I.M. Skaugen Posts 1Q13 Results (Norway)

The I.M. Skaugen Group (IMSK) achieved a pre-tax result for 1Q13 of USD25.1 mill, compared to USD0.1 mill in 1Q12. EBITDA was USD3.6 mill for 1Q13 compared to USD5.5 mill in 1Q12.

PERFORMANCE 1Q-2013

The performance of gas transportation activity was disappointing in the first quarter of 2013. A number of unplanned shut-downs of petrochemical plants in the Middle East replaced long haul trades with short – haul trades for the commodities that the company carries and with loss of ton miles as a result. The total export volumes of petrochemicals out of the Middle East in 1Q were down; about 40 per cent compared with 4Q 2012 and about 55 per cent compared with 1Q 2012.  A slower than anticipated growth in demand especially in Europe and China also had an impact on core business.

A highlight and a great relief was the long – awaited release of Norgas Cathinka from its 194 days detention in Indonesia and with a total loss of EBITDA (revenues and cost) of about USD5mill.

In line with strategy for visualising values and focus on core business Gas Transportation, I.M. Skaugen has re-structured joint venture companies with GATX. I.M. Skaugen now has direct ownership of five of these vessels. The five vessels owned by GATX will continue to trade in the Norgas pool. From an operational point of view this will have no real change for the business of Norgas. As the company has acquired control of part of the joint ventures, the previously held interests are re-measured to fair value and a gain of USD 28.3 mill is recognized in the income statement. With these assets and debt consolidated, the impact on the equity ratio will be immaterial.

I.M. Skaugen’s strive for reduction of headcount of shore based staff and focusing resources around core business ‘Gas transportation’ is paying-off and I.M. Skaugen will reach the target set in 2010 of a 50% reduction in head-count during the course of this year.

All the projects initiated by the board to address the improvement of the equity ratio remain in full force and I.M. Skaugen will continue to see the effect of these going forward in 2013.

The remaining IMSK10 bond was settled as planned and lowered the overall debt position and thus had a positive impact on the equity ratio. I.M. Skaugen has no refinancing needs until 2015, no material capital commitments and remain fully financed.

The result on EBITDA basis in Norgas Carriers segment for 1Q13 was USD4.2 mill compared with USD6.1 mill for the same period in 2012 (based on IMS’s ownership).

Norgas’ total volumes transported were up 8% compared with 4Q 2012 but down 17% compared with 1Q 2012.

The average time charter equivalent rate for the first quarter is above five – year average and the weakness through the quarter is a reflection of more idle time for their ships.

In January I.M. Skaugen did second LNG cargo on one of the Multigas ships, proving not only the technology itself but also small – scale LNG concept. I.M. Skaugen’s LNG segment at SPT delivered in 1Q13 a complete solution, equipment and services, for ship to ship transfers of LNG to a global customer.

NORGAS CATHINKA

On April 8th 2013 in the late evening  vessel “Norgas Cathinka” and its crew and cargo arrived safely at the entrance of Singapore port; having been released from its more than 6 months detention in Indonesia.  All crews, save for two, were released and allowed to leave the country.  Two of colleagues remain in custody in Indonesia awaiting completion of a court trial with regards to their role in the events leading to the collision and the loss of lives. The “Norgas Cathinka” was on departure escorted to an agreed point by police launch to ensure she was safe for a simultaneous release of an “out of court settlement” payment that I.M. Skaugen and insurance providers have made to the owners of the ferry “Bahuga Jaya”.

This situation came from an unfortunate accident in the Sunda Strait in Indonesian waters on September 26th 2012 involving ship “Norgas Cathinka” in a collision. The incident leading to the tragic loss of life for 6 passengers and 1 crew member and reportedly the missing of 2 passengers, on the Indonesian flag ferry called “Bahuga Jaya”, which according to experts probably lost its stability due to the impact. I.M. Skaugen has been advised that the stability was probably lost due to the shifting of the cargo (trucks) on board.

NON-STRATEGIC JOINT VENTURES AND ASSOCIATES

I.M. Skaugen non-strategic investments, including SPT, delivered an EBIT of USD0.2 mill which was a significant improvement compared to a negative EBIT of USD2.1 mill in 1Q 2012 .

I.M. Skaugen is in the process of monetizing the investment in the manufacturing company Shenghui Gas and Chemical Systems. The company is reasonably confident that these shares will be sold in 2013 at a gain compared to book value of the investment.

COMPANY OUTLOOK

I.M. Skaugen remains cautiously optimistic about the outlook for the remainder of the year and that the growth in world economy will pick up again.  I.M. Skaugen foresees that the export of petrochemicals from the Middle East will come back to more normal levels and thus expect an improvement from the 1Q for gas transportation business.

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LNG World News Staff, April 25, 2013; Image: I.M. Skaugen