Second quarter report 2012
Announcement no. 30 / 21 August 2012 Second quarter report 2012 Page 1 of 22
TORM recognized a loss before tax of USD 59 million in the second quarter of 2012 before special items of USD -73 million. “The financial results in the second quarter of 2012 were negatively affected by the challenging market conditions as well as TORM’s difficult financial situation. TORM experiences full support for a final restructuring agreement from all involved parties,” says CEO Jacob Meldgaard.
• The financial results were adversely affected by TORM’s financial situation. EBITDA for the second quarter of 2012 was a loss of USD 23 million including negative mark-to-market non-cash adjustments of USD 8 million and loss from sale of vessels of USD 5 million in a jointly controlled company, compared to an EBITDA gain of USD 30 million in the second quarter of 2011. Impairment losses from FR8 accounted for USD 42 million in the second quarter of 2012, compared to no impairment losses in the same period of 2011. In addition, financial expenses for the second quarter of 2012 include USD 18 million in restructuring costs. The result before tax for the second quarter of 2012 was a loss of USD 132 million, compared to a loss of USD 24 million in the same period of 2011.
• The product tanker freight rates continued to be under pressure in the second quarter of 2012, as global economic indicators were sluggish. In the West, MR freight rates were negatively affected by weaker US East Coast product demand and higher US refinery utilization. In the East, the freight markets for LR2 and LR1 vessels saw an increase in activity in June mainly due to the effects of the jet oil arbitrage from the Arabian Gulf to Europe. In general, the markets are still suffering from tonnage oversupply.
• The bulk market experienced positive freight rate movements in April 2012 as a result of the South American grain season, which was replaced by a negative market sentiment due to the macroeconomic uncertainty and events like the Indonesian commodity export ban. The second quarter of 2012 continued to see a high influx of newbuildings in all main segments.
• As stated in announcement no. 14 dated 4 April 2012 and further elaborated in announcement no. 20 dated 23 April 2012, TORM is still working closely with its banks and time charter partners on a financing and restructuring plan.
• The completion of a restructuring agreement is a prerequisite for TORM’s continued operation.
• TORM’s cost program has led to a reduction of administration costs to USD 17 million in the second quarter of 2012, equivalent to a reduction of 7% compared to the same period of 2011.
• In the second quarter of 2012, TORM sold its shares in a JV entity which main asset was the 2007-built LR1 vessel, TORM Ugland. This led to a loss of USD 5 million which is booked under results from jointly controlled entities.
• The book value of the fleet excluding financial lease vessels as of 30 June 2012 was USD 2,193 million. Based on broker valuations, TORM’s fleet excluding financial lease vessels had a market value of USD 1,370 million as of 30 June 2012. TORM estimates the fleet's total long-term earning potential each quarter based on future discounted cash flows. The estimated value for the fleet as at 30 June 2012 supports the book value.
• Net interest-bearing debt amounted to USD 1,852 million in the second quarter of 2012 compared to USD 1,838 million as at 31 March 2012.
• Cash totalled USD 17 million at the end of the second quarter of 2012 and the Company has no available credit lines. TORM has no order book and therefore no CAPEX related hereto. As at 20 August 2012 the cash totalled USD 33 million.
• Booked equity amounted to USD 435 million as at 30 June 2012, equivalent to USD 6.2 per share (excluding treasury shares), giving TORM an equity ratio of 17%.
• As at 30 June 2012, TORM had covered 12% of the remaining tanker earning days in 2012 at USD/day 14,300 and 4% of the earning days in 2013 at USD/day 15,005. 119% of the remaining bulk earning days in 2012 are covered at USD/day 12,148 and 27% of the 2013 earnings days at USD/day 17,454.
• The financial result for 2012 is subject to considerable uncertainty given TORM’s financial situation and the changes to the Company’s business model that may follow. Consequently, TORM has decided not to provide earnings guidance for 2012 until the comprehensive, long-term financing solution is in place.
Teleconference
Contact TORM A/S
TORM will be holding a teleconference for financial analysts
and investors at 15:00 Danish time today. Please call 10
minutes before the conference is due to start on +45 3271
4607 (from Europe) or +1 887 491 0064 (from the USA). The
presentation documents can be downloaded from TORM's
website.
Tuborg Havnevej 18, DK-2900 Hellerup, Denmark
Tel.: +45 39 17 92 00 / Fax: +45 39 17 93 93
www.torm.com
Jacob Meldgaard, CEO, tel.: +45 39 17 92 00
Roland M. Andersen, CFO, tel.: +45 39 17 92 00
Christian Søgaard-Christensen, IR, tel.: +45 30 76 12 88
Key figures
*) Gains/losses from sale of vessels and the mark-to-market adjustments of 'Other financial assets' are not annualized when
calculating the return on equity.
**) Gains/losses from sale of vessels are not annualized when calculating the Return on Invested Capital.
Q1-Q2 Q1-Q2
Million USD Q2 2012 Q2 2011 2012 2011 2011
Income statement
Revenue 272.3 335.7 582.9 606.1 1,305.2
Time charter equivalent earnings (TCE) 102.6 178.8 254.6 326.3 644.3
Gross prof it 0.6 39.1 27.9 66.9 81.0
EBITDA -22.9 29.5 -30.0 33.6 -43.8
Operating prof it (EBIT) -98.5 -7.0 -139.6 -39.5 -388.6
Prof it/(loss) before tax -132.1 -23.7 -210.6 -68.6 -451.4
Net prof it/(loss) -132.1 -24.3 -210.8 -69.6 -453.0
Balance sheet
Total assets 2,543.8 3,201.8 2,543.8 3,201.8 2,779.2
Equity 434.5 1,036.9 434.5 1,036.9 643.8
Total liabilities 2,109.3 2,164.9 2,109.3 2,164.9 2,135.4
Invested capital 2,274.4 2,857.7 2,274.4 2,857.7 2,425.1
Net interest bearing debt 1,851.8 1,823.9 1,851.8 1,823.9 1,786.8
Cash flow
From operating activities -19.5 -30.2 -76.1 -41.3 -74.8
From investing activities 5.9 60.3 11.1 93.4 168.2
Thereof investment in tangible f ixed assets -4.4 -34.4 -48.5 -102.4 -118.4
From f inancing activities 0.9 -25.4 -3.8 -25.0 -127.8
Total net cash f low -12.7 4.7 -68.8 27.1 -34.4
Key financial figures
Gross margins:
TCE 37.7% 53.3% 43.7% 53.8% 49.4%
Gross prof it 0.2% 11.6% 4.8% 11.0% 6.2%
EBITDA -8.4% 8.8% -5.1% 5.5% -3.4%
Operating prof it -36.2% -2.1% -23.9% -6.5% -29.8%
Return on Equity (RoE) (p.a.)*) -98.0% -10.7% -75.2% -12.9% -51.5%
Return on Invested Capital (RoIC) (p.a.)**) -16.8% -1.7% -11.2% -2.8% -14.4%
Equity ratio 17.1% 32.4% 17.1% 32.4% 23.2%
Exchange rate USD/DKK, end of period 5.90 5.16 5.90 5.16 5.75
Exchange rate USD/DKK, average 5.80 5.18 5.73 5.32 5.36
Share related key figures
Earnings per share, EPS USD -1.9 -0.3 -3.0 -1.0 -6.5
Diluted earnings per share, EPS USD -1.9 -0.3 -3.0 -1.0 -6.5
Cash f low per share, CFPS USD -0.3 -0.4 -1.1 -0.6 -1.1
Share price, end of period (per share of DKK 5 each) DKK 2.1 21.7 2.1 21.7 3.7
Number of shares, end of period Million 72.8 72.8 72.8 72.8 72.8
Number of shares (excl. treasury shares), average Million 69.6 69.5 69.6 69.6 69.6
Announcement no. 30 / 21 August 2012 Second quarter report 2012 3 of 22
Results
In general, TORM’s financial results have been negatively affected by the combination of adverse market
conditions and the uncertainty about the Company’s difficult financial situation.
