The I.M. Skaugen Group (IMSK) achieved a negative pre-tax result for 3Q 2012 of USD6.3 mill, down from a loss of USD5.1 mill in 2Q 2012. EBITDA decreased to USD5.5 mill for 3Q 2012 compared to USD6.6 mill in 2Q2012.
For YTD 3Q 2012 the pre-tax result was a loss of USD11.4 mill, down from a loss of USD6.4 mill in YTD 3Q 2011. EBITDA for YTD 3Q 2012 was USD17.4 mill down from USD21.6 mill in YTD 3Q 2011.
On September 26, the Norgas Cathinka was involved in a collision with a Ro-Ro ferry in the Sunda strait between Sumatra and Java in Indonesia. We are fully cooperating with the authorities and their investigations to establish the truth about this unfortunate incident. The Norgas vessel carries the required and customary insurances for collision damages and Protection and Indemnity (P&I) insurances for relevant third party liability.
NORGAS - GAS SEGMENT
The result on EBITDA basis in Norgas Carriers segment for 3Q12 was USD5.9 mill and USD20.5 mill YTD 2012. Compared with the same periods in 2011; down 20% and 11% respectively (based on IMS's ownership).
Contrary to expectations in the 2nd quarter, third quarter volumes were down. Main downturn were from lower spot volumes while our volumes to customer on contract business declined slightly, but were still higher than in 1Q.
In 3Q12 we have seen rising oil and commodities prices which will normally encourage expansion of trade in liquefied gases (Petchem gasses). However, the slowing down of the world economy and in particularly industrial activity in Asia dampened much of this effect. The "Iranian sanctions" by US and EU continued to affect the longer haul transportation market negatively, with additional tonnage made available for the global spot markets.
Vessels that were engaged in our contract business increased during 3Q and were on average close to 80%.
The investigations into the unfortunate collision in Indonesia waters are still on-going. We have provided the authorities with the data from our "black-box" or VSDR which will be vital to establish what happened before, during and after the incident. The other vessel in the collision suffered above water line damage, but did unfortunately sink. The reasons for this 40 year old ship sinking is not clear as the damage should normally not cause such a sized vessel to sink. The unfortunate loss of lives occurred on this vessel after the sinking of the ship and the reasons may be found in the lack of available lifesaving equipment or in the proper use of same. Our vessel sustained limited damage. We will ask for the vessel to be released against customary security and as soon as the vessel is released by the authorities, she will undergo repairs and regular maintenance dry-docking and then be fit to trade.
PETROCHEMICAL GAS SHIPPING MARKET - LONG TERM FUNDEMENTALS
Our niche strategy focuses on the higher value segment of the liquefied gas market; the petrochemical gases and within that, the long-haul trade. The key product is ethylene (57%) which together with butadiene (27%) now make up close to 85% of products transported.
Over time ethylene demand has grown with a factor of 1.1-1.3 times global GDP growth. Our niche, the long-haul ethylene trade, has over time shown an even stronger growth; approx. 9% CAGR over the last 8 years. Vehicle production is the main key driver for butadiene demand growth, as butadiene is the major product in tyre manufacturing Sea-borne trade of butadiene has also shown a similar growth trend as long-haul ethylene trade.
The net order book for Semi-Refrigerated (SR) gas carriers stands at about 5 % of current cbm capacity (280 vessels) when factoring in that ships above certain age will be eligible for recycling within the delivery period of the order book. Normal age for recycling of such vessels has historically been between 27 and 30 years of age. These are for both "long haul and short haul" transportation. Of the 280 existing SR gas carriers, 132 ships have ethylene capability. The net order book for ethylene capable vessels on same measurement is at 19%. However at about 25 years of age it is quite normal for such ships to cease carrying ethylene and concentrate on other less demanding products to trade. Excluding vessels aging 25 years in this period the net ethylene order book is at 10% of current capacity.
The long-haul fleet segment (8-22,000 cbm) has seen no firm additions the last quarter and we are the operator of the largest fleet with a below average age of our vessels. In this segment the net order book for SR long-haul vessels is at 7% of current capacity (145 vessels). Of these 145 SR gas carriers, 77 have ethylene capacity. The net order book for long-haul ethylene vessels on same measurement is at 13% excluding vessels above 25 years and vessels aging above 25 years in the delivery period. The SR fleet growth composition illustrate that new orders over the past years have primarily been SR gas carriers with ethylene capacity.
