d1197949_6-k.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO
RULE 13A-16 OR 15D-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of May 2011

Commission File Number:  000-49650

 
TORM A/S
 
(Translation of registrant's name into English)

Tuborg Havnevej 18
DK-2900 Hellerup
Denmark
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F [x]       Form 40-F [  ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [  ].

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [  ].

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant's "home country"), or under the rules of the home country exchange on which the registrant's securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant's security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 
 

 

INFORMATION CONTAINED IN THIS FORM 6-K REPORT

Set forth herein as Exhibit 99.1 is a copy of the interim report for the first quarter of 2011 issued by TORM A/S to The Copenhagen Stock Exchange on May 19, 2011.




 
 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
TORM A/S
(registrant)
 
Dated: May 31, 2011
 
By:
/s/ Jacob Meldgaard
Name: Jacob Meldgaard
Title:   Chief Executive Officer





 
 

 

Exhibit 99.1





 

 
Interim report Q1 2011
 

 
"We have generally experienced a stronger market during the past couple of months, while product tanker rates were low in the beginning of the first quarter," says CEO Jacob Meldgaard. As expected, TORM recognised a loss before tax of USD 45 million in the first quarter of 2011 and maintains the forecast for 2011.
 
EBITDA excl. sale of vessels for the first quarter of 2011 was USD 10 million, compared to USD 37 million in the first quarter of 2010. The result before tax for the first quarter of 2011 was a loss of USD 45 million, compared to a profit of USD 3 million for the same period in 2010. The result for the first quarter of 2011 was impacted by a loss of USD 6 million from sale of vessels, compared to a profit of USD 18 million in the first quarter of 2010. The result for the first quarter of 2011 was as expected.
 
Product tanker freight rates in the first quarter of 2011 were generally weak and lower than in the same period last year. Freight rates in the East were impacted by weak demand and competition from vessels in the crude oil market. The transatlantic market for MR tonnage was positive from mid-February with stronger rates. This was due to the effects of the cold winter in the Northern hemisphere, a number of arbitrage opportunities due to the unrest in North Africa and high levels of demand in South America.
 
Bulk freight rates were generally under pressure throughout the first quarter, primarily due to the increase in the number of newbuilding deliveries. The number of earning days increased in the first quarter in order to service cargo contracts.
 
TORM has identified additional cost savings of USD 10 million annually, with expected full effect from 2012 onwards. The savings will come from a range of procurement initiatives and by further optimising crew composition. In addition, the Company is evaluating its flag strategy in order to be aligned with the Danish maritime cluster.
 
TORM has in the second quarter of 2011 agreed to defer two MR newbuildings both with delivery in 2012. They are now expected to be delivered in the first quarter of 2013 and the second quarter of 2014, respectively.
 
Net interest-bearing debt was down to USD 1,853 million in the first quarter of 2011, from USD 1,875 million as at 31 December 2010.
 
TORM had undrawn credit facilities and cash of approx. USD 346 million at the end of the first quarter of 2011. Outstanding CAPEX relating to the order book amounted to USD 195 million.
 
Equity amounted to USD 1,075 million as at 31 March 2011, equivalent to USD 15.5 per share (DKK 81.1 per share), excluding treasury shares, giving TORM an equity ratio of 33%.
 
As at 31 March 2011, TORM had covered 15% of the remaining earning days in 2011 in the Tanker Division at USD/day 16,345 and 60% of the remaining earning days in the Bulk Division at USD/day 16,492.
 
TORM maintains the forecast of a loss before tax of USD 100-125 million in 2011. As 25,075 earning days for 2011 are unfixed as at 31 March 2011, a change in freight rates of USD/day 1,000 will impact the profit before tax by USD 25 million.
 
 
 
Teleconference
 
 
 
Contact TORM A/S
TORM will be holding a teleconference for financial analysts and investors at 15:00 Danish time today. Please call 10 minutes before the conference is due to start on +45 3271 4607 (from Europe) or +1 887 491 0064 (from the USA). The presentation documents can be downloaded from TORM's website.
 