The result before tax for the second quarter of 2012 was a loss of USD 132 million, compared to a loss of USD 24
million in the same period of 2011. The result before depreciation (EBITDA) for the second quarter of 2012 was a
loss of USD 23 million, compared to a gain of USD 30 million in the same period of 2011. In addition, the result
was negatively impacted by mark-to-market non-cash adjustments of USD 8 million in total, compared to a gain of
USD 2 million in the same period of 2011.
The Tanker Division reported an operating loss of USD 42 million in the second quarter of 2012, compared to an
operating profit of USD 1 million in the same period last year. The sale of shares in a JV entity which main asset
was the 2007-built LR1 vessel, TORM Ugland led to a loss of USD 5 million in the second quarter of 2012.
The Bulk Division had an operating loss in the second quarter of 2012 of USD 13 million, compared to a loss of
USD 7 million in the second quarter of 2011.
Other (not allocated) activities include an impairment loss on FR8 of USD 42 million and financial expenses of
USD 18 million in costs related to the restructuring of the Company’s capital structure.
The activity in TORM’s 50% ownership in FR8 Holding Pte. Ltd. is included in “not-allocated”
Profit/(loss) by segment
Million USD
Tanker Bulk Not Tanker Bulk Not
Division Division allocated Total Division Division allocated Total
Revenue 232.6 39.7 0.0 272.3 484.0 98.9 0.0 582.9
Port expenses, bunkers and commissions -137.0 -24.6 0.0 -161.6 -275.7 -58.1 0.0 -333.8
Freight and bunkers derivatives -0.1 -8.0 0.0 -8.1 -0.5 6.0 0.0 5.5
Time charter equivalent earnings 95.5 7.1 0.0 102.6 207.8 46.8 0.0 254.6
Charter hire -43.7 -16.9 0.0 -60.6 -94.9 -50.1 0.0 -145.0
Operating expenses -40.4 -1.0 0.0 -41.4 -80.0 -1.7 0.0 -81.7
Gross profit (Net earnings from shipping activities) 11.4 -10.8 0.0 0.6 32.9 -5.0 0.0 27.9
Prof it from sale of vessels 0.0 0.0 0.0 0.0 -15.9 0.0 0.0 -15.9
Administrative expenses -14.8 -1.7 0.0 -16.5 -29.7 -3.4 0.0 -33.1
Other operating income 0.3 0.1 0.0 0.4 0.8 0.1 0.0 0.9
Share of results of jointly controlled entities -5.5 0.0 -1.9 -7.4 -5.4 0.0 -4.4 -9.8
EBITDA -8.6 -12.4 -1.9 -22.9 -17.3 -8.3 -4.4 -30.0
Impairment losses on jointly controlled entities 0.0 0.0 -41.5 -41.5 0.0 0.0 -41.5 -41.5
Amortizations and depreciation -33.5 -0.6 0.0 -34.1 -66.8 -1.3 0.0 -68.1
Operating profit (EBIT) -42.1 -13.0 -43.4 -98.5 -84.1 -9.6 -45.9 -139.6
Financial income - - 3.2 3.2 - - 6.8 6.8
Financial expenses - - -36.8 -36.8 - - -77.8 -77.8
Profit/(loss) before tax - - -77.0 -132.1 - - -116.9 -210.6
Tax - - 0.0 0.0 - - -0.2 -0.2
Net profit/(loss) for the period - - -77.0 -132.1 - - -117.1 -210.8
Q2 2012 Q1-Q2 2012
Announcement no. 30 / 21 August 2012 Second quarter report 2012 4 of 22
Outlook and coverage
The financial result for 2012 is subject to considerable uncertainty given TORM’s financial situation and the
changes to the Company’s business model that may follow. Consequently, TORM has decided not to provide
earnings guidance for 2012 before a comprehensive, long-term financing solution is in place.
With 13,782 earning days for 2012 open as at 30 June 2012, a change of USD/day of 1,000 in freight rates will
currently impact the profit before tax by approx. USD 14 million.
As at 30 June 2012, TORM had covered 12% of the remaining earning days in 2012 in the Tanker Division at
USD/day 14,300 and 119% of the remaining earning days in the Bulk Division at USD/day 12,148. The table
below shows the figures for the period from 1 July to 31 December 2012. 2013 and 2014 are full year figures.
2012 2013 2014 2012 2013 2014
Ow ned days
LR2 1,600 3,187 3,267
LR1 1,281 2,509 2,509
MR 7,069 13,997 14,075
Handy size 2,013 3,975 3,944
Tanker Division 11,963 23,667 23,795
Panamax 364 726 694
Handymax - - -
Bulk Division 364 726 694
Total 12,326 24,393 24,489
T/C in days T/C in costs (USD/day)
LR2 366 726 725 20,733 20,729 20,916
LR1 2,009 2,979 2,210 22,387 23,881 24,000
MR 1,830 3,590 3,267 13,643 13,905 14,135
Handy size - - - - - -
Tanker Division 4,205 7,295 6,202 18,437 18,658 18,443
Panamax 1,465 2,690 3,046 16,050 16,231 16,157
Handymax 307 363 363 15,827 15,995 15,995
Bulk Division 1,772 3,053 3,409 16,011 16,203 16,140
Total 5,977 10,348 9,611 17,718 17,934 17,626
Total physical days Covered days
LR2 1,966 3,913 3,992 216 278 225
LR1 3,290 5,488 4,719 534 365 175
MR 8,899 17,587 17,342 1,182 743 -
Handy size 2,013 3,975 3,944 54 - -
Tanker Division 16,168 30,962 29,997 1,985 1,386 400
Panamax 1,829 3,416 3,740 1,843 79 -
Handymax 307 363 363 693 948 869
Bulk Division 2,136 3,779 4,103 2,536 1,027 869
Total 18,303 34,741 34,100 4,521 2,413 1,269
Coverage rates (USD/day)
LR2 11% 7% 6% 14,838 17,005 17,099
LR1 16% 7% 4% 15,109 15,666 15,666
MR 13% 4% 0% 13,911 13,932 -
Handy size 3% 0% 0% 12,681 - -
Tanker Division 12% 4% 1% 14,300 15,005 16,472
Panamax 101% 2% 0% 12,209 18,065 -
Handymax 226% 261% 239% 11,983 17,403 17,644
Bulk Division 119% 27% 21% 12,148 17,454 17,644
Total 25% 7% 4% 13,093 16,047 17,275
Fair value of f reight rate contracts that are mark-to-market in the income statement (USD million):
Contracts not included above 0.0
Contracts included above 2.5
Notes
Actual no. of days can vary from projected no. of days primarily due to vessel sales and delays of vessel
deliveries. T/C in costs do not include potential extra payments from prof it split arrangements.
