RESULTS
Odfjell’s consolidated net result after tax was USD 22 million for the first half of 2002 compared to a result of USD 34 million in the first half of 2001. The freight levels in the second quarter 2002 reflects stable market conditions for the transportation and storage of chemicals and clean petroleum products compared to the first quarter. First half year earnings before interest, tax, depreciation and amortisation (EBITDA) were USD 79 million, compared to USD 106 million for the comparable 2001 period. Operating result (EBIT) was USD 37 million, compared to USD 69 million in the first half of 2001. Gain from the sale of 50% of the M/T Bow Saphir is included in the figures for the first half 2001 with USD 3.5 million.
Operating expenses as well as general and administrative expenses were higher than in the same period last year, partly due to a weaker USD and the incorporation of our share of the new tank terminal in Singapore. Net interest expenses for the first half of 2002 were USD 14 million compared to USD 22 million in the first half of 2001 due to lower interest rates.
The average USD/NOK exchange rate was 8.57 compared to 9.03 for the first half 2001. The USD/NOK rate weakened substantially from 9.01 at year-end 2001 to 7.48 at 30 June 2002, most of which occurred in the second quarter of 2002. The weakening of the USD positively impacted our currency hedging portfolio and cash balances in NOK. The currency gain in the period was USD 4 million compared to a cost of USD 10 million the same period the previous year. This gain is partly offset by higher voyage, operating as well as general and administrative expenses.
The net result for the second quarter of 2002 was USD 16 million compared to USD 6 million in the first quarter. The improvement is primarily due to a better net financial result.
BUSINESS SEGMENTS
Global trade
EBITDA for the first half of 2002 was USD 52 million compared to USD 79 million in the first half of 2001. Operating profit (EBIT) was USD 22 million in the first half of 2002 compared to USD 53 million in the first half of 2001 (including, then a sales gain of USD 3.5 million.). Lower freight rates and volumes lead to time-charter income expressed in USD per day 17% lower than in the first half of 2001. Such time-charter income was stable from the first quarter 2001 to the second quarter this year. The average price of bunkers in the first half of 2002, still high, was USD 132 per ton, compared to USD 130 per ton the previous year. Operating expenses on a comparable fleet basis was at the same level as in 2001.
On 28 June 2002, we took delivery of the 37.500 dwt. newbuilding Bow Chain from Kleven Florø AS.
The company had newbuilding contracts with Stocznia Szczecinska Porta Holding S.A. for the construction of four 39,500 tdw. chemical tankers at a total contract price of USD 220 million. The yard was declared bankrupt on 29 July 2002. As a consequence, the above contracts have been cancelled. All pre-delivery instalments (about USD 30 million) made to the yard are secured by refund guarantees issued by an AA-rated bank. ChemLog S.P.C. contracts for four sisterships that were supposed to enter the Odfjell Seachem pool of chemical tankers have also been cancelled.
Regional trade
EBITDA for the first half of 2002 was USD 7 million compared to USD 8 million in the same period last year. EBIT for the first half of 2002 was USD 3 million compared to USD 4 million in the same period last year.
Tank terminals
EBITDA for the first half of 2002 was USD 18 million, the same figure as in the first half of 2001. The EBITDA of Odfjell Terminals (Houston) was USD 9 million, slightly above the figure for the first half 2001. Odfjell Terminals (Rotterdam) showed a reduction in EBITDA from USD 10 million for the first half 2001 to USD 6 million for the first half of 2002. Our share of the terminal in Singapore and the two terminals in China made an EBITDA of USD 3 million. EBIT for the first half of 2002 was USD 10 million compared to USD 12 million in the same period last year.
Tank containers
EBITDA for the first half of 2002 was USD 2 million, the same figure as in the first half of 2001. EBIT for the first half 2002 was USD 1 million compared to a break-even level in the first half of 2001. Hoyer-Odfjell is improving, but still impacted by difficult market conditions.
KEY FIGURES
Return on total assets was 5.1%, the return on capital employed (ROCE) was 5.7% and the return on equity was 8.0% in the first half of 2002. Return on the market cap as per 30 June 2002 was 11.7%, caused by the share trading at a discount to book value.
Earnings per share amounted to USD 0.94 (NOK 8.07) in the first half of 2002 compared to USD 1.33 (NOK 11.99) in the first half 2001. Cash flow per share was USD 2.79 (NOK 23.93) compared to USD 2.92 (NOK 26.26).
As per 30 June 2002 the Price/Earnings ratio (P/E) was 8.5 and the Price/Cashflow ratio was 2.9. Book value per share equals an EV/EBITDA multiple of 8.3, while market value per share as 30 June 2002 corresponds to an EV/EBITDA multiple of 7.2. Interest coverage ratio (EBITDA/Net interest expenses) improved to 5.4 for the first half of 2002 compared to 4.8 for the first half 2001.
Cash and bonds as of 30 June 2002 were USD 211 million compared to USD 213 million as of 31 December 2001. Additionally, undrawn credit facilities equalled USD 18 million as per 30 June 2002 compared to USD 33 million as per year-end 2001.
Interest bearing debt increased from USD 960 million as per year-end 2001 to USD 981 million per 30 June 2002. The increase in debt is due to the delivery of the newbuilding Bow Chain from Kleven Florø. This vessel and newbuilding Kleven 144 to be delivered in December 2003 are financed under a long term lease facility in the UK. Net interest bearing debt was USD 770 million as per 30 June 2002. The equity ratio was 34% as per 30 June 2002 and the ratio between current assets and current liabilities was 346%.
SHAREHOLDER INFORMATION
At the end of the first half of 2002 the Odfjell A-shares were trading at NOK 120, down 11.1% from NOK 135 as per 31 December 2001. The B-shares were trading at NOK 120 at the end of June 2002, a decrease of 10.4% from NOK 134 at year-end 2001. Dividend of NOK 8 per share was paid to the shareholders in May 2002.
By way of comparison, the Oslo Stock Exchange benchmark index decreased by 11.2% and the transportation index fell by 5.6% during the period. The A-shares traded between NOK 120 and NOK 163 during the first half 2002 whilst the the B-shares traded between NOK 116 and NOK 157.
To improve the trading liquidity in Odfjell shares we entered into a market maker agreement with Pareto Securities ASA valid as from 1 January 2002.
The Annual General Meeting held 29 April 2002 decided a dividend of NOK 8 per share for 2001, equal to NOK 182.9 million (USD 20.3 million).
During July and August 2002 we acquired 164,860 A-shares at an average price of NOK 124.06 per share and 258,600 B-shares at an average price of NOK 121.32 per share, representing 1.9% of the total shares in the company.
PROSPECTS
World economic growth in 2002 is still sluggish, particularly in the OECD area. There is still uncertainty as to the length of the current downturn and its impact on the chemical tanker industry. We expect a continued reduction in the supply of new tonnage, as fewer newbuildings will be delivered the next two years.
For the full year 2002 we expect a net result somewhat below that of 2001. EBITDA will be lower than in 2001, but this will partly be offset by reduced interest expenses and currency gains assuming USD exchange rates remaining at present levels through to the end of the year.
Through consolidation and by terminal acquisitions the company has steadily strengthened its market position as a total logistics service provider.
Bergen, 14 August 2002
The Board of Directors of Odfjell ASA
