Odfjells Announces Good 1Q Results

Odfjell's consolidated net result after tax was $34 million the first quarter 2004 compared to $18 million 1Q 2003. The first quarter 2004 figure includes capital gains on assets of $9 million. Time-charter results per day improved by 9 percent compared to first quarter 2003 and to the full year 2003.

Increased voyage expenses reflect the increased number of ships in the fleet. Earnings before interest, taxes, depreciation and amortization (EBITDA) for first quarter 2004 were $53 million, up from $41 million first quarter 2003. Operating result (EBIT), including capital gain on assets, was $38 million in the first quarter 2004, compared to $19 million in the first quarter 2003.

Operating expenses as well as general and administrative expenses were higher than first quarter 2003, mainly due to increased activity level. Net interest expenses for the first quarter 2004 were $6 million compared to $5 million first quarter 2003. The $9 million capital gain on assets in the first quarter 2004 include insurance proceeds from the loss of M/T Bow Mariner (39,821 dwt./built 1982), the sale of M/T Bow Queen (32,363/1975) for demolition and the sale of M/T Bow Apollo (6,291/1981) previously controlled by us through a bareboat charter with charterer's purchase option.

The average $/NOK exchange rate for the first quarter 2004 was 6.93 compared to 7.06 for the first quarter 2003. The dollar strengthened against the NOK from 6.68 at year-end 2003 to 6.86 at 31 March 2004. The currency gain, primarily from hedging, was $6 million compared to $7 million the same period last year. Taxes were $3 million in first quarter 2004 compared to $1 million in the first quarter 2003.

Global trade

EBITDA for the first quarter 2004 was up 35 percent to $35 million compared to $26 million in the first quarter 2003. Operating profit (EBIT) was $27 million in the first quarter 2004, compared to $10 million in the first quarter 2003. Improved market conditions led to time-charter income expressed in $/day being about 9 percent higher in first quarter 2004 compared to first quarter 2003. The average cost of bunkers in first quarter 2004 was $153 per ton (after bunker clause compensations), compared to $163 per ton last year. Operating expenses on a comparable fleet basis were 5 percent lower in first quarter 2004 than the full year 2003 figure. On February 20, 2004, the company took delivery of the 39,900 dwt. newbuilding M/T Bow Star from Stocznia Szczecinska Nowa in Poland, the second ship in a series of six to eight newbuildings from the Polish yard.

Key figures

Return on equity was 20 percent and return on total assets was 8.1 percent. Return on capital employed (ROCE) was 9.7 percent in first quarter 2004. Earnings per share amounted to $1.56 (NOK 10.81) in the first quarter 2004 compared to $0.84 (NOK 5.94) in the first quarter 2003. Cash flow per share was $2.65 (NOK 18.35) compared to $1.87 (NOK 13.22). As per 31 March 2004 the Price/Earnings ratio (P/E) was 4.8 and the Price/Cash flow ratio was 2.8. Based on book value the Enterprise Value (EV)/EBITDA multiple is 6.2 while, based on market value as per 31 March 2004, the EV/EBITDA multiple is 6.7. Interest coverage ratio (EBITDA/Net interest expenses) improved in first quarter 2004 to 8.2 compared to 7.7 in the first quarter 2003.

Finance

Cash and bonds as of March 31, 2004 increased to $223 million from $203 million as of December 31, 2003. Additionally, undrawn credit facilities equaled $60 million as per March 31, 2004. Interest bearing debt increased from $944 million as per year-end 2003 to $979 million per March 31, 2004 as a consequence of investments. Net interest bearing debt was $756 million as per March 31, 2004.

The equity ratio was 33 percentage as per March 31, 2004 and the current ratio was 2.8. Long-term financing is established for the remaining four to six newbuildings from the Stettin yard in Poland at attractive terms through Polish export credit arrangements. At March 31, 2004 the Odfjell A-shares were trading at NOK 205 ($29.9) up 38.5 percentage from NOK 148 ($22.1) year-end 2003. The B-shares were trading at NOK 200 ($29.2) at 31 March 2004, up 39.4 percentage from NOK 143.50 ($21.5) year-end 2003. By way of comparison, the Oslo Stock Exchange benchmark index rose 13.3 percentage and the transportation index improved by 20.2 percentage during the same period. The A-shares traded between NOK 149 ($22.3) and NOK 220.50 ($31.6) during the period whilst the corresponding figures for the B-shares were NOK 144.5 ($21.6) and NOK 217 ($31.1).

Prospects

The world economy is recovering, and there is strong growth in China and the US as well as continued economic growth elsewhere in Asia. Volume and spot rates in the chemical tanker market started to improve late 2003. We believe such trend will continue the next few years, the more so since new ships are becoming more expensive and delivery lead times are becoming steadily longer. Further enhanced by continued strong results in our tank terminal business we fully expect an improved operating result for 2004 as compared to 2003.