Date: 14.10.95, From: I.M. Skaugen
Summary
Continued improvement in the results for I.M. Skaugen.
I.M. Skaugen's result for the 3rd Quarter of 1995 was NOK 39 mill. while the corresponding result for the same period in 1994 was minus NOK 7 mill. The operating result was NOK 55 mill. representing an improvement over the same period in 1994 of NOK 58 mill. The consolidated cash flow before unrealized currency gains/losses was NOK 99 mill. compared to NOK 5 mill. the same period of 1994.
I.M. Skaugen currently operates vessels for the transport of petrochemical gases and LPG, through its wholly owned subsidiary Norwegian Gas Carriers. Together with Unigas International B.V. of the Netherlands, the company operates 22 vessels in a co-operation organised as an income pool representing a world wide market share of 25% in the segment 2,000 - 25,000 cbm. The activity in the market has shown a significant upturn since June 1993, and the freight rates have shown a continuous positive trend since January 1994. The company has over the last couple of years significantly improved its marketing and operating efficiency. Furthermore, it has completed a full refinancing on improved terms as well as strengthened its equity through a large share issue during February 1995.
I.M. Skaugen currently operates vessels for the transportation of petrochemical gases and LPG and serves the leading companies in the global petrochemical industry through its wholly owned subsidiary, Norwegian Gas Carriers (NGC).
The company operates 16 wholly or partly owned gas carriers of which one vessel is on timecharter. In a joint marketing pool with Unigas International B.V., of the Netherlands, NGC employs a total of 22 vessels with a carrying capacity of approx. 150,000 cbm. The company is among the worlds leading operators in its segment. Our group of companies has no other operative activities.
The result
I.M. Skaugen's result for the 3rd Quarter of 1995 was NOK 39 mill. representing an improvement over the same period in 1994 of NOK 46 mill.
The operating result was NOK 55 mill. compared to minus NOK 3 mill. for the same period in 1994, and consolidated cash-flow before unrealized foreign currency exchange gains/losses was NOK 99 mill. The corresponding figure for 1994 was NOK 5 mill.
Main figures by Quarter in NOK mill:
3Q 2Q 1Q
Freight income T/C basis 80 97 95
Operating result before sale
of shares in limited partnerships 2 25 24
Result 6 17 16
NOK/USD rate 6.36 6.39 6.52
The result for the 3rd quarter is negatively affected by dry-docking cost of NOK 5.5 mill and loss of NOK 6.0 mill in income during the dry-docking period.
Capital
The consolidated current ratio is 4.3 and book equity ratio 40.7%. As of September 30, the company has NOK 319 mill. in liquid assets and book equity of NOK 514 mill. Independent brokers assess the market value of the fleet to NOK 1205 mill which is NOK 302 mill. above book value. An unrealized foreign exchange gain of NOK 50 mill. related to USD debt following the fall in the USD/NOK exchange rate since year end is not included in the result. The company's earnings and debts are primarily in USD.
The company will focus on a step by step fleet renewal through the 2nd hand market while keeping a debt ratio that ensures financial flexibility. The debt has been reduced through the period by USD 18.5 mill. corresponding to NOK 136 mill. through repayment and purchase of "Variable Rate Notes" issued by NGC.
Operations
The improvement in the results is primarily due to a continuous increase in the earnings of the company's vessels.
The average earnings per vessel as of September 30 has been USD 391,000 per month compared to USD 252,000 per month for the same period in 1994. The development during 1995 has been as follows:
1st Quarter USD 382,000
2nd Quarter USD 412,000
3rd Quarter USD 379,000
After a significant increase in the market prices for Ethylene, Propylene and other main plastics the first months of 1995, the development during 3rd Quarter has been reversed with a significant reduction in the same product prices. This has been followed by a lower level of activity for our customers resulting in less trade with these products. For I.M. Skaugen this has translated into a higher level of idle time for the vessels, 6.8% of the capacity in the 3rd Quarter compared to 1.8% during 2nd Quarter.
Furthermore, the spot rates have been under pressure. Given the fact that the company during 1st half of 1995 has secured Contracts of Affreightment and Timecharters of 80% of available capacity to gradually improved rates, lower spot rates do not necessarily lead to a reduction in the average income per vessel.
With respect to the supply of new vessels the order situation for ethylene vessels is unchanged from 2nd Quarter with 4% of existing capacity on order. For LPG vessels in total between 2,000 and 20,500 cbm there has been a significant increase in orders from 10% of capacity by the end of 2nd Quarter to 15% by the end of 3rd Quarter. This increase is mainly related to smaller fully pressurized vessels intended for the growing LPG trade in China and India.
The company is now in the middle of an active period with renewals of existing Contracts of Affreightment and Timecharters as well as negotiations for new contracts for 1996. These renewals and negotiations clearly indicate that the players in the petrochemical industry consider the reduction of product prices during 3rd Quarter as a necessary market correction within a period of a positive market development. Given this background, I.M. Skaugen believe that the average earnings per vessel will show further improvement.
Operating conditions
The vessel operations have been without any major problems during the period. Two out of three planned dry-dockings during 1995 have been completed in the period within the planned cost frame, but the time in dock of two months for one vessel was significantly above expectations due primarily to a lack of qualified manpower at the yard. For programming purposes the last dry-docking for 1995 was postponed until 4th Quarter. Figures relating to personnel injuries and damage to equipment and cargo continue the positive trend with very few incidents and damages.
I.M. SKAUGEN
Statement of Income
NOK million
(Exchange rate NOK/USD 6,36 3rd Quarter 1995)
| 1995 | 1994 | 1994 | |
|---|---|---|---|
| 1.1.-30.9. | 1.1.-30.9. | 1.1.-31.12. | |
| Gross freight revenue | 334 | 260 | 355 |
| Voyage-related expenses | (62) | (55) | (74) |
| Net revenue on T/C-basis | 272 | 205 | 281 |
| T/C-hire | (26) | (18) | (20) |
| Other operating expenses | (150) | (149) | (213) |
| Depreciation | (53) | (53) | (69) |
| Operating result before interests in limited partnerships | 43 | (15) | (21) |
| Interests in limited partnerships | 12 | 2 | 1 |
| Result from discontinued operations | 0 | 10 | 15 |
| Operating result | 55 | (3) | (5) |
| Financial income | 14 | 6 | 8 |
| Financial expenses | (52) | (51) | (78) |
| Net result on foreign exchange - realized | 29 | 0 | 52 |
| Net result on foreign exchange - unrealized | (7) | 41 | (12) |
| Net financial items | (16) | (4) | (30) |
| Result | 39 | (7) | (35) |
Balance Sheet
NOK million
(Exchange rate NOK/USD 6,25 as per 30 September 1995)
| 30.9.95 | 30.9.94 | 31.12.94 | |
|---|---|---|---|
| Cash and bank deposits | 319 | 205 | 173 |
| Other current assets | 87 | 72 | 78 |
| Vessels and other fixed assets | 856 | 907 | 892 |
| Total assets | 1,262 | 1,184 | 1,143 |
| Current liabilities | 95 | 86 | 76 |
| Long term debt | 609 | 752 | 742 |
| Subordinated unsecured loan/Convertible loan | 44 | 93 | 100 |
| Shareholders' equity | 514 | 253 | 225 |
| Total liabilities and shareholders' equity | 1,262 | 1,184 | 1,143 |
For questions or comments please contact Executive Vice President Hans-Jørgen Blomseth on telephone +47 22 83 30 60.