With a low net growth of the long-haul SR fleet of 7%, where the ethylene part of the long-haul SR fleet growing with 13% we see the long term supply and demand fundamentals for our long-haul petrochemical shipping trade as positive despite of the current slowdown of activity due to the global economy slowing down.
SMALL SCALE LNG
Recent developments in the market with key leading International Oil Companies (IOC) making moves to position themselves in the downstream LNG marine bunkering market are encouraging.
To effectively service future smaller LNG bunkering hubs large conventional LNG carriers will be oversized and we foresee a need for smaller LNG vessels acting as "bulk-breakers" moving LNG in smaller parcels. Our fleet of six LNG capable vessels; 4 x 10.000 cbm and 2 x 12.000 cbm make us well positioned for growth in this developing market segment.
SPT - MARINE SERVICES
SPT delivered a negative result of USD0.3 mill on an EBITDA basis during the third quarter of 2012 (based on our share or IMS's 50% ownership). Compared to 2Q, this was an improvement of USD1.3 mill from 2Q.
To offset the very weak Aframax tanker market we have continued to build the core business of ship-to-ship (STS) transfers and we have seen an increased activity during the quarter. Our STS business saw volumes in line with our forecast and higher than the 2nd quarter. For the Aframax tanker market, we expect no near term improvement in tanker rates.
With respect to SPT's LNG business, a number of commercial opportunities were achieved in the quarter and we have additional projects under active development for FSRU related operations and LNG STS operations.
The SPT trades makes the effective earnings for our 6 Aframax sized vessels higher than the prevailing markets (period or spot markets) and they are better than our immediate competitors in this niche market. However they are still not good enough to cover our cost of operations.
SHENGHUI - CHINA
Our industrial manufacturing JV in China, Shenghui Gas and Chemical Systems (Shenghui) had revenues of RMB192 mill in 3Q12 compared to RMB258 mill in 3Q11. YTD revenues stand at RMB600m which is 8% up on the same period last year. Shenghui has an order book of approx. RMB670 mill.
In the process of visualizing our value creation in Shenghui, both IMS and Shenghui have selected their local advisors to facilitate the process.
IMSK09, one of our outstanding bonds, matured on September 17, reducing our bond debt with NOK2.5 mill to a current total bond debt of NOK794.5 mill. Upcoming maturity of IMSK10 with NOK59.5 mill outstanding is March 15 2013. For this maturity we have liquidity set aside. After March 2013 we will have no bonds maturing until 2015 (NOK 385M) and 2017 (NOK 350M).
Going forward we see a high level of uncertainty in the near term and with GDP growth forecast for 2012/2013 more likely to be revised down and not up. The recovery of the world economy could be slower than anticipated earlier this year.
Our high contract coverage ratio is heartening but the current level of uncertainty in the world economy together with the Iran sanctions still impacting the spot markets for ethylene, will make for challenging short term outlook for our core market segment gas shipping.
The fundamentals for a long term sustainable growth in long haul petrochemical shipping market remain positive with global GDP growth being the key demand driver. The supply and demand balance for the current fleet continuous to look favorable with demand outpacing supply basis current level of new buildings planned.
The Small Scale LNG market outlook remains positive, and with the world largest fleet of small vessels, we are well positioned.
The company has no material capital commitments and remains fully financed.
I.M. Skaugen SE
Board of Directors
If you have any questions, please contact:
Bente Flø, Chief Financial Officer, on telephone +47 23 12 03 30/+47 91 64 56 08 or by e-mail:email@example.com. This press release is also available on the Internet at our website:http://www.skaugen.com.
I.M. Skaugen SE (IMS) is a marine transport service company, with a focus on Innovative Maritime Solutions. Our core business is the seaborne transport and logistics of liquefied gas, such as petrochemical gases, LPG and LNG.
IMS currently operates 39 vessels worldwide, which are engaged in the transportation of petrochemical gases, chemicals, LPG and LNG, the marine transfer of crude oil and LNG, as well as LNG terminal man-agreement. We also have in-house capability for the development and design of specialized high quality vessels within our niche.
IMS employs approximately 2.000 people, with 20 nationalities represented. We manage and operate our activities from our offices in Singapore, Shanghai, Bahrain, Houston, St. Petersburg, Sunderland and Oslo. IMS is listed on the Oslo Stock Exchange under the ticker code, IMSK.
This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act. IMSK 3Q Presentation 2012IMSK 3Q Report 2012
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Source: I. M. Skaugen SE via Thomson Reuters ONEHUG#1649637