Tuborg Havnevej 18
DK-2900 Hellerup, Denmark
Tel.: +45 39 17 92 00 / Fax: +45 39 17 93 93
www.torm.com
 
Jacob Meldgaard, CEO, tel.: +45 39 17 92 00
Roland M. Andersen, CFO, tel.: +45 39 17 92 00
 
 

 
Announcement No. 7 / 19 May 2011                      Interim report Q1 2011                         Page 1 of 18

                       
 
 
 

 
Key figures
 
                   
Million USD
    Q1 2011       Q1 2010       2010  
Income statement
                       
Revenue
    270.4       205.5       856.1  
Time charter equivalent earnings (TCE)
    147.5       147.5       560.6  
Gross profit
    27.8       55.9       179.8  
EBITDA
    4.1       55.3       96.8  
Operating profit (EBIT)
    -32.5       20.3       -79.6  
Profit/(loss) before tax
    -44.9       2.6       -136.2  
Net profit
    -45.3       2.3       -135.3  
Balance sheet
                       
Total assets
    3,259.8       3,225.7       3,286.1  
Equity
    1,075.0       1,247.7       1,115.3  
Total liabilities
    2,184.8       1,978.0       2,170.8  
Invested capital
    2,925.1       2,866.3       2,987.0  
Net interest bearing debt
    1,853.2       1,621.6       1,874.7  
Cash flow
                       
From operating activities
    -11.1       20.9       -0.6  
From investing activities
    33.1       41.1       -186.9  
  Thereof investment in tangible fixed assets
    -68.0       -23.6       -253.9  
From financing activities
    0.4       2.5       185.6  
Total net cash flow
    22.4       64.5       -1.9  
Key financial figures
                       
Gross margins:
                       
  TCE
    54.5 %     71.8 %     65.5 %
  Gross profit
    10.3 %     27.2 %     21.0 %
  EBITDA
    1.5 %     26.9 %     11.3 %
  Operating profit
    -12.0 %     9.9 %     -9.3 %
Return on Equity (RoE) (p.a.)*)
    -15.0 %     -2.9 %     -11.4 %
Return on Invested Capital (RoIC) (p.a.)**)
    -3.8 %     0.9 %     -2.7 %
Equity ratio
    33.0 %     38.7 %     33.9 %
Exchange rate DKK/USD, end of period
    5.25       5.52       5.61  
Exchange rate DKK/USD, average
    5.46       5.38       5.62  
Share related key figures                              
                       
Earnings per share, EPS                                                           USD
    -0.7       0.0       -2.0  
Diluted earnings per share, EPS                                              USD
    -0.7       0.2       -2.0  
Cash flow per share, CFPS                                                       USD
    -0.2       0.3       0.0  
Share price, end of period (per share of DKK 5 each)         DKK
    30.0       57.0       39.7  
Number of shares, end of period                                             Mill.
    72.8       72.8       72.8  
Number of shares (excl. treasury shares), average               Mill.
    69.3       69.2       69.3  
                         
 
*)  Gains/losses from sale of vessels and the mark-to-market adjustments of 'Other financial assets' are not annualised when calculating the return on equity.
   
**)  Gains/losses from sale of vessels are not annualised when calculating the Return on Invested Capital.
 
 

  
Announcement No. 7 / 19 May 2011                      Interim report Q1 2011                         Page 2 of 18

 
 
 
 

 
Results

The result before tax for the first quarter of 2011 was a loss of USD 45 million, compared to a profit of USD 3 million for the same period in 2010. The result before depreciation (EBITDA) for the period was USD 4 million, compared to USD 55 million in the first quarter of 2010.
 
The Tanker Division reported a primary operating loss of USD 32 million in the first quarter of 2011, as against a result of USD 2 million in the same period last year. The Tanker Division's result for the first quarter of 2011 was impacted by a loss of USD 5 million from sale of vessels.
 
The Bulk Division's primary operating result in the first quarter of 2011 was USD 2 million, compared to USD 22 million in the first quarter of 2010. The result for the first quarter of 2010 includes profits of USD 18 million from sale of vessels.
 
Other (not allocated) activities include a loss on investments in joint ventures of USD 2 million, financial costs of USD 12 million and tax of USD 0 million.
 
TORM has identified additional cost savings of USD 10 million annually, with expected full effect from 2012 onwards. The savings will come from a range of procurement initiatives and by further optimising crew composition. In addition, the Company is evaluating its flag strategy in order to be aligned with the Danish maritime cluster.
 