Covered %
Announcement no. 30 / 21 August 2012 Second quarter report 2012 5 of 22
Tanker Division
The product tanker freight rates continued to be under pressure in the second quarter of 2012, as global
economic indicators were sluggish. Most notably, this included the continued European financial crisis and
decreasing GDP growth in both China and the USA, which negatively impacted the global oil consumption and
subsequently the oil product transportation.
In the West, MR freight rates were negatively affected by the closed gasoline and diesel arbitrage between the
European Continent and the USA, weaker US East Coast product demand and higher utilization in the US
refineries. In addition, the MR freight rates were hampered by an overall migration of vessels from the East.
In the East, the freight rates for LR2 and LR1 vessels increased during June mainly due to the jet oil arbitrage
opening to Europe, which also had positive spill-over effects on the activities in the Arabian Gulf. Palm oil exports
from Indonesia climbed ~10% in June compared to May, but the overall palm oil exports have declined since the
end of 2008, mainly due to the European financial crisis and subsequent lower demand.
The global product tanker fleet grew by ~1% in the second quarter of 2012 (source: SSY). In general, the markets
are still suffering from tonnage oversupply.
The Tanker division’s results continued to be adversely affected by TORM’s financial situation. However, the
Company outperformed spot benchmarks across all segments; but, the general market sentiment in the second
quarter of 2012 was weaker than last year. TORM achieved LR2 spot rates of USD/day 10,206 in the second
quarter of 2012, which was at the same level as in the second quarter last year. The segment is still affected by
substitution from the Aframax and Suezmax newbuildings and general oversupply of tonnage. The LR1 spot rates
were at USD/day 11,237, down by 26% year-on-year, and TORM’s largest segment (MR) was at USD/day
11,510, down by 25% year-on-year. The Handysize spot rates were at USD/day 10,939, down by 18% year-onyear.
The Tanker Division’s operating loss for the second quarter of 2012 was USD 42 million, compared to a gain of
USD 1 million in the same period 2011. Mark-to-market effects were negative with USD 1 million.
Q4 11 Q1 12 Q2 12 Change
Q2 11
- Q2 12
LR2 (Aframax, 90-110,000 DWT)
Available earning days 1,153 1,158 1,092 899 854 -26%
Spot rates1) 10,612 10,836 11,959 10,814 10,206 -4%
TCE per earning day2) 12,542 12,423 15,647 7,865 14,157 13% 12,649
Operating days 1,183 1,196 1,121 1,001 1,001 -15%
Operating expenses per operating day3) 5,781 6,721 6,133 5,976 7,001 21% 6,458
LR1 (Panamax 75-85,000 DWT)
Available earning days 2,164 2,208 2,081 2,076 1,879 -13%
Spot rates1) 15,174 9,841 7,678 12,515 11,237 -26%
TCE per earning day2) 14,962 9,467 9,020 12,977 11,747 -21% 10,758
Operating days 637 644 644 637 637 0%
Operating expenses per operating day3) 6,135 6,481 6,419 6,389 5,798 -5% 6,272
MR (45,000 DWT)
Available earning days 4,373 4,511 4,477 4,681 4,362 0%
Spot rates1) 15,315 11,749 14,080 14,363 11,510 -25%
TCE per earning day2) 15,867 12,910 13,335 14,082 11,418 -28% 12,959
Operating days 3,549 3,496 3,496 3,557 3,549 0%
Operating expenses per operating day3) 6,629 6,732 5,929 6,743 6,756 2% 6,540
Handysize (35,000 DWT)
Available earning days 996 992 978 989 981 -2%
Spot rates1) 13,403 10,582 9,483 12,823 10,939 -18%
TCE per earning day2) 11,983 12,020 9,809 13,122 12,189 2% 11,790
Operating days 1,001 1,012 1,012 1,001 1,001 0%
Operating expenses per operating day3) 5,183 5,436 6,919 5,577 5,686 10% 5,904
12 month
avg.
Tanker Division Q2 11 Q3 11
1) Spot rates = Time Charter Equivalent Earnings for all charters with less than 6 months duration = Gross freight income less bunker, commissions and port expenses.
2) TCE = Time Charter Equivalent Earnings = Gross freight income less bunker, commissions and port expenses.
3) Operating expenses are related to owned vessels.
Announcement no. 30 / 21 August 2012 Second quarter report 2012 6 of 22
Bulk Division
The bulk market experienced positive freight rate movements in April 2012 as a result of the South American
grain season, which was replaced by a negative market sentiment due to the macroeconomic uncertainty and
events like the Indonesian commodity export ban.
In the Pacific spot market, the Cape market continued its dismal performance as a result of continued tonnage
inflow, high iron ore prices and high stock levels in the Chinese ports with freight rates dropping to USD/day 3-
4,000. Freight rates in the Panamax segment were about USD/day 7-10,000 throughout the period. The reduced
trade volumes from the Indonesian export ban especially affected the Handymax segment where freight rates
temporarily dropped to USD/day 3-4,000 and later increased to USD/day 8-9,000.
In the Atlantic spot market, the freight rates for Panamax initially benefitted from the South American grain
season, reaching USD/day 15-16,000 only to drop back in May to USD/day 4-5,000 and finally improving towards
the end of June to USD/day 7-8,000. The Handymax segment continued to show strength – especially for South
American and West African activities on iron ore, sugar and grains – with fronthaul freight rates at USD/day
~20,000.
The number of newbuilding deliveries in the second quarter of 2012 continued at similar high levels as realized in
the first quarter of 2012 with 76 Capesize, 102 Panamax and 95 Handymax vessels being delivered (source:
SSY).
TORM experienced a continued high number of waiting days and ballasting time in the second quarter of 2012
due to the adverse effects from the Company’s financial situation. TORM’s Panamax time charter equivalent
(TCE) earnings in the second quarter of 2012 were USD/day 9,647 or 40% below the same period in 2011. The
realized TCE earnings for Handymax during the second quarter of 2012 were USD/day 4,353, which is 65% lower
than in the same period of 2011. The Handymax earnings have been negatively affected by position voyages by
the end of the quarter.
The Bulk Division’s result was an operating loss of USD 13 million, which included negative mark-to-market
effects on unrealized bunker hedge of USD 10 million.
Q2 12 Change
Q2 11
- Q2 12
Panamax (60-80,000 DWT)
Available earning days 2,068 2,279 3,127 1,848 1,447 -30%
TCE per earning day2) 16,015 12,140 14,357 9,670 9,647 -40% 11,998
Operating days 182 184 184 182 182 0%
Operating expenses per operating day3) 3,904 5,126 3,896 3,934 5,130 31% 4,522
Handymax (40-55,000 DWT)
Available earning days 1,133 1,152 1,361 642 260 -77%
TCE per earning day2) 12,554 12,510 13,403 11,763 4,353 -65% 12,105
Operating days - - - - - - -
Operating expenses per operating day3) - - - - - - -
Q2 11 Q3 11 Q4 11 Q1 12 12 month
avg.
