d1314573_6-k.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO
RULE 13A-16 OR 15D-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of August 2012

Commission File Number:  000-49650

 
TORM A/S
 
(Translation of registrant's name into English)

Tuborg Havnevej 18
DK-2900 Hellerup
Denmark
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F [x]       Form 40-F [  ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [  ].

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [  ].

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant's "home country"), or under the rules of the home country exchange on which the registrant's securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant's security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 
 

 

INFORMATION CONTAINED IN THIS FORM 6-K REPORT

Set forth herein as Exhibit 99.1 is a copy of Announcement No. 30 - 2012 issued by TORM A/S to The Copenhagen Stock Exchange on August 21, 2012.




 
 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
TORM A/S
(registrant)
 
Dated: August 23, 2012
By:
/s/ Jacob Meldgaard
  Name: Jacob Meldgaard
  Title:  Chief Executive Officer





 
 

 

Exhibit 99.1
 
 
 
 
Second quarter report 2012
 

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.
 
 
     
Announcement no. 30 / 21 August 2012
Second quarter report 2012
Page 1 of 21 
     

 
 

 
 
 

 
·  
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
                           
 
 
                                 
                    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 profit
      0.6       39.1       27.9       66.9       81.0  
EBITDA
      -22.9       29.5       -30.0       33.6       -43.8  
Operating profit (EBIT)
      -98.5       -7.0       -139.6       -39.5       -388.6  
Profit/(loss) before tax
      -132.1       -23.7       -210.6       -68.6       -451.4  
Net profit/(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       168.1  
  Thereof investment in tangible fixed assets
    -4.4       -34.4       -48.5       -102.4       -118.5  
From financing activities
      0.9       -25.4       -3.8       -25.0       -127.8  
Total net cash flow
      -12.7       4.7       -68.8       27.1       -34.5  
Key financial figures
                                         
Gross margins:
                                         
  TCE
      37.7 %     53.3 %     43.7 %     53.8 %     49.4 %
  Gross profit
      0.2 %     11.6 %     4.8 %     11.0 %     6.2 %
  EBITDA
      -8.4 %     8.8 %     -5.1 %     5.5 %     -3.4 %
  Operating profit
      -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 flow 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  
 
*)
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.
 
     
Announcement no. 30 / 21 August 2012
Second quarter report 2012
Page 2 of 21
 
 
 

 
 
 
 




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.
 
Profit/(loss) by segement
 
Million USD
Q2 2012
 
Q1-Q2 2012
 
 
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
Profit 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
 
The activity in TORM's 50% ownership in FR8 Holding Pte. Ltd. is included in "not-allocated"
 
 
 
     
Announcement no. 30 / 21 August 2012
Second quarter report 2012
Page 3 of 21
     

 
 

 
 
 
 
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
 
         
Owned 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  
                             
      Covered %    
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 freight 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 profit split arrangements.
 
     
Announcement no. 30 / 21 August 2012
Second quarter report 2012
Page 4 of 21
     
 
 

 
 
 

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-on-year.

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.
 
Tanker Division
   
Q2 11
     
Q3 11
     
Q4 11
     
Q1 12
     
Q2 12
   
Change Q2 11
-Q2 12
   
12 month
avg.
 
                                           
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  
 
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
Page 5 of 21
     
 
 
 

 

 
 


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.

Bulk Division
Q2 11
Q3 11
Q4 11
Q1 12
Q2 12
Change
12 month
           
Q2 11
avg.
           
- 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)
-
-
-
-
-
-
-
 
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
Page 6 of 21
     



 
 

 

 
 



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
Current fleet
Newbuildings and T/C-in deliveries
with a period >= 12 months
 
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
       
 
 
 
 
     
Announcement no. 30 / 21 August 2012
Second quarter report 2012
Page 7 of 21
     



 
 

 

 
 
 

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.
 
     
Announcement no. 30 / 21 August 2012
Second quarter report 2012
Page 8 of 21
     



 
 

 

 
 


 
 
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 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.
 
 
     
Announcement no. 30 / 21 August 2012
Second quarter report 2012
Page 9 of 21
     



 
 

 
 
 
 


 
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.
 
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
 
Niels Erik Nielsen, Chairman
Roland M. Andersen, CFO
 
Christian Frigast, Deputy Chairman
   
Jesper Jarlbæk
   
Kari Millum Gardarnar
   
Rasmus Johannes Hoffmann
     

 







 
     
Announcement no. 30 / 21 August 2012
Second quarter report 2012
Page 10 of 21
     




 
 

 
 
 
 




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  
                                         
Profit from 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
Page 11 of 21
     



 
 

 


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  
                                         
Profit from 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
Page 12 of 21
     



 
 

 

 
 


 

 
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 different
                                       
   from USD
    -0.4       0.0       0.3       0.0       -0.4  
                                         
Fair value adjustment on hedging instruments
    -7.2       -13.4