         
Million USD
Q1 2011
   
Tanker
   
Bulk
   
Not
       
   
Division
   
Division
   
allocated
   
Total
 
                         
Revenue
    219.2       51.2       0.0       270.4  
Port expenses, bunkers and commissions
    -108.5       -21.3       0.0       -129.8  
Freight and bunkers derivatives
    -0.3       7.2       0.0       6.9  
Time charter equivalent earnings
    110.4       37.1       0.0       147.5  
Charter hire
    -45.7       -30.9       0.0       -76.6  
Operating expenses
    -42.2       -0.9       0.0       -43.1  
Gross Profit
    22.5       5.3       0.0       27.8  
Profit/(loss) from sale of vessels
    -5.4       -0.3       0.0       -5.7  
Administrative expenses
    -14.6       -2.5       0.0       -17.1  
Other Operating income
    0.2       0.0       0.0       0.2  
Share of results of jointly controlled entities
    0.9       0.0       -2.0       -1.1  
EBITDA
    3.6       2.5       -2.0       4.1  
Impairment losses on jointly controlled entities
    0.0       0.0       0.0       0.0  
Depreciation and impairment losses
    -35.9       -0.7       0.0       -36.6  
Operating profit (EBIT)
    -32.3       1.8       -2.0       -32.5  
Financial items, net
    -       -       -12.4       -12.4  
Profit/(Loss) before tax
    -       -       -14.4       -44.9  
Tax
    -       -       -0.4       -0.4  
Net profit/(loss)
    -       -       -14.8       -45.3  
                                 
 
The activity in TORM's 50% ownership of FR8 Holding Pte. Ltd. is included in "Not-allocated".
 

  
Announcement No. 7 / 19 May 2011                      Interim report Q1 2011                         Page 3 of 18

 
 
 

 
 
Outlook and coverage
 
TORM maintains the forecast of a loss before tax of USD 100-125 million in 2011.
 
As at 31 March 2011, TORM had covered 15% of the remaining earning days in 2011 in the Tanker Division at USD/day 16,345 and 60% of the remaining earning days in the Bulk Division at USD/day 16,492.
 
The table below shows the figures for 2011 for the period from 1 April to 31 December. The figures for 2012 and 2013 are for the full year.
 
                                     
   
2011
   
2012
   
2013
   
2011
   
2012
   
2013
 
   
Owned days
                   
LR2
    3,509       4,732       4,719                    
LR1
    1,913       2,550       2,543                    
MR
    10,328       14,868       15,250                    
SR
    2,961       4,004       3,993                    
Tanker Division
    18,711       26,154       26,505                    
Panamax
    546       769       1,423                    
Handymax
    -       -       -                    
Bulk Division
    546       769       1,423                    
Total
    19,257       26,923       27,928                    
                                           
   
T/C in days
   
T/C in costs (USD/day)
 
LR2
    -       -       -       -       -       -  
LR1
    4,548       4,819       2,978       21,637       21,909       23,882  
MR
    3,206       3,820       3,575       16,053       15,626       15,605  
SR
    -       -       -       -       -       -  
Tanker Division
    7,754       8,639       6,553       19,328       19,131       19,366  
Panamax
    4,309       4,342       4,148       16,303       15,894       16,200  
Handymax
    1,474       697       363       16,415       16,855       15,995  
Bulk Division
    5,783       5,039       4,511       16,331       16,027       16,184  
Total
    13,537       13,678       11,064       18,048       17,987       18,069  
                                                 
   
Total physical days
   
Covered days
 
LR2
    3,509       4,732       4,719       511       130       -  
LR1
    6,461       7,369       5,521       706       532       365  
MR
    13,534       18,688       18,825       1,279       404       -  
SR
    2,961       4,004       3,993       1,446       167       -  
Tanker Division
    26,465       34,793       33,058       3,942       1,234       365  
Panamax
    4,855       5,111       5,571       2,598       430       -  
Handymax
    1,474       697       363       1,180       606       606  
Bulk Division
    6,329       5,808       5,934       3,777       1,036       606  
Total
    32,794       40,601       38,992       7,719       2,270       971  
                                                 
   
Covered %
 
Coverage rates (USD/day)
 
