earnings in 9M 2019. Other external costs were reduced by USD 0.3 million to USD 1.0 million (USD 1.3 million) due mainly to the reduction in management fees charged by the corporate manager of the Group and other corporate expenses.
The Group realised a loss of USD 0.2 million (9M 2018: NIL) on asset-held-for-sale in 9M 2019 related to the sale of Nordic Ruth in July 2019. The Group did not make any impairment nor reversal of impairment on the remaining vessels in 9M 2019.
Between 31 December 2018 and 30 September 2019, equity decreased from USD 11.8 million to USD 7.1 million as a result of the cumulative loss during the period. Consequently, the equity ratio decreased from 11.4% to 7.5%.
As part of the loan restructuring concluded with the lending banks in Q4 2018, the financial covenants under the original loans such as (i) minimum value (fair market value of vessels as a percentage of outstanding loan) and (ii) minimum equity ratio are waived whilst the minimum liquidity level is reduced. The relief from these financial covenants are provided till 30 September 2020. In addition, the quarterly loan instalments are deferred from December 2018 to September 2020.
The Group is also subject to a quarterly cash sweep mechanism under which the Group after payment of instalments and interest under the loan agreement, must apply any cash and cash equivalents of the Group (excluding the bank balance held in dry-docking reserve bank accounts) in excess of USD 6.0 million towards prepayment of the loan. There was no cash sweep in 9M 2019 and 9M 2018.
In 9M 2019, cash flow generated from operations was USD 2.0 million (cash flow used in operations of USD 2.9 million) mainly contributed by earnings from the pools. In 9M 2019, the Group paid USD 4.1 million for the dry-docking of Nordic Anne, Nordic Agnetha and Nordic Amy (the Group paid USD 0.8 million for the dry-docking of Nordic Ruth in 9M 2018). In Q3 2019, the net proceeds from the sale of Nordic Ruth was applied towards the prepayment of bank loans. There was no loan repayment in 9M 2018 as the Group used previously swept cash for the scheduled amortisation on the term loan facility.
As at 30 September 2019, cash and cash equivalents (including balances held in dry-docking reserve bank accounts of USD 0.7 million) was USD 6.4 million (USD 0.7 million).
The dry-dockings for Nordic Anne, Nordic Agnetha and Nordic Amy took longer than expected. Together with lower than expected daily TCE rates in Q3 2019, and the projected TCE revenue for the remaining 3 months, the Board has revised the forecast for TCE revenue for 2019.
The TCE revenue for 2019 is now forecasted to be in the region of USD 21.5 million – USD 23.5 million, decreased from USD 23.0 million – USD 26.0 million.
After accounting for operating expenditure budgeted by the respective technical managers, the Group’s expected EBITDA (earnings before interest, tax, depreciation and amortisation) for 2019 is in the range of USD 5.5 million – USD 7.5 million, revised from USD 5.0 million – USD 8.0 million. The result before tax is between USD -5.0 million – USD -3.0 million, revised from USD -6.0 million – USD -3.0 million. This revised outlook for 2019 does not take into account any impairment or write-back of impairment of vessels’ carrying values.
The Company continues to pursue growth and potential consolidation opportunities that are accretive to the Company.