Bulk Division
1) TCE = Time Charter Equivalent Earnings = Gross freight income less bunker, commissions and port expenses.
2) Operating expenses are related to owned vessels.
Announcement no. 30 / 21 August 2012 Second quarter report 2012 7 of 22
Fleet development
During the second quarter of 2012, TORM sold its shares in the JV entity that owned the LR1 vessel, TORM
Ugland. Following the sale, TORM’s owned fleet consists of 66 product tankers and two dry bulk vessels. TORM
does not have any newbuildings on order. At the end of the second quarter of 2012, outstanding CAPEX relating
to the order book was thus zero, compared to USD 167 million in the same period of 2011.
TORM’s operated fleet as at 30 June 2012 is shown in the table below. In addition to the 68 owned vessels,
TORM had chartered-in 25 product tankers and 11 bulk vessels on longer time charter contracts (minimum one
year contracts) and five bulk vessels on shorter time charter contracts (less than one year contracts). Another 18
product tankers were either in pools or under commercial management with TORM.
# of vessels
Q1 2012 Changes Q2 2012 2012 2013 2014 2015
Owned vessels
LR2 9.0 - 9 .0
LR1 7.5 -0.5 7.0
MR 39.0 - 39.0
Handysize 11.0 - 11.0
Tanker Division 66.5 -0.5 66.0 - - - -
Panamax 2.0 - 2 .0
Handymax - -
Bulk Division 2 .0 - 2 .0 - - - -
Total 68.5 -0.5 68.0 - - - -
T/C-in vessels with contract period >= 12 months
LR2 2.0 - 2 .0
LR1 16.0 -3.0 13.0
MR 12.0 -2.0 10.0
Handysize - -
Tanker Division 30.0 -5.0 25.0 - - - -
Panamax 11.0 -2.0 9.0 1 .0 1 .0 2 .0
Handymax 2.0 - 2 .0
Bulk Division 13.0 -2.0 11.0 1.0 1 .0 2 .0 -
Total 43.0 -7.0 36.0 1.0 1 .0 2 .0 -
T/C-in vessels with contract period < 12 months
LR2
LR1
MR
Handysize
Tanker Division - - -
Panamax 3.0 - 3 .0
Handymax 2.0 - 2 .0
Bulk Division 5 .0 - 5 .0
Total 5.0 - 5 .0
Pools/commecial management 20.0 -2.0 18.0
Total fleet 136.5 -9.5 127.0
Current fleet
Newbuildings and T/C-in deliveries
with a period >= 12 months
Announcement no. 30 / 21 August 2012 Second quarter report 2012 8 of 22
Notes on the financial reporting
Accounting policies
The interim report for the period 1 January – 30 June 2012 is presented in accordance with IAS 34
"Interim Financial Reporting" as adopted by the EU and additional Danish disclosure requirements
for interim reports of listed companies. The interim report has been prepared using the accounting
policies as for the Annual Report for 2011. The accounting policies are described in more detail in
the Annual Report for 2011. As from 1 January 2012, TORM has implemented the amendment to
IFRS 7 regarding disclosures about transfer of financial assets. The amended standard has not
affected recognition and measurement in TORM's interim report for the first half of 2012. The
interim report of the second quarter of 2012 is unaudited, in line with the normal practice.
Income statement
The gross profit for the second quarter of 2012 was USD 1 million, compared to USD 39 million for
the corresponding period in 2011.
The second quarter of 2012 was not impacted by gains from sale of vessels, whereas the second
quarter of 2011 had a gain of USD 7 million from sale of vessels. Administrative costs in the second
quarter of 2012 were USD 17 million, compared to USD 18 million in the second quarter of 2011.
The result before depreciation (EBITDA) for the second quarter of 2012 was a loss of USD 23
million, compared to a profit of USD 30 million for the corresponding period of 2011. Loss from
sales of vessels constituted USD 5 million in the second quarter of 2012, which is booked under
results from jointly controlled entities.
Impairment losses on jointly controlled entities (FR8) constituted USD 42 million for the second
quarter of 2012, subsequently the book value is set to USD 0 million. In comparison, there was no
impairment in the second quarter of 2011.
Depreciation in the second quarter of 2012 was USD 34 million, USD 3 million lower than the
second quarter of 2011. This decrease was due to vessel sales during first half of 2012.
The primary operating result for the second quarter of 2012 was a loss of USD 99 million, compared
to a loss of USD 7 million in the same quarter of 2011.
The second quarter of 2012 was negatively impacted by mark-to-market non-cash adjustments of
USD 8 million in total: Negative USD 11 million in connection with FFA/bunker derivatives and the
positive net effect from other financial derivatives amounting to USD 3 million. The second quarter
of 2011 had positive mark-to-market non-cash adjustments of USD 2 million.
Financial expenses of USD 37 million include USD 18 million in restructuring costs – primarily fees
to advisors of the Company and the Company’s creditors related to the work on a restructuring
agreement.
The result after tax was a loss of USD 132 million in the second quarter of 2012, as against a loss
of USD 24 million in the second quarter of 2011.
Assets
Total assets were down from USD 2,779 million as at 31 December 2011 to USD 2,544 million as at
30 June 2012. The book value of the fleet excluding financial lease vessels as of 30 June 2012 was
USD 2,193 million. Based on broker valuations, TORM’s fleet excluding financial lease vessels had
a market value of USD 1,370 million as of 30 June 2012. TORM estimates the fleet's total long-term
earning potential each quarter based on future discounted cash flows. The estimated value for the
fleet as at 30 June 2012 supports the book value.
Debt
Net interest-bearing debt was USD 1,852 million as at 30 June 2012, compared to USD 1,838
million as at 31 March 2012. As at 30 June 2012, TORM was in breach of its financial covenants
Announcement no. 30 / 21 August 2012 Second quarter report 2012 9 of 22
under the existing loan agreements. As at 30 June 2012, TORM did not have a standstill agreement
with the bank group and therefore the Company no longer has the right to defer payments until such
time as the final restructuring agreement has been entered into.
Equity
Equity declined in the second quarter of 2012 from USD 569 million as at 31 March 2012 to USD
435 million primarily due to the loss during the period. Equity as a percentage of total assets was
17% as at 30 June 2012, compared to 23% as at 31 December 2011.
TORM held 3,230,432 treasury shares as at 30 June 2012, equivalent to 4.4% of the Company's
share capital. This is the same level as of 31 March 2012.
Liquidity
TORM had cash of USD 17 million at the end of the second quarter of 2012 and no credit lines
available. TORM has no order book and therefore no CAPEX related hereto. As at 20 August 2012
the cash totalled USD 33 million.
Post balance sheet events
No subsequent events have occurred after the balance sheet date which would materially affect the financial
performance of the Company.
Financial calendar
TORM's third quarter report for 2012 will be published on 7 November 2012. TORM's complete financial calendar
can be found at www.torm.com/investor-relations.
About TORM
TORM is one of the world’s leading carriers of refined oil products as well as a significant player in the dry bulk market. The Company operates a
fleet of approximately 125 modern vessels in cooperation with other respected shipping companies sharing TORM’s commitment to safety,
environmental responsibility and customer service.