LR2
    15 %     3 %     0 %     22,969       22,962       -  
LR1
    11 %     7 %     7 %     16,788       17,476       15,666  
MR
    9 %     2 %     0 %     17,385       15,403       -  
SR
    49 %     4 %     0 %     12,866       12,263       -  
Tanker Division
    15 %     4 %     1 %     16,345       16,671       15,666  
Panamax
    54 %     8 %     0 %     17,533       21,322       -  
Handymax
    80 %     87 %     167 %     14,200       17,000       17,000  
Bulk Division
    60 %     18 %     10 %     16,492       18,794       17,000  
Total
    24 %     6 %     2 %     16,417       17,640       16,499  
                                                 
 
Fair value of freight rate contracts that are mark-to-market in the income statement (USD million):
Contracts not included above
0.0
Contracts included above
1.4
 
Note
 
Actual number of days can vary from projected number of days primarily due to vessel sales and delays of vessel deliveries. T/C in costs do not include potential extra payments from profit split arrangements.
 
 

  
Announcement No. 7 / 19 May 2011                      Interim report Q1 2011                         Page 4 of 18

 
 

 
 
Tanker Division
 
The freight rates were low in the first quarter of 2011, particularly in the Eastern market, where mainly the larger LR vessels operate. The East remained weak as the demand remained low, due to low demand for naphtha, which became even more pronounced after the earthquake in Japan, and limited arbitrage opportunities. Furthermore, the Eastern market was affected by the weak market for transport of crude oil, which implied that a number of newbuildings in this segment made their virgin voyage in the product tanker segment.
 
In the Western market, rates also remained low in the first part of the quarter, but increased to higher levels from mid-February. This was due to a number of circumstances: the effect of the cold winter, rising demand in South America, an increasing number of arbitrage opportunities due to the unrest in North Africa and the high oil price. Especially the MR segment, which dominates the Western market, was positively impacted.
 
The positive trend in the Western market, and the MR segment in particular, has persisted in the second quarter and has had some positive effects on the Eastern market.
 
The global fleet grew by approx. 2% in the first quarter of 2011. The significant slippage in newbuilding deliveries experienced in 2010 continued in the first quarter of 2011 and was around 60%.
 
The level of floating storage remains at a low level due to a forward curve in backwardation for most refined products.
 
 
Tanker Division
    Q1 10       Q2 10       Q3 10       Q4 10       Q1 11    
Change
Q1 10
- Q1 11
   
12 month 
avg.
 
LR2 (Aframax, 90-110,000 DWT)
                                                   
Available earning days
    1,163       1,122       1,098       1,193       1,157       -1 %      
Spot rates (USD/day)1)
    19,270       17,185       19,848       17,061       10,890       -43 %      
TCE (USD/day)2)
    17,375       15,583       17,278       15,123       13,524       -22 %     15,377  
Operating days
    1,080       1,092       1,104       1,196       1,170       8 %        
Operating expenses (USD/day)3)
    6,908       6,301       6,571       6,614       7,698       11 %     6,796  
LR1 (Panamax 75-85,000 DWT)
                                                       
Available earning days
    1,748       1,777       2,094       2,195       2,085       19 %        
Spot rates (USD/day)1)
    16,273       14,903       14,662       10,750       14,435       -11 %        
TCE (USD/day)2)
    16,686       15,509       14,628       12,172       14,654       -12 %     14,241  
Operating days
    810       749       714       644       630       -22 %        
Operating expenses (USD/day)3)
    6,454       5,420       5,729       5,650       6,577       2 %     5,844  
MR (45,000 DWT)
                                                       
Available earning days
    3,755       3,916       4,212       4,053       4,263       14 %        
Spot rates (USD/day)1)
    14,179       12,567       13,753       12,524       12,760       -10 %        
TCE (USD/day)2)
    14,700       12,363       14,280       11,993       12,768       -13 %     12,851  
Operating days
    2,790       2,951       3,128       3,281       3,412       22 %        
Operating expenses (USD/day)3)
    6,883       6,053       6,388       6,261       6,628       -4 %     6,333  
SR (35,000 DWT)
                                                       
Available earning days
    1,002       979       951       1,007       969       -3 %        
Spot rates (USD/day)1)
    12,954       13,673       9,478       9,692       10,410       -20 %        
TCE (USD/day)2)
    18,034       16,099       13,851       12,090       11,319       -37 %     13,340  
Operating days
    990       1,001       1,012       1,012       990       0 %        
Operating expenses (USD/day)3)
    6,041       4,821       6,274       6,075       6,517       8 %     5,922  
                                                         
 
1) Spot rates = Time Charter Equivalent Earnings for all charters with less than 6 months duration = Gross freight income less bunker, broker
    commissions and port expenses.
2) TCE = Time Charter Equivalent Earnings = Gross freight income less bunker, commissions and port expenses.
3) Operating expenses are related to owned vessels.



