Results
Odfjell's consolidated net result after tax was USD 56 million first half 2004, compared to USD 41 million first half 2003.
Time-charter results per day improved by 9% compared to first half 2003 and 10% compared to the full year 2003. Earnings before interest, taxes, depreciation and amortisation (EBITDA) for first half 2004 were USD 104 million, up from USD 84 million first half 2003. Operating result (EBIT), including a capital gain on assets, was USD 65 million in the first half 2004, compared to USD 39 million in the first half 2003.
Operating expenses as well as general and administrative expenses were higher than first half 2003, mainly due to increased activity as well as a one time compensation of USD 1.2 million to the former CEO. Net interest expenses for first half 2004 were USD 12 million, compared to USD 11 million first half 2003.
The USD 9 million capital gain on assets in the first half 2004 include insurance proceeds from the loss of M/T Bow Mariner (39,821 dwt./built 1982), the sale for demolition of M/T Bow Queen (32,363/1975) and the sale of M/T Bow Apollo (6,291/1981).
The average USD/NOK exchange rate for first half 2004 was 6.90, compared to 7.03 first half 2003. The USD strengthened against the NOK from 6.68 at year-end 2003 to 6.95 at 30 June 2004. The currency gain, primarily from hedging, was USD 10 million, compared to USD 13 million the same period last year. Taxes were USD 6 million in first half 2004, compared to a USD 1 million tax credit in the first half 2003. The net result for the first half 2003 included extraordinary costs after tax of USD 2 million.
The second quarter 2004 net result of USD 22 million compares with a net result of USD 23 million the second quarter 2003 and USD 34 million first quarter 2004. The first quarter 2004 included a capital gain on fixed assets of USD 9 million. The second quarter 2004 reflects high off-hire however as a consequence of more dry-dockings.
Business segments
Global trade
EBITDA for the first half 2004 was up 33% to USD 69 million, compared to USD 52 million the first half 2003. Operating profit (EBIT) doubled to USD 44 million first half 2004, compared to USD 22 million first half 2003. Improved market conditions led to time-charter income expressed in USD per day being about 9% higher in first half 2004, compared to first half 2003, and time-charter income increased by about 2% from the first to the second quarter 2004. The average cost of bunkers first half 2004 was USD 161 per ton (including bunker clause compensations), compared to USD 153 last year. Operating expenses on a comparable fleet basis were 1% lower in first half 2004 than the full year 2003 figure.
At a price of USD 32 million en bloc the company has agreed to acquire two second-hand tankers from ChemLog Tankers Ltd. (a company related to ChemLog ApS), the M/T Fertility L (45,507 dwt./built 1987) and the M/T Fraternity L (45,507/1987). Since mid 2000 the two ships have been operating in the Odfjell pool of parcel tankers. At the time of delivery to Odfjell, the ships will be renamed Bow Fertility and Bow Fraternity. This acquisition completes the process of consolidation of fleets following the Odfjell Seachem merger in 2000.
Regional trade
EBITDA for the first half 2004 was USD 7 million, stable from last year. EBIT for first half 2004 was USD 4 million, compared to USD 3 million first half 2003.
Tank terminals
EBITDA for the first half 2004 was USD 25 million, an improvement from USD 22 million the same period last year. EBIT for first half 2004 was USD 15 million, up from USD 13 million first half 2003.
The EBITDA of Odfjell Terminals (Houston) was USD 9 million first half 2004, stable from last year. Odfjell Terminals (Rotterdam) showed an EBITDA of USD 12 million first half 2004, compared to USD 10 million first half 2003. Our share of the terminals in Onsan, Korea, Singapore and the two terminals in China made an EBITDA of USD 4 million.
On 25 June 2004 we signed a joint-venture agreement with the Garson Group of China to build a tank terminal in Jiangyin in China. The terminal will be strategically located on the south riverbank of the Yangtze river about two hours drive from Shanghai and about 12 hours by ship from the entrance of the Yangtze river, and serve as a public first-come-first serve ship/shore interfacing facility. The plan is to build a tank terminal with about 80.000 cbm. of initial storage capacity and two large berths, both of which can accommodate ships up to 50.000 dwt. The terminal will have ample land for expansion and additional smaller berths. The first phase development is estimated to cost about USD 30 million. Odfjell will own 55% of the joint-venture and the Garson Group will hold 45%.