TORM was founded in 1889. The Company conducts business worldwide and is headquartered in Copenhagen, Denmark. TORM’s shares are
listed on NASDAQ OMX Copenhagen (ticker: TORM) and on NASDAQ in New York (ticker: TRMD). For further information, please visit
www.torm.com.
Safe Harbor statements as to the future
Matters discussed in this release may constitute forward-looking statements. Forward-looking statements reflect our current views with respect to
future events and financial performance and may include statements concerning plans, objectives, goals, strategies, future events or performance,
and underlying assumptions and statements other than statements of historical facts. The forward-looking statements in this release are based
upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management’s examination of
historical operating trends, data contained in our records and other data available from third parties. Although TORM believes that these
assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which
are difficult or impossible to predict and are beyond our control, TORM cannot guarantee that it will achieve or accomplish these expectations,
beliefs or projections.
Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward- looking statements include
the strength of the world economy and currencies, changes in charter hire rates and vessel values, changes in demand for “tonne miles” of oil
carried by oil tankers, the effect of changes in OPEC’s petroleum production levels and worldwide oil consumption and storage, changes in
demand that may affect attitudes of time charterers to scheduled and unscheduled dry-docking, changes in TORM’s operating expenses, including
bunker prices, dry-docking and insurance costs, changes in the regulation of shipping operations, including requirements for double hull tankers or
actions taken by regulatory authorities, potential liability from pending or future litigation, domestic and international political conditions, potential
disruption of shipping routes due to accidents and political events or acts by terrorists.
Risks and uncertainties are further described in reports filed by TORM with the US Securities and Exchange Commission, including the TORM
Annual Report on Form 20-F and its reports on Form 6-K. Forward-looking statements are based on management’s current evaluation, and TORM
is only under an obligation to update and change the listed expectations to the extent required by law.
Announcement no. 30 / 21 August 2012 Second quarter report 2012 10 of 22
Statement by the Board of Directors and Executive Management
The Board and Management have today discussed and adopted this interim report for the period 1 January – 30
June 2012.
This interim report is unaudited and was prepared in accordance with the International Financial Reporting
Standards for Interim Financial Reporting, IAS 34, as adopted by the EU and additional disclosure of listed
Danish companies.
Reference is made to the Annual Report for 2011’s note 2 to the consolidated financial statements “Liquidity,
capital resources, going concern and subsequent events”, in which it is stated that the successful outcome of the
current negotiations with TORM’s banks and other stakeholders to secure the implementation of the
comprehensive financing and restructuring plan outlined in the conditional framework agreement in principle is a
prerequisite for TORM’s continued operation. In a forced sale, or if TORM is otherwise not able to continue as a
going concern, the net value of the Company’s assets, liabilities and off balance sheet items would be
significantly lower than the current carrying amounts.
We believe the accounting practices used are reasonable, and that this interim report gives a true and accurate
picture of the Group's assets, debt, financial position, results and cash flows.
Copenhagen, 21 August 2012
Executive Management
Board of Directors
Jacob Meldgaard, CEO
Roland M. Andersen, CFO
Niels Erik Nielsen, Chairman
Christian Frigast, Deputy Chairman
Jesper Jarlbæk
Kari Millum Gardarnar
Rasmus Johannes Hoffmann
Announcement no. 30 / 21 August 2012 Second quarter report 2012 11 of 22
Consolidated income statement
Million USD Q2 2012 Q2 2011 Q1-Q2 2012 Q1-Q2 2011 2011
Revenue 272.3 335.7 582.9 606.1 1,305.2
Port expenses, bunkers and commissions -161.6 -159.9 -333.8 -289.7 -675.0
Freight and bunkers derivatives -8.1 3.0 5.5 9.9 14.1
Time charter equivalent earnings 102.6 178.8 254.6 326.3 644.3
Charter hire -60.6 -99.6 -145.0 -176.2 -398.3
Operating expenses -41.4 -40.1 -81.7 -83.2 -165.0
Gross profit (Net earnings from shipping activities) 0.6 39.1 27.9 66.9 81.0
Prof it f rom sale of vessels 0.0 7.1 -15.9 1.4 -52.6
Administrative expenses -16.5 -17.7 -33.1 -34.8 -71.2
Other operating income 0.4 2.3 0.9 2.5 3.2
Share of results of jointly controlled entities -7.4 -1.3 -9.8 -2.4 -4.2
EBITDA -22.9 29.5 -30.0 33.6 -43.8
Impairment losses on jointly controlled entities -41.5 0.0 -41.5 0.0 -13.0
Impairment losses on tangible and intangible assets 0.0 0.0 0.0 0.0 -187.0
Amortizations and depreciation -34.1 -36.5 -68.1 -73.1 -144.8
Operating profit (EBIT) -98.5 -7.0 -139.6 -39.5 -388.6
Financial income 3.2 -0.5 6.8 2.0 9.9
Financial expenses -36.8 -16.2 -77.8 -31.1 -72.7
Profit/(loss) before tax -132.1 -23.7 -210.6 -68.6 -451.4
Tax 0.0 -0.6 -0.2 -1.0 -1.6
Net profit/(loss) for the period -132.1 -24.3 -210.8 -69.6 -453.0
Earnings/(loss) per share, EPS
Earnings/(loss) per share, EPS (USD) -1.9 -0.3 -3.0 -1.0 -6.5
Earnings/(loss) per share, EPS (DKK)* -11.0 -1.8 -17.4 -5.3 -34.9
Diluted earnings/(loss) per share, (USD) -1.9 -0.3 -3.0 -1.0 -6.5
Diluted earnings/(loss) per share, (DKK)* -11.0 -1.8 -17.4 -5.3 -34.9
*) The key figures have been translated from USD to DKK using the average USD/DKK exchange change rate for the period in question.