 
Announcement No. 7 / 19 May 2011                      Interim report Q1 2011                         Page 5 of 18

 
 

 
Bulk Division

The bulk freight rates were under pressure throughout the first quarter, primarily due to the increased tonnage available from continuing high influx of newbuildings, reduced waiting times in ports and weaker demand. Demand was negatively affected by the earthquake in Japan and floods in Australia, but positively affected by continuing growth in China's imports of iron ore, which were approx. 10% higher in the first quarter of 2011 than in the fourth quarter of 2010 and up 14% on the first quarter of 2010.
 
The global bulk fleet grew by approx. 4% in the first quarter of 2011.
 
The freight rates for the Capesize segment, but also to some extent for the Panamax segment, were weak, while smaller vessels such as Supramax and Handymax were at a stable level. The pressure on Capesize rates is mainly due to the increased influx of tonnage, as the order book is considerably larger in the Capesize segment. Some cargoes in the Panamax segment were taken by Capesize vessels, which to some extent affected the Panamax rates.
 
As part of TORM's new dry bulk strategy, whereby the Company will become an integrated freight service provider primarily to industrial clients, the number of earning days has increased in the first quarter due to signing of a number of short and medium-term time charter contracts. TORM has sought to cover most of the increased tonnage, so that the net exposure to the dry bulk market only increased to a limited extent.
 
 
Bulk Division
    Q1 10       Q2 10       Q3 10       Q4 10       Q1 11    
Change
   
12 month 
avg.
 
    Q1 10  
    - Q1 11  
                                                       
Panamax (60-80,000 DWT)
                                                     
Available earning days
    1,119       1,060       1,189       1,193       1,524       36 %      
TCE (USD/day)1)
    18,298       18,611       20,418       19,294       15,851       -13 %     18,544  
Operating days
    315       182       184       184       180       -43 %        
Operating expenses (USD/day)2)
    5,187       4,603       4,297       3,505       4,836       -7 %     4,310  
Handymax (40-55,000 DWT)
                                                       
Available earning days
    -       -       -       30       566                  
TCE (USD/day)1)
    -       -       -       11,919       11,544                  
Operating days
    -       -       -       -       -                  
Operating expenses (USD/day)2)
    -       -       -       -       -                  
 
1) TCE = Time Charter Equivalent Earnings = Gross freight income less bunker, commissions and port expenses.
2) Operating expenses are related to owned vessels.

 

Announcement No. 7 / 19 May 2011                      Interim report Q1 2011                         Page 6 of 18

 
 

 
 
Fleet development

TORM's current fleet and planned future changes are shown in the table below. In the first quarter of 2011, TORM took delivery of two new product tankers, TORM Agnes and TORM Amalie, and has as previously announced delivered two newbuild Kamsarmax bulk vessels and an older product tanker to new owners. At the end of the first quarter, TORM thus owned 70.5 product tankers and two bulk vessels. In addition, TORM had chartered-in 27 product tankers and 13 dry bulk vessels on longer time charter contracts (minimum one year's duration) and 21 dry bulk vessels on shorter time charter contracts (less than one year's duration). Another 26 product tankers were either in pools or under commercial management with TORM.
 
TORM did not order any vessels in the first quarter of 2011. Thus the order book was four MR vessels and two Kamsarmaxes at the end of the first quarter. Outstanding capex relating to the order book amounted to USD 195 million.
 
TORM has in the second quarter of 2011 agreed to defer two MR newbuildings both with delivery in 2012. They are now expected to be delivered in the first quarter of 2013 and the second quarter of 2014, respectively. The table below is as per 31 March 2011 and does not reflect the deferral of the two MR newbuildings.

