Danish product tanker operator Torm has reported a strong first 2020H1 and is continuing its programme of fleet renewals and scrubber installations.
“The strong market during the first quarter continued into the second quarter of 2020, which has resulted in the strongest half-year since 2008. Torm achieved a profit before tax of $128m for the first six months of 2020. I am pleased that Torm’s strong financial position allows us to distribute a total of $63m, or DKK397m, in dividends to our shareholders for the half-year. With recent sales of seven older vessels at attractive prices, we have continued our ongoing fleet renewal activities, enabling Torm to actively pursue attractive opportunities in the market as they arise,” said Executive Director Jacob Meldgaard and added, “Further, I am pleased that at this point in the third quarter of 2020, Torm’s solid operational platform has secured strong bookings that indicate a positive result for the whole quarter.”
In the first six months of 2020, Torm achieved TCE rates of $/day 24,465 (2019, same period: $/day 16,689) and an EBITDA of $220.5m (2019, same period: $102.1m). The profit before tax for the first six months of 2020 amounted to 128.2m (2019, same period: $28.7m), and earnings per share (EPS) was $1.71 or DKK 11.6 (2019, same period: 38 cents or DKK 2.5). Cash flow from operating activities was positive at $163.1m in the first six months of 2020 (2019, same period: $93.0m). Return on Invested Capital (RoIC) for the first six months of 2020 was 17.1% (2019, same period: 6.2%).
The second quarter of 2020 was characterised by significant market volatility with product tanker rates reaching all-time high levels by the end of April, supported by temporary export boosts and floating storage. The strong market was a result of the COVID-19 outbreak that dramatically reduced oil demand while the OPEC+ price war at the same time resulted in an increased oil production in March and early April. This led to stock building of an unprecedented scale, including floating storage. Especially operational floating storage due to discharging issues at terminals and refineries tied up product tankers and effectively removed vessels from the market. However, by the end of June, rates had come off as the oil market started to rebalance, resulting in a significant part of the tonnage in floating storage being released. Current uncertainties in the product tanker market are driven by the speed towards normalization of the demand and supply situation in the oil market.
Torm has praised its crew members saying, ‘While crew changes remain an issue due to travel bans and quarantine in several countries around the world, Torm has observed a very positive development since the end of the second quarter and has conducted more than 700 crew changes since the end of June, reducing the percentage of crew with overdue employment from approx. 40% to approximately 10% of the total crew on board Torm’s vessels.
During the second quarter of 2020, Torm took delivery of the MR newbuilding Torm Stellar
and sold five older vessels. The vessels sold consist of three 2002-built MR vessels: Torm Mary, Torm Gertrud and Torm Vita and two LR2 vessels: Torm Kristina (built in 1999) and Torm Helene (built in 1997). Torm Vita is expected to be delivered to the new owner at the beginning of the fourth quarter. After the second quarter ended, Torm has sold another two 2002-built MR vessels: Torm Gerd and Torm Caroline
that both are expected to be delivered to the new owners later in 2020. The seven vessels have been sold for a total consideration of $66m of which $10m were received in the second quarter of 2020. Torm will repay a total of $37m in debt in connection with the vessel sales, and $9m has been repaid in the second quarter of 2020. Torm is pleased to have completed these vessel sales above prevailing broker values and believes that the transactions are well-timed in the market, supporting Torm’s ongoing fleet renewal.
Torm expects to install a total of 49 scrubbers. As of 30 June 2020, Torm had installed 37 scrubbers, and as of 17 August 2020 Torm has installed 40 scrubbers. Of the remaining nine installations, five are expected to be conducted in the third quarter this year, one in the fourth quarter this year and one in the third quarter of 2021. The remaining two scrubbers will be installed on the two LR2 newbuildings to be delivered in the fourth quarter of 2021.
After the quarter ended, Torm received commitment for financing of scrubbers and ballast water treatment systems on four vessels from an international financing institution. The drawdown of the debt will be approx. $12m and will be made when all installations are finalised later in 2020. After the quarter ended, Torm furthermore received commitment from Hamburg Commercial Bank to refinance $35m in senior secured debt covering five older vessels. The refinancing will postpone the debt maturity related to these vessels from 2021 to 2025, thereby providing additional financial flexibility.