Announcement no. 30 / 21 August 2012 Second quarter report 2012 12 of 22
Consolidated income statement per quarter
Million USD Q2 12 Q1 12 Q4 11 Q3 11 Q2 11
Revenue 272.3 310.6 367.3 331.8 335.7
Port expenses, bunkers and commissions -161.6 -172.2 -202.5 -182.8 -159.9
Freight and bunkers derivatives -8.1 13.6 5.1 -0.9 3.0
Time charter equivalent earnings 102.6 152.0 169.9 148.1 178.8
Charter hire -60.6 -84.4 -118.6 -103.5 -99.6
Operating expenses -41.4 -40.3 -39.5 -42.3 -40.1
Gross profit (Net earnings from shipping activities) 0.6 27.3 11.8 2.3 39.1
Prof it f rom sale of vessels 0.0 -15.9 -54.0 0.0 7.1
Administrative expenses -16.5 -16.6 -19.6 -16.8 -17.7
Other operating income 0.4 0.5 0.3 0.4 2.3
Share of results of jointly controlled entities -7.4 -2.4 1.1 -2.9 -1.3
EBITDA -22.9 -7.1 -60.4 -17.0 29.5
Impairment losses on jointly controlled entities -41.5 0.0 -13.0 0.0 0.0
Impairment losses on tangible and intangible assets 0.0 0.0 -187.0 0.0 0.0
Amortizations and depreciation -34.1 -34.0 -35.6 -36.1 -36.5
Operating profit (EBIT) -98.5 -41.1 -296.0 -53.1 -7.0
Financial income 3.2 3.6 8.4 -0.5 -0.5
Financial expenses -36.8 -41.0 -25.1 -16.5 -16.2
Profit/(loss) before tax -132.1 -78.5 -312.7 -70.1 -23.7
Tax 0.0 -0.2 -0.3 -0.3 -0.6
Net profit/(loss) for the period -132.1 -78.7 -313.0 -70.4 -24.3
Earnings/(loss) per share, EPS
Earnings/(loss) per share, EPS (USD) -1.9 -1.1 -4.5 -1.0 -0.3
Diluted earnings/(loss) per share, (USD) -1.9 -1.1 -4.5 -1.0 -0.3
Announcement no. 30 / 21 August 2012 Second quarter report 2012 13 of 22
Consolidated statement of comprehensive income
Million USD Q2 2012 Q2 2011 Q1-Q2 2012 Q1-Q2 2011 2011
Net profit/(loss) for the period -132.1 -24.3 -210.8 -69.6 -453.0
Other comprehensive income:
Exchange rate adjustment arising on translation
of entities using a measurement currency dif ferent
f rom USD -0.4 0.0 0.3 0.0 -0.4
Fair value adjustment on hedging instruments -7.2 -13.4 -9.1 -10.1 -29.7
Value adjustment on hedging instruments transferred
to income statement 5.7 -0.1 9.9 0.8 1.7
Fair value adjustment on available for sale investments -0.6 -0.1 -0.3 0.1 8.7
Transfer to income statement on sale of available for sale
investments 0.0 0.0 0.0 0.0 0.0
Other comprehensive income after tax -2.5 -13.6 0.8 -9.2 -19.7
Total comprehensive income -134.6 -37.9 -210.0 -78.8 -472.7
Announcement no. 30 / 21 August 2012 Second quarter report 2012 14 of 22
Consolidated balance sheet – Assets
30 June 30 June 31 December
Million USD 2012 2011 2011
NON-CURRENT ASSETS
Intangible assets
Goodwill 0.0 89.2 0.0
Other intangible assets 1.8 2.0 1.9
Total intangible assets 1.8 91.2 1.9
Tangible fixed assets
Land and buildings 1.6 2.0 2.0
Vessels and capitalised dry-docking 2,260.5 2,485.2 2,258.6
Prepayments on vessels 0.0 136.8 69.2
Other plant and operating equipment 7.0 9.1 8.1
Total tangible f ixed assets 2,269.1 2,633.1 2,337.9
Financial assets
Investment in jointly controlled entities 0.8 69.5 50.3
Loans to jointly controlled entities 0.0 9.2 8.2
Other investments 11.9 3.1 11.6
Other financial assets 0.0 0.2 0.0
Total f inancial assets 12.7 82.0 70.1
TOTAL NON-CURRENT ASSETS 2,283.6 2,806.3 2,409.9
CURRENT ASSETS
Bunkers 63.6 59.9 84.6
Freight receivables 144.1 117.7 140.2
Other receivables 21.2 24.6 26.0
Other financial assets 0.0 4.1 0.0
Prepayments 14.6 28.4 11.8
Cash and cash equivalents 16.7 147.1 85.5
260.2 381.8 348.1
Non-current assets held for sale 0.0 13.7 21.2
TOTAL CURRENT ASSETS 260.2 395.5 369.3
TOTAL ASSETS 2,543.8 3,201.8 2,779.2
Announcement no. 30 / 21 August 2012 Second quarter report 2012 15 of 22
Consolidated balance sheet – Equity and liabilities
30 June 30 June 31 December
Million USD 2012 2011 2011
EQUITY
Common shares 61.1 61.1 61.1
Treasury shares -17.3 -17.3 -17.3
Revaluation reserves 5.9 -2.4 6.2
Retained profit 409.9 1,002.5 620.0
Proposed dividends 0.0 0.0 0.0
Hedging reserves -29.0 -11.1 -29.8
Translation reserves 3.9 4.1 3.6
TOTAL EQUITY 434.5 1,036.9 643.8
LIABILITIES
Non-current liabilities
Deferred tax liability 53.4 54.0 53.7
Mortgage debt and bank loans 0.0 1,701.8 0.0
Finance lease liabilities 30.5 75.2 29.4
Deferred income 5.8 0.0 6.4
TOTAL NON-CURRENT LIABILITIES 89.7 1,831.0 89.5
Current liabilities
Mortgage debt and bank loans 1,792.7 190.7 1,794.6
Finance lease liabilities 45.3 3.3 48.3
Trade payables 79.8 48.9 115.6
Current tax liabilities 0.9 1.8 1.2
Other liabilities 99.7 80.0 85.0
Acquired liabilities related to options on vessels 0.0 1.0 0.0
Deferred income 1.2 8.2 1.2
TOTAL CURRENT LIABILITIES 2,019.6 333.9 2,045.9
TOTAL LIABILITIES 2,109.3 2,164.9 2,135.4
TOTAL EQUITY AND LIABILITIES 2,543.8 3,201.8 2,779.2
Announcement no. 30 / 21 August 2012 Second quarter report 2012 16 of 22
Consolidated statement of changes in equity as at 1 January – 30
June 2012
Consolidated statement of changes in equity as at 1 January – 30
June 2011
Common Treasury Retained Proposed Revaluation Hedging Translation Total
shares shares profit dividends reserves reserves reserves
Million USD
Equity at 1 January 2012 61.1 -17.3 620.0 0.0 6.2 -29.8 3.6 643.8
Comprehensive income for the year:
Net prof it/(loss) for the year - - -210.8 - - - - -210.8
Other comprehensive income for the year - - - - -0.3 0.8 0.3 0.8
Total comprehensive income for the year - - -210.8 - -0.3 0.8 0.3 -210.0
Disposal treasury shares, cost - - - - - - - 0.0
Loss from disposal of treasury shares - - - - - - - 0.0
Share-based compensation - - 0.7 - - - - 0.7
Total changes in equity Q1-Q2 2012 0.0 0.0 -210.1 0.0 -0.3 0.8 0.3 -209.3
Equity at 30 June 2012 61.1 -17.3 409.9 0.0 5.9 -29.0 3.9 434.5
Common Treasury Retained Proposed Revaluation Hedging Translation Total
shares shares profit dividends reserves reserves reserves
Million USD
Equity at 1 January 2011 61.1 -17.9 1,072.3 0.0 -2.5 -1.8 4.1 1,115.3
Comprehensive income for the year:
Net prof it/(loss) for the year - - -69.6 - - - - -69.6
Other comprehensive income for the year - - - - 0.1 -9.3 0.0 -9.2
Total comprehensive income for the year - - -69.6 - 0.1 -9.3 0.0 -78.8
Disposal treasury shares, cost - 0.6 - - - - - 0.6
Loss from disposal of treasury shares - - -0.6 - - - - -0.6
