Bangkok, Thailand, 28 November 2013 -- Thoresen Thai Agencies Public Company Limited ("TTA") announced net losses of THB 5,080 million and losses per share of THB 5.86 for its 2013 fiscal year that ended on 30 September 2013 ("FY 2013"), compared with net losses of THB 4,494 million and losses per share of THB 6.35 during the same period last year. As with last year's results, significant non-cash extraordinary items totalling THB 4,843 million drove net losses.
The largest of these non-cash items was a THB 3,917 million impairment which was taken against the dry bulk shipping fleet of wholly-owned subsidiary Thoresen Shipping Singapore Pte. ("Thoresen Shipping"), following an exhaustive analysis of expected future freight rates and key operating costs. In addition, a THB 120 million non-cash impairment was taken against TTA's investment in Merton Group (Cyprus) Limited ("Merton") as well as a write down of THB 596 million against goodwill related to TTA's acquisition of Unique Mining Services Public Company Limited ("UMS"). The moves were taken in strict adherence to TTA's conservative financial reporting standards.
Despite the negative results, which were driven primarily by non-cash items, revenues rose 13% year-on-year to THB 18,463 million, as a result of more vessel days at Thoresen Shipping and improved performance at oil and gas services subsidiary, Mermaid Maritime Public Company Limited ("Mermaid"). In addition, equity income rose 94% year-on-year to THB 250 million, primarily as Mermaid's associate company, Asia Offshore Drilling Ltd. ("AOD") launched commercial operations during the year. Mermaid's net profit grew almost five-fold to THB 320 million, as it began to realise the proceeds of several high value contracts. Baconco Co., Ltd. ("Baconco") meanwhile, recorded a record year in fiscal 2013, with net profits up 24% year-on-year to THB 253 million.
The company generated consolidated EBITDA of THB 1,797 million, despite the historically low freight rates in the dry bulk shipping industry and higher SG&A costs associated with initiating Mermaid's full subsea services contracts.
Commented TTA incoming President & CEO Mr. Chalermchai Mahagitsiri, "TTA's 2013 results were most significantly impacted byvery weak freight rates due to the prolonged downturn in the dry bulk shipping industry. This situation forced us to take a substantial impairment against the fleet in order to bring our asset values in line with their fair market value. The significant net losses this year, driven primarily by non-cash items, however mask many of the successes we have achieved over the past 12 months, including a strong turnaround for Mermaid, a record year for Baconco, and sustained cash flow positive performance for Thoresen Shipping, which continues to remain cost competitive despite the challenging environment. The focus over the last two years has been to work on our fundamentals, and in 2014, we enter a new phase in which we begin to capitalise on all of this important groundwork."
Group Transport
A combination of lower trade growth and vessel oversupply adversely affected dry bulk freight rates, as the Baltic Dry Index ("BDI"), the index that tracks global freight rates, averaged 986 points during the year, a 15% year-on-year decline and the lowest average level since 1999. In the July-September quarter, the BDI jumped 45% quarter-on-quarter (and +53% year-on-year) to average 1,292 points. Various business indicators suggest that a gradual recovery has likely begun, as demand growth continues amid lower vessel supply growth.
Thoresen Shipping's Time Charter Equivalent ("TCE") was USD 8,364 per day, which outperformed the Baltic Supramax Index ("BSI"), the index by which Thoresen Shipping benchmarks itself, by 7% on a fleet adjusted basis in FY 2013. The charteredin TCE improved from negative USD 13 per day in the previous year to USD 152 per day in FY 2013.
Thoresen Shipping continued to focus on cost efficiencies. At USD 4,087 per day, its owner's expenses remained significantly lower than the industry average of USD 4,500- 4,600 per day. As a result, Thoresen Shipping still reported a positive EBITDA of THB 337 million in FY 2013.
Group Energy
Operating at the top of its industry cycle, Mermaid's revenues rose 44% to THB 8,243 million, as its subsea division began to realise the proceeds of several significant deals, chief amongst them a five-year diving services contract with Saudi Arabian Oil Company ("Saudi Aramco"). Mermaid's equity income jumped from losses of THB 10 million last year to a positive contribution of THB 124 million this year, as AOD, which is 33.8% owned by Mermaid, launched commercial operations with the deployment of two of its three high-specification jack-up rigs, AOD I and AOD II. AOD III was deployed for its first contract early in the 2014 fiscal year.
While the utilisation of Mermaid's subsea fleet remained roughly steady at 66%, the company's drilling fleet lagged behind, as MTR-1 continued to seek a new assignment following the expiry of an accommodation barge contract in July 2013, while MTR-2 underwent its special periodic survey between November 2012 and April 2013 and came back on-hire in the end of May 2013.
At THB 1,369 million, Mermaid's EBITDA remained largely flat year-on-year, partly due to additional expenses incurred to initiate services on the Saudi Aramco contract and other subsea contracts as well as the lower utilisation of its drilling rig fleet. Mermaid's direct costs rose 60% year-on-year to THB 5,989 million, while SG&A grew by 52% to THB 885 million during the same period.
Group Infrastructure
Group Infrastructure reported mixed results for the fiscal year, with Baconco bringing in record profits and UMS improving only marginally as it continued to struggle with soft coal prices as well as inefficiencies at its recently reopened facility in Samut Sakorn.
UMS reported revenues of THB 1,931 million, a 44% year-on-year decline, as the company halted its aggressive sales of 0-5 mm coal, which had been one of the preconditions for the reopening of its Samut Sakorn plant. UMS' EBITDA margin improved slightly to 1% compared to negative 1% the year before, as the proportion of lowmargin 0-5 mm coal in UMS' total sales volume dropped significantly during the year. EBITDA in fiscal 2013 reversed from a loss of THB 40 million to a profit of THB 14 million, as SG&A costs were reduced in line with lower revenues.
Baconco reported a record year in terms of profitability, despite a 4% drop in revenues, which resulted from lower selling prices of fertiliser. EBITDA climbed 32% from THB 257 million to THB 340 million, as Baconco realised efforts to source lower cost ingredients, in the process boosting gross margins from 10.7% last year to 14.6% in fiscal 2013.
Baconco's warehouse division continued to thrive, with rental revenues more than doubling in fiscal 2013, driven by additional space from the opening of the Baconco 5 warehouse in February.
TTA's investment in Phu My Port operator Baria Serece contributed equity income of THB 24.5 million, down 15% year-on-year due to softer imports of grain and agricultural products.
Outlook
Mr. Chalermchai Mahagitsiri concluded, "We enter fiscal 2014 with improved prospects across our portfolio of businesses. In the dry bulk shipping industry, we have already begun to see gradual signs of a recovery while the impairments we have taken against the fleet have resulted in a significantly lower asset cost base. With the average daily depreciation on Thoresen Shipping's dry bulk vessels being reduced by 48%, there is good reason to believe the company will return to profitability in fiscal 2014. Mermaid continues to operate in a strong environment and should be able to maintain the positive momentum it has established by leveraging its expanded footprint and excellent service record. Baconco continues to seek growth opportunities across both its fertiliser and warehousing businesses and will launch a new granular production unit, which is expected to boost production capacity by 100,000 tonnes in 2014. UMS meanwhile, remains a key focus area for improvement, as we explore ways to regain full use of the Samut Sakorn facility as well as solutions to increase the value of our 0-5 mm coal inventory."