 
   
Current fleet
   
Newbuildings and TC-in deliveries with a period >= 12 months
 
      Q4 2010    
Changes
      Q1 2011       Q2 2011       Q3 2011       Q4 2011       2012       2013       2014  
                                                                       
Owned vessels
                                                                     
LR2
    13.0       -       13.0                                                  
LR1
    7.5       -       7.5                                                  
MR
    38.0       1.0       39.0                       1.0       3.0       -       -  
SR
    11.0       -       11.0                                                  
Tanker Division
    69.5       1.0       70.5       -       -       1.0       3.0       -       -  
Panamax
    2.0       -       2.0                               1.0       1.0          
Handymax
    -       -       -                                                  
Bulk Division
    2.0       -       2.0       -       -       -       1.0       1.0       -  
Total
    71.5       1.0       72.5       -       -       1.0       4.0       1.0       -  
                                                                         
TC-in vessels with contract period >= 12 months
                                                         
LR2
    -       -       -                                                  
LR1
    16.0       -       16.0       1.0                                          
MR
    9.0       2.0       11.0       1.0                                          
SR
    -       -       -                                                  
Tanker Division
    25.0       2.0       27.0       2.0       -       -       -       -       -  
Panamax
    12.0       (1.0 )     11.0       1.0       1.0               2.0       1.0       2.0  
Handymax
    1.0       1.0       2.0                                                  
Bulk Division
    13.0       -       13.0       1.0       1.0       -       2.0       1.0       2.0  
Total
    38.0       2.0       40.0       3.0       1.0       -       2.0       1.0       2.0  
                                                                         
T/C-in vessels with contract period < 12 months
                                                                 
LR2
                                                                       
LR1
                                                                       
MR
                                                                       
SR
                                                                       
Tanker Division
    -       -       -                                                  
Panamax
    1.0       10.0       11.0                                                  
Handymax
    2.0       8.0       10.0                                                  
Bulk Division
    3.0       18.0       21.0                                                  
Total
    3.0       18.0       21.0                                                  
                                                                         
Pools/Commercial managment
    25.0       1.0       26.0                                                  
                                                                         
Total fleet
    137.5               159.5                                                  
                                                                         
 
Note:
The contract duration is defined based on the contractual minimum period and does not include optional periods.
There is not contracted any newbuildings or T/C-in vessels with delivery after 2014.
 

  
Announcement No. 7 / 19 May 2011                      Interim report Q1 2011                         Page 7 of 18

 
 
 
 
Notes on the financial reporting
 
Accounting policies
 
 
The interim report for the first quarter of 2011 is presented in accordance with IAS 34 "Interim Financial Reporting" as adopted by the EU and additional Danish disclosure requirements for interim reports of listed companies. Except for the instances mentioned below, the interim report has been prepared using the accounting policies as for the Annual Report for 2010. The accounting policies are described in more detail in the Annual Report for 2010. As from 1 January 2011, TORM has implemented the following new or amended standards and interpretations: Amendment to IAS 24 "Related Party Disclosures", amendment to IAS 32 "Financial Instruments: Presentation: Classification of Rights Issues", smaller changes from Improvements to IFRS May 2010, amendment to IFRIC 14 "Prepayments of a Minimum Funding Requirement" and IFRIC 19 "Extinguishing Financial Liabilities with Equity Instruments". The new or amended standards and interpretations have not affected recognition and measurement in TORM's interim report for the first quarter of 2011. The interim report for the first quarter of 2011 is unaudited, in line with the normal practice.
 
Income statement
 
 
The gross profit for the first quarter of 2011 was USD 28 million, compared to USD 56 million for the corresponding period in 2010. Administrative costs in the first quarter of 2011 were USD 17 million, compared to USD 18 million in the first quarter of 2010.
 
The result before depreciation (EBITDA) for the period was USD 4 million, as against USD 55 million for the first quarter of 2010. The EBITDA in the first quarter was impacted by losses of USD 6 million from sale of vessels. The EBITDA for the first quarter of 2010 included profits of USD 18 million from sale of vessels.
 
Depreciation in the first quarter of 2011 was USD 37 million, up USD 2 million on the first quarter of 2010. This increase was due to acquired tonnage.
 
The primary operating result for the first quarter of 2011 was a loss of USD 33 million, compared to a profit of USD 20 million in the same quarter of 2010.
 
The first quarter of 2011 was impacted by mark-to-market non-cash adjustments of USD 8 million in total, USD 6 million in connection with FFA/bunker derivatives and USD 2 million on other financial derivatives.
 
The result after tax was a loss of USD 45 million in the first quarter of 2011, as against a profit of USD 2 million in the first quarter of 2010.
 
