While the COVID-19 pandemic and the oil price war which started in Q1 2020 did not have any negative impact on the Group’s earnings in Q1 2020, the Group’s performance was boosted by the substantial improvement in the tanker market caused by the oil price war during this period as compared to Q4 2019. As a result, the average daily Time Charter Equivalent (“TCE”) rate earned in Q1 2020 by the 5 vessels was approximately 24% higher than the average TCE rate earned in Q4 2019.
For the 3 months ended 31 March 2020, the Group generated a profit after tax of
USD 3.6 million (USD 0.4 million) primarily due to improved TCE revenue generated in Q1 2020.
Despite the sale of Nordic Ruth in July 2019, TCE earnings rose 36.7% to USD 9.7 million (USD 7.1 million) in Q1 2020 arising from higher TCE earnings by the vessels in the pools compared to the same period last year.
Expenses relating to the operation of vessels in Q1 2020 decreased to USD 2.9 million (USD 3.6 million) primarily due to the sale of Nordic Ruth in July 2019.
EBITDA increased significantly to USD 6.4 million (USD 3.1 million) as a result of improved TCE earnings in Q1 2020. Other external costs remained relatively consistent at USD 0.3 million (USD 0.3 million).
The Group did not make any impairment nor reversal of impairment during the quarter.
After accounting for depreciation, interest expenses and other finance expenses, the Group generated a profit after tax of USD 3.6 million in Q1 2020 (USD 0.4 million).
Between 31 December 2019 and 31 March 2020, equity increased from USD 7.9 million to USD 11.5 million as a result of the cumulative profit earned during the period. Consequently, the equity ratio improved from 8.1% to 12.0%.
As part of the loan restructuring concluded with the lending banks in Q4 2018, the financial covenants under the original loans such as (i) minimum value (fair market value of vessels as a percentage of outstanding loan) and (ii) minimum equity ratio are waived whilst the minimum liquidity level is reduced. The relief from these financial covenants are provided till and including 30 September 2020. In addition, the quarterly loan instalments due from December 2018 to September 2020 are deferred to December 2020 where all of the Group’s debts fall due.
The Group is also subject to a quarterly cash sweep mechanism under which the Group after payment of instalments and interest under the loan agreement, must apply any cash and cash equivalents of the Group in excess of USD 6.0 million towards prepayment of the loan. This cash sweep mechanism was activated on 31 March 2020 and excess cash of USD 3.3 million was used to pay down the loan (USD NIL cash sweep for Q1 2019).
During the financial period under review, cash flow generated from operations was USD 4.0 million (USD 0.7 million) contributed by earnings from the pools.
As at 31 March 2020, cash and cash equivalents stood at USD 6.2 million (USD 9.3 million, including balances held in dry-docking reserve bank accounts).
For the rest of 2020, the vessels will continue to be commercially deployed on a pool basis.
As mentioned, the high TCE revenue in Q1 2020 has resulted in the Group being able to repay USD 3.3 million on its loan facilities under the cash sweep mechanism, and as the positive TCE revenue has continued well into Q2 2020, it is expected that the Group shall be able to make further repayment on its loan facilities under the cash sweep mechanism by the end of Q2 2020.
Despite these improved results and extraordinary principal payments, the Group is still in a difficult position, and with a view to the uncertainties ahead caused by the COVID-19 pandemic and the collapse of the oil price, the forecast for the rest of the year is still subject to unprecedented uncertainties; therefore, the Group for the time being, is unable to provide a forecast for 2020. A forecast will be provided when there is more certainty. As described in Note 0 in the Interim Report Q1 2020, the management is pursuing various alternatives to secure the Group’s ability to continue as a going concern by securing long-term financing for the Group. These alternatives include a potential merger and renegotiation of the Group’s loan facilities, but may also include disposal of one or more vessels and further repayment on its loan facilities.
Source: Nordic Shipholding