The I.M. Skaugen Group achieved a negative pre-tax result for 2Q 2012 of USD5.1 mill, down from a small profit of USD0.1 mill in 1Q 2012. EBITDA increased to USD6.6 mill for 2Q 2012 compared to USD5.3 mill in 1Q2012.
For 1H 2012 the pre-tax result was a loss of USD5.1 mill, down from a loss of USD4.0 mill in 1H 2011. EBITDA for 1H 2012 was USD11.9 mill down from USD14.1 mill in 1H 2011.
NORGAS ? GAS SEGMENT
The EBITDA result in Norgas Carriers 2Q12 was USD8.5 mill and USD14.6 mill in 1H 2012. 2Q is up 40% compared to USD6.1 mill in 1Q12 and 1H12 is down 8% compared to USD15.8 mill in 1H11 (based on IMS?s ownership).
Due to declining oil and commodity prices and a slowing world economy the markets for petrochemicals and petrochemical gasses have been weakening in the second quarter. The petrochemical shipping segments have also become more challenging and owners have experienced an increase in idle time as a result of the Iranian sanctions that kicked in with full effect from May 1.
However, Norgas performance improved in the second quarter due to increased export from Middle-East clients and positive effects from a successful repositioning of the fleet in first quarter. The volumes transported under? COA contracts was up with 70% from 1Q 2012. The reposition of the fleet opened up for new nominations of voyages West of Suez and with acceptable level of earnings in 2Q 2012.
PETROCHEMICAL GAS SHIPPING MARKET ? LONG TERM FUNDEMENTALS
Transportation of liquefied gases is company?s core business with focus on the petrochemicals market. Of total transported cargo Ethylene is the main product Norgas lifts, accounting for more than 60% of the volume. Butadiene make up approx. 20% of the cargo mix and Propylene, VCM, Crude-C4, among others contributes with the balance.
A key driver for Ethylene demand, Skaugen?s main product, is global GDP growth and Ethylene demand has historically been growing with 1.1-1.3 times GDP growth. Adding to this, regional price differences on ethylene due to variable sourcing availability of feedstock are other positive drivers for the long haul ethylene trade. All factors leading to an acceptable level of average annual growth in ethylene tons transported long haul in the period from 2004-2012.
The current newbuilding activity in the long-haul segment has a growing orderbook and implies a net increase in the fleet of 14% (assuming scrapping at the age of 30). The company thus sees that despite the current slowdown in world economic growth, long-term demand fundamentals are positive with increase in demand outpacing growth in supply.
Norgas has the largest fleet, and below average age, in the long haul ethylene trade (8-22,000 cbm).
SMALL SCALE LNG
The Bahrain LNG tender has now expired and IMS had not at the time of expiry received any information nor advice when an evaluation would be made, nor when or if a decision would be made.
There is political turbulence in the Gulf region, oil prices have dropped and there are thus also fiscal challenges for such projects in the short term picture.
The company continues to monitor the needs for additional energy in the shape of LNG in the region and sees many small scale applications and projects that it will pursue East of Suez.
SPT ? MARINE SERVICES
SPT delivered a negative result of USD 1.6 mill on an EBITDA basis during the second quarter of 2012 (based on IMS?s 50% ownership).
SPT?s global support services continue to mitigate the negative effects from a very weak tanker market for Aframax tonnage and the company is thus able to limit their losses.
The company?s focus to develop and build the core business of ship-to-ship (STS) transfers as an offset to the weak tanker market remains unchanged and a number of expansion opportunities are under evaluation with Panama becoming operational on June 1. I.M. Skaugen?s STS business saw volumes in line with the prior quarter but lower than forecast.
With respect to SPT?s LNG business, I.M. Skaugen is hopeful that a number of tendered projects in the quarter, with a focus on FSRU related operations, will result in additional fixed revenue.
SHENGHUI ? CHINA
The industry manufacturing company Shenghui Gas and Chemical Systems (Shenghui) had EBIT result of RMB22.4 mill in 2Q12 compared to RMB9.6 mill in 1Q12. EBIT result for 1H12 increased to RMB32 mill compared to RMB16.1mill in 1H11. Revenue growth for the first half of 2012 was 36.6% compared to the first half of last year. This growth materialized in EBIT margins of 7.8% compared to 5.4% in 1H11.
CORPORATE ACTIVITIES
IMSK04, one of Skaugen?s bonds, matured on June 6, reducing their bond debt with NOK69.5 mill to a current total bond debt of NOK797 mill. Cost of refinancing the bond portfolio resulted in a loss of USD1.2mill in the quarter. Upcoming maturity of IMSK09 with NOK2.5 mill outstanding is September 17. IMSK10 with NOK59.5 mill outstanding is March 15 2013. For both maturities the company has liquidity reserves set aside.
COMPANY OUTLOOK
The short term outlook for the company?s core segment gas is challenging. The current financial turmoil in the Euro zone is affecting the world outlook and the Iran sanctions are affecting the spot market rates for ethylene.
I.M. Skaugen?s expectations for their contractual volumes have though risen from a low level in 1Q to a more normal level and are looking positive going into the third quarter.
In the longer term I.M. Skaugen sees attractive fundamentals in long haul petrochemical shipping and stable growth. Demand should be higher than supply with current fleet growth and I.M. Skaugen should be capitalizing on their recent fleet renewal.
The prospects of development of Small Scale LNG remain positive, and IMS has the largest fleet available of such vessels.
The company has no capital commitments and the company remains fully financed. This is particularly important as the available debt and risk capital is becoming very expensive and hard to come by for many in the current financial markets.
LNG World News Staff, July 18, 2012; Image: I.M. Skaugen
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Source: http://www.lngworldnews.com/norway-i-m-skaugen-releases-1h-results/
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