Assets
 
 
Total assets were down from USD 3,286 million as at 31 December 2010 to USD 3,260 million as at 31 March 2011. TORM estimates the fleet's total long-term earning potential each quarter based on future discounted cash flows. The estimated value for the fleet as at 31 March 2011 supports the book value.
 
Debt
 
Net interest-bearing debt was down in the first quarter of 2011 to USD 1,853 million from USD 1,875 million as at 31 December 2010.
 
Equity
 
Equity declined in the first quarter of 2011 from USD 1,115 million as at 31 December 2010 to USD 1,075 million, due to the loss during the period. Equity as a percentage of total assets was 33% as at 31 March 2011, compared to 34% as at 31 December 2010.
 
TORM held 3,230,432 treasury shares as at 31 March 2011, equivalent to 4.4% of the Company's share capital. The number of treasury shares held is down 231,148 since 31 December 2010, as shares have been allocated to staff in connection with the incentive scheme for the period 2007-2009.
 
Liquidity
 
TORM had undrawn credit facilities and cash of approx. USD 346 million at the end of the first quarter of 2011. Outstanding CAPEX relating to the order book amounted to USD 195 million.
 
 

  
Announcement No. 7 / 19 May 2011                      Interim report Q1 2011                         Page 8 of 18

 
 
 

 
Post balance sheet events

TORM has in the second quarter of 2011 agreed to defer two MR newbuildings both with delivery in 2012. They are now expected to be delivered in the first quarter of 2013 and the second quarter of 2014, respectively.
 
Financial calendar
 
TORM's half-year report for 2011 will be published on 18 August 2011. TORM's complete financial calendar can be found at www.torm.com/IR.
 
 
About TORM
 
TORM is one of the world's leading carriers of refined oil products as well as a significant player in the dry bulk market. The Company runs a fleet of approximately 140 modern vessels in cooperation with other respected shipping companies sharing TORM's commitment to safety, environmental responsibility and customer service.
 
TORM was founded in 1889. The Company conducts business worldwide and is headquartered in Copenhagen, Denmark. TORM's shares are listed on NASDAQ OMX Copenhagen (ticker: TORM) and on NASDAQ in New York (ticker: TRMD). For further information, please visit www.torm.com.
 
 
Safe Harbor statements as to the future
 
Matters discussed in this release may constitute forward-looking statements. Forward-looking statements reflect our current views with respect to future events and financial performance and may include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and statements other than statements of historical facts. The forward-looking statements in this release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Although TORM believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, TORM cannot guarantee that it will achieve or accomplish these expectations, beliefs or projections.
 
Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward- looking statements include the strength of the world economy and currencies, changes in charter hire rates and vessel values, changes in demand for "tonne miles" of oil carried by oil tankers, the effect of changes in OPEC's petroleum production levels and worldwide oil consumption and storage, changes in demand that may affect attitudes of time charterers to scheduled and unscheduled dry-docking, changes in TORM's operating expenses, including bunker prices, dry-docking and insurance costs, changes in the regulation of shipping operations, including requirements for double hull tankers or actions taken by regulatory authorities, potential liability from pending or future litigation, domestic and international political conditions, potential disruption of shipping routes due to accidents and political events or acts by terrorists.
 
Risks and uncertainties are further described in reports filed by TORM with the US Securities and Exchange Commission, including the TORM Annual Report on Form 20-F and its reports on Form 6-K.
 
Forward-looking statements are based on management's current evaluation, and TORM is only under an obligation to update and change the listed expectations to the extent required by law.
 


  
Announcement No. 7 / 19 May 2011                      Interim report Q1 2011                         Page 9 of 18

 
 
 
 
 
Statement by the Board of Directors and Executive Management
 
The Board and Management have today discussed and adopted this interim report for the period 1 January – 31 March 2011.
 
This interim report is unaudited and was produced in accordance with current accounting requirements for listed Danish companies, including IFRS rules on quantifying and reporting which are assumed to apply to the annual report for 2011.
 
We believe the accounting practices used are reasonable, and that this interim report gives a true and accurate picture of the Group's assets, debt, financial position, results and cash flows.
 
 
Copenhagen, 19 May 2011
 
 
Management
 
Board
Jacob Meldgaard, CEO
 
Roland M. Andersen, CFO