Tank containers
EBITDA for first half 2004 was USD 2 million, compared to USD 3 million the same period last year. EBIT for first half 2004 was USD 1 million, compared to USD 2 million first half 2003.
Key figures
Return on equity was 18.5% and return on total assets was 7.8%. Return on capital employed (ROCE) was 9.3% first half 2004.
Earnings per share amounted to USD 2.59 (NOK 17.84) first half 2004, compared to USD 1.88 (NOK 13.19) first half 2003. Cash flow per share was USD 4.78 (NOK 32.95), compared to USD 4.01 (NOK 28.20).
As per 30 June 2004 the Price/Earnings ratio (P/E) was 6.6 and the Price/Cash flow ratio was 3.6. Based on book value the Enterprise Value (EV)/EBITDA multiple is 6.5 while, based upon market value as per 30 June 2004, the EV/EBITDA multiple is 7.3. Interest coverage ratio (EBITDA/Net interest expenses) improved first half 2004 to 8.1, compared to 7.6 first half 2003.
Finance
Cash and bonds as of 30 June 2004 increased to USD 208 million from USD 203 million as of 31 December 2003. Additionally, undrawn credit facilities equalled USD 60 million as per 30 June 2004. Interest bearing debt increased from USD 944 million year-end 2003 to USD 969 million per 30 June 2004 as a consequence of investment in ships. Net interest bearing debt was USD 761 million as per 30 June 2004. The equity ratio was 34% as per 30 June 2004 and the current ratio was 3.0.
Shareholder information
At 30 June 2004 the Odfjell A-shares were trading at NOK 238 (USD 34.3) up 60.8% from NOK 148 (USD 22.1) year-end 2003. The B-shares were trading at NOK 233 (USD 33.5) at 30 June 2004, up 62.4% from NOK 143.50 (USD 21.5) year-end 2003. By way of comparison, the Oslo Stock Exchange benchmark index rose 19.6% and the transportation index improved by 24.8% during the same period. The A-shares traded between NOK 149 (USD 22.3) and NOK 238 (USD 34.3) during the period whilst the corresponding figures for the B-shares were NOK 144.5 (USD 21.6) and NOK 233 (USD 33.5).
The Annual General Meeting (AGM) held 5 May 2004 approved a dividend of NOK 6 (USD 0.90) per share for 2003, equal to NOK 130.2 million (USD 19.5 million). The dividend was paid out on 24 May 2004.
The AGM also elected Stein Pettersen and Laurence W. Odfjell as new Board Members for a two year period. Accordingly, the Board now consists of B. D. Odfjell jr. (Chairman), Terje Storeng, Peter G. Livanos, Reidar Lien, Marianna Moschou, Stein Pettersen and Laurence W. Odfjell.
Legal Matters
We have previously reported extensively on the different actions related to the antitrust violations in the parcel tanker industry. During the last quarter a lawsuit has been filed against Odfjell and others from the liquidated estate of O.N.E. Shipping for alleged antitrust violations that resulted in O.N.E. Shipping's liquidation. Furthermore, Hoyer-Odfjell USA Inc., a US subsidiary of Hoyer-Odfjell BV in the Netherlands in which Odfjell owns 50%, has received a subpoena from the U.S. Department of Justice requesting documents with respect to the tank container industry.
Accident
On 4 June 2004 the M/T NCC MEKKA had an explosion in one of her forward cargo tanks. The accident occurred off the coast of Brazil. Two of the Philippine crewmembers, most unfortunately, died as a consequence thereof. The ship suffered some structural damage, but no pollution occurred. M/T NCC MEKKA is owned by National Chemical Carriers Ltd of Saudi Arabia, and operated commercially and managed by Odfjell.
President/CEO
The Board of Directors of Odfjell ASA and President/CEO Bjørn Sjaastad mutually agreed that Bjørn Sjaastad would leave Odfjell with effect from 30 June 2004. In accordance with his contract Mr. Sjaastad has been paid two years' salary at NOK 2.6 mill. per year. He was also entitled to pension rights, the capitalized value of which was calculated at NOK 4.3 mill.
Mr. Terje Storeng will continue as interim President/CEO until further notice.
Prospects
The world economy, helped by China's growth, is still continuing to be strong. The current upward trend in our industry started late 2003 and seems to be continuing. Future shipbuilding capacity remains tight.
We expect an operating result before capital gain for second half 2004 in line with first half.
Bergen, 30 July 2004
THE BOARD OF DIRECTORS
OF ODFJELL ASA