Share-based compensation - - 0.4 - - - - 0.4
Total changes in equity Q1-Q2 2011 0.0 0.6 -69.8 0.0 0.1 -9.3 0.0 -78.4
Equity at 30 June 2011 61.1 -17.3 1,002.5 0.0 -2.4 -11.1 4.1 1,036.9
Announcement no. 30 / 21 August 2012 Second quarter report 2012 17 of 22
Consolidated statement of cash flows
Q1-Q2 Q1-Q2
Million USD Q2 2012 Q2 2011 2012 2011 2011
Cash flow from operating activities
Operating prof it -98,5 -7,0 -139,6 -39,5 -388,6
Adjustments:
Reversal of prof it/(loss) f rom sale of vessels 0,0 -7,1 15,9 -1,4 52,6
Reversal of amortizations and depreciation 34,1 36,5 68,1 73,1 144,8
Reversal of impairment of jointly controlled entities 41,5 0,0 41,5 0,0 13,0
Reversal of impairment of tangible and intangible assets 0,0 0,0 0,0 0,0 187,0
Reversal of share of results of jointly controlled entities 7,4 1,3 9,8 2,4 4,2
Reversal of other non-cash movements 11,2 -5,3 1,7 -12,0 -6,8
Dividends received 0,4 0,0 0,4 0,0 0,0
Dividends received f rom jointly controlled entities 0,0 0,3 0,0 1,0 1,4
Interest received and exchange rate gains -0,2 2,9 0,0 6,5 5,0
Interest paid and exchange rate losses -2,9 -17,9 -20,9 -33,7 -67,0
Advisor fees related to financing and restructuring plan -18,0 0,0 -40,0 0,0 0,0
Income taxes paid/repaid 0,0 0,0 -0,5 -1,2 -2,7
Change in bunkers, receivables and payables 5,5 -33,9 -12,5 -36,5 -17,7
Net cash flow from operating activities -19,5 -30,2 -76,1 -41,3 -74,8
Cash flow from investing activities
Investment in tangible f ixed assets -4,4 -34,4 -48,5 -102,4 -118,5
Loans to jointly controlled entities 8,2 0,6 8,2 1,1 2,1
Sale of equity interests and securities 1,8 0,0 1,8 0,0 0,0
Sale of non-current assets 0,3 94,1 49,6 194,7 284,5
Net cash flow from investing activities 5,9 60,3 11,1 93,4 168,1
Cash flow from financing activities
Borrow ing, mortgage debt 0,0 60,3 22,5 87,0 87,0
Borrow ing, f inance lease liabilities 0,1 46,8 0,1 46,8 46,8
Repayment/redemption, mortgage debt 0,0 -130,7 -26,4 -156,2 -254,1
Repayment/redemption, f inance lease liabilities 0,8 -1,8 0,0 -2,6 -7,5
Net cash flow from financing activities 0,9 -25,4 -3,8 -25,0 -127,8
Net cash flow from operating, investing and financing activities -12,7 4,7 -68,8 27,1 -34,5
Cash and cash equivalents, beginning balance 29,4 142,4 85,5 120,0 120,0
Cash and cash equivalents, ending balance 16,7 147,1 16,7 147,1 85,5
Announcement no. 30 / 21 August 2012 Second quarter report 2012 18 of 22
Consolidated quarterly statement of cash flows
Million USD Q2 12 Q1 12 Q4 11 Q3 11 Q2 11
Cash flow from operating activities
Operating prof it -98,5 -41,1 -296,0 -53,1 -7,0
Adjustments:
Reversal of prof it/(loss) f rom sale of vessels 0,0 15,9 54,0 0,0 -7,1
Reversal of amortizations and depreciation 34,1 34,0 35,6 36,1 36,5
Reversal of impairment of jointly controlled entities 41,5 0,0 13,0 0,0 0,0
Reversal of impairment of tangible and intangible assets 0,0 0,0 187,0 0,0 0,0
Reversal of share of results of jointly controlled entities 7,4 2,4 -1,1 2,9 1,3
Reversal of other non-cash movements 11,2 -9,5 -0,5 5,7 -5,3
Dividends received 0,4 0,0 0,0 0,0 0,0
Dividends received f rom jointly controlled entities 0,0 0,0 0,2 0,2 0,3
Interest received and exchange rate gains -0,2 0,2 -0,2 -1,3 2,9
Interest paid and exchange rate losses -2,9 -18,0 -19,5 -13,8 -17,9
Advisor fees related to f inancing and restructuring plan -18,0 -22,0 0,0 0,0 0,0
Income taxes paid/repaid 0,0 -0,5 -0,4 -1,1 0,0
Change in bunkers, receivables and payables 5,5 -18,0 14,9 3,8 -33,9
Net cash flow from operating activities -19,5 -56,6 -13,0 -20,6 -30,2
Cash flow from investing activities
Investment in tangible f ixed assets -4,4 -44,1 -11,6 -4,4 -34,4
Loans to jointly controlled entities 8,2 0,0 0,5 0,5 0,6
Sale of equity interests and securities 1,8 0,0 0,0 0,0 0,0
Sale of non-current assets 0,3 49,3 75,4 14,4 94,1
Net cash flow from investing activities 5,9 5,2 64,4 10,4 60,3
Cash flow from financing activities
Borrow ing, mortgage debt 0,0 22,5 0,0 0,0 60,3
Borrow ing, f inance lease liabilities 0,1 0,0 0,0 0,0 46,8
Repayment/redemption, mortgage debt 0,0 -26,4 -59,4 -38,5 -130,7
Repayment/redemption, f inance lease liabilities 0,8 -0,8 -2,3 -2,6 -1,8
Net cash flow from financing activities 0,9 -4,7 -61,7 -41,1 -25,4
Net cash flow from operating, investing and financing activities -12,7 -56,1 -10,3 -51,3 4,7
Cash and cash equivalents, beginning balance 29,4 85,5 95,8 147,1 142,4
Cash and cash equivalents, ending balance 16,7 29,4 85,5 95,8 147,1
Announcement no. 30 / 21 August 2012 Second quarter report 2012 19 of 22
Notes
Note 1 - Impairment test
As at 30 June 2012, Management performed a review of the recoverable amount of the assets by assessing the recoverable
amount for the significant assets within the Tanker Division, the Bulk Division and the investment in 50% of FR8.
Based on the review, Management concluded that:
• Assets within the Tanker Division were not further impaired as of 30 June 2012 as the value in use exceeds the
carrying amount.
• Assets within the Bulk Division were not impaired as the fair value less costs to sell exceeded the carrying amount by
USD 25 million.
• The carrying amount of the investment in FR8 was impaired by USD 42 million in addition to the impairment losses
previously recognized.
Tanker division
The methodology used for calculating the value in use is unchanged compared to the annual report for 2011 and accordingly
the freight rate estimates in the period 2012 to 2015 are based on the Company's business plans, which in 2014 and 2015
assume a gradual increase towards the 10-year historic average spot freight rate. The freight rates from 2016 are based on the
10-year historic average spot freight rates from Clarksons adjusted by the inflation rate.
The WACC of 8.0% (30 June 2011: 8.2%) is unchanged compared to 31 December 2011.
The 10-year historic average spot freight rates as of 30 June 2012 are as follows:
• LR2 USD/day 26,878 (30 June 2011: USD/day 28,335)
• LR1 USD/day 22,582 (30 June 2011: USD/day 23,702)
• MR USD/day 20,034 (30 June 2011: USD/day 20,495)
Management believes that these major assumptions are reasonable.
