FSL Trust Management Pte. Ltd. (FSLTM), as trustee-manager of First Ship Lease Trust, announced the financial results of FSL Trust for the quarter ended 31 March 2013.
Revenue for 1QFY13 declined by 11.6% to $23.0 million (USD) compared to the corresponding quarter last year. In 1QFY13, all the trust’s vessels continued to generate revenue from their respective employments on bareboat charters and time charters as well as in the ‘Nordic Tankers 19,000 Stainless Steel Pool’ (Nordic Pool). On a bareboat charter/bareboat charter equivalent (BBCE) basis, revenue fell 4.0% to $19.9 million compared to 1QFY12.
i) Bareboat Charter
The rentals received from 20 vessels leased on long-term bareboat charters continued to support the overall earnings of FSL Trust.
Rentals from vessels on bareboat charters in 1QFY13 fell 18.3% to $17.3 million, mainly because of payment defaults by subsidiaries of PT Berlian Laju Tanker Tbk for three chemical tankers since February 2012 and lower rentals from vessels leased to TORM A/S and to OMNI Ships Pte. Ltd. as the leases were restructured.
ii) Time Charter
FSL Hamburg and FSL Singapore are employed on time charters with Petròleo Brasileiro S.A. and, together, these vessels generated net time charter revenue of $2.4 million. After deducting vessel operating expenses, they earned BBCE revenue of $1.2 million in 1QFY13.
The Trust’s three chemical tankers, FSL New York, FSL London and FSL Tokyo, continued their employment in the Nordic Pool and collectively generated net pool revenue of $3.3 million in 1QFY13. After deducting vessel operating expenses, these vessels earned BBCE revenue of $1.4 million.
Other operating expenses declined by 10.5% to $15.1 million, which was attributable to lower depreciation expenses arising from changes in the expected useful life and residual value of the two vessels leased to TORM and the two vessels leased to OMNI. In the corresponding quarter last year, non-recurring vessel-related expenses of $0.8 million were incurred because of the re-delivery of the three chemical tankers to FSL Trust.
Overall, FSL Trust generated an operating profit of $4.8 million, an increase of 24.6% over the same period last year.
The Trust has pared down its outstanding indebtedness through quarterly principal repayments of $11.0 million since 1QFY12. Together with lower swap costs, these repayments contributed to a 22.3% drop in finance expenses in 1QFY13.
As a result of a significant decline in the quoted share price of TORM, an impairment loss of $5.3 million was recognized on FSL Trust’s investment in TORM. Consequently, the trust incurred a net loss of $7.1 million in 1QFY13.
In line with the temporary loan covenant relaxation obtained in June 2012, no distributions have been declared for 1QFY13.
As of March 31, 2013, cash and cash equivalents stood at $37.0 million (against $37.5 million as at December 31, 2012).
Vessel Portfolio Update
The Trust’s vessel portfolio comprises 25 vessels, of which 20 vessels are employed on long-term bareboat charters and two vessels are employed on time charters. As at 31 March 2013, these 22 vessels have a dollar-weighted average remaining lease period of approximately five years2. The remaining three chemical tankers are employed in the Nordic Pool. The combined portfolio of 25 vessels has a dollar-weighted average age of approximately seven and a half years.
The Trustee-Manager remains engaged in a restructuring discussion with one bareboat charter lessee. Further details will be announced as and when there are material developments in this matter. Taking this restructuring into account, the Trust’s vessel portfolio still generates sufficient cash flow to meet its scheduled interest and principal repayments.
Mr. Philip Clausius, Chief Executive Officer of FSLTM, said, “We continue to closely monitor the deployment of our vessels and our lessees’ performance. Some of the Trust’s vessels have been positioned to take advantage of potential rate improvements in sectors that we believe should recover more quickly. Given the near-term uncertainties, we are in ongoing discussions with our lenders to extend the relaxation of our loan covenants and are confident of reaching an agreement soon.
The industry is working its way through excess capacity and, unfortunately, this process will take time, given the large number of newbuildings that have been delivered into the market. On a more positive note, the orderbook is now more manageable and supply pressures should subside gradually. So far, industry players have been relatively disciplined in managing capacity and financing for new ships has been limited. All these factors should set the stage for an eventual recovery.”
1QFY13 Results Conference Call
FSLTM will host a conference call for all registered participants on Tuesday, 23 April 2013 at 10.00 am (Singapore time) to discuss the results. An audio recording of the conference call will be available on FSL Trust’s website at www.FSLTrust.com from 12 p.m. (Singapore time) on Wednesday, 24 April 2013.