The calculation of value in use is very sensitive to changes in the key assumptions which are considered to be related to the
future development in freight rates, the WACC applied as discounting factor in the calculations and the development in
operating expenses. The sensitivities have been assessed as follows, all other things being equal:
• A decrease in the Tanker freight rates of USD/day 500 would result in a further impairment of USD 138 million for the
Tanker Division.
• An increase of the WACC of 1.0% would result in a further impairment of USD 197 million for the Tanker Division.
• An increase of the operating expenses of 5.0% would result in a further impairment of USD 86 million for the Tanker
Division
It should be emphasized that in a forced sale the recoverable amount of the vessels would be significantly lower than the
carrying amount under a going concern assumption.
FR8
The book value of the investment in FR8 has been impaired by USD 42 million (1 April – 30 June 2011: USD 0 million) to zero.
Announcement no. 30 / 21 August 2012 Second quarter report 2012 20 of 22
Note 2 - Vessels and capitalized dry-docking
30 June 30 June 31 Dec.
USD million 2012 2011 2011
Cost:
Balance at 1 January 2,999.3 3,113.9 3,113.9
Exchange rate adjustment 0.0 0.0 0.0
Additions 6.2 7.9 20.7
Disposals -49.6 -216.7 -334.6
Transferred to/f rom other items 102.9 199.3 199.3
Transferred to non-current assets held for sale 0.0 -31.8 0.0
Balance 3,058.8 3,072.6 2,999.3
Depreciation and impairments:
Balance at 1 January 740.7 553.8 553.8
Exchange rate adjustment 0.0 0.0 0.0
Disposals -8.7 -43.2 -67.8
Depreciation for the year 66.3 70.9 140.6
Impairment loss 0.0 16.3 97.8
Transferred to/f rom other items 0.0 -10.4 16.3
Balance 798.3 587.4 740.7
Carrying amount 2,260.5 2,485.2 2,258.6
Note 3 - Prepayments on vessels
30 June 30 June 31 Dec.
USD million 2012 2011 2011
Cost:
Balance at 1 January 69.2 243.3 243.3
Additions 41.7 92.8 94.8
Disposals -8.0 0.0 -7.8
Transferred to/f rom other items -102.9 -199.3 -199.3
Transferred to non-current assets held for sale 0.0 0.0 -61.8
Balance 0.0 136.8 69.2
Depreciation and impairments:
Balance at 1 January 0.0 16.3 16.3
Transferred to/f rom other items 0.0 -16.3 -16.3
Balance 0.0 0.0 0.0
Carrying amount 0.0 136.8 69.2
Announcement no. 30 / 21 August 2012 Second quarter report 2012 21 of 22
Note 4 - Mortgage debt and bank loans
30 June 30 June 31 Dec.
Million USD 2012 2011 2011
Mortgage debt and bank loans
To be repaid as follow s:
Falling due w ithin one year 1,792.7 190.7 1,794.6
Falling due between one and tw o years 0.0 283.0 0.0
Falling due between tw o and three years 0.0 154.1 0.0
Falling due between three and four years 0.0 272.1 0.0
Falling due between four and five years 0.0 591.0 0.0
Falling due after five years 0.0 401.6 0.0
Carrying amount 1,792.7 1,892.5 1,794.6
As at 30 June 2012, TORMs equity ratio of 17.1% and cash at bank at USD 16.7 million resulted in a breach of its financial
covenants under the existing loan agreements. As at 30 June 2012, TORM therefore does not have an unconditional right to
defer payments on the loans for more than 12 months and the mortgage debt and bank loans are in principle payable on
demand. Accordingly the mortgage debt and bank loans are classified as current liabilities in the balance sheet.
As at 21 August 2012, none of these defaults have been remediated.
Note 5 - Segment information
Million USD
Tanker Bulk Not Tanker Bulk Not
Division Division allocated Total Division Division allocated Total
Revenue 484.0 98.9 0.0 582.9 478.4 127.7 0.0 606.1
Port expenses, bunkers and commissions -275.7 -58.1 0.0 -333.8 -238.3 -51.4 0.0 -289.7
Freight and bunkers derivatives -0.5 6.0 0.0 5.5 0.3 9.6 0.0 9.9
Time charter equivalent earnings 207.8 46.8 0.0 254.6 240.4 85.9 0.0 326.3
Charter hire -94.9 -50.1 0.0 -145.0 -94.8 -81.4 0.0 -176.2
Operating expenses -80.0 -1.7 0.0 -81.7 -81.6 -1.6 0.0 -83.2
Gross profit (Net earnings from shipping activities) 32.9 -5.0 0.0 27.9 64.0 2.9 0.0 66.9
Prof it from sale of vessels -15.9 0.0 0.0 -15.9 1.8 -0.4 0.0 1.4
Administrative expenses -29.7 -3.4 0.0 -33.1 -28.9 -5.9 0.0 -34.8
Other operating income 0.8 0.1 0.0 0.9 2.4 0.1 0.0 2.5
Share of results of jointly controlled entities -5.4 0.0 -4.4 -9.8 1.4 0.0 -3.8 -2.4
EBITDA -17.3 -8.3 -4.4 -30.0 40.7 -3.3 -3.8 33.6
Impairment losses on jointly controlled entities 0.0 0.0 -41.5 -41.5 0.0 0.0 0.0 0.0
Amortizations and depreciation -66.8 -1.3 0.0 -68.1 -71.5 -1.6 0.0 -73.1
Operating profit (EBIT) -84.1 -9.6 -45.9 -139.6 -30.8 -4.9 -3.8 -39.5
Financial income - - 6.8 6.8 - - 2.0 2.0
Financial expenses - - -77.8 -77.8 - - -31.1 -31.1
Profit/(loss) before tax - - -116.9 -210.6 - - -32.9 -68.6
Tax - - -0.2 -0.2 - - -1.0 -1.0
Net profit/(loss) for the period - - -117.1 -210.8 - - -33.9 -69.6
BALANCE SHEET
Total non-current assets 2,234.0 37.7 11.9 2,283.6 2,628.0 102.9 75.4 2,806.3
The activity in TORM's 50% ow nership of FR8 Holding Pte. Ltd. is included in 'Not-allocated'.
Q1-Q2 2012 Q1-Q2 2011
During the year, there have been no transactions betw een the Tanker Division and the Bulk Division, and therefore all revenue derives f rom
external customers.
Announcement no. 30 / 21 August 2012 Second quarter report 2012 22 of 22
Note 6 - Post balance sheet date events
No subsequent events have occurred af ter the balance sheet date w hich w ould materially af fect the f inancial performance of the Company.
Note 7 - Accounting policies
The interim report for the period 1 January – 30 June 2012 is presented in accordance with IAS 34 "Interim Financial Reporting" as adopted by
the EU and additional Danish disclosure requirements for interim reports of listed companies. The interim report has been prepared using the
accounting policies as for the Annual Report for 2011. The accounting policies are described in more detail in the Annual Report for 2011. As
f rom January 1 2012, TORM has implemented the amendment to IFRS 7 regarding disclosures about transfer of f inancial assets. The amended
standard have not af fected recognition and measurement in TORM's interim report for the f irst half of 2012. The interim report of the second
quarter of 2012 is unaudited, in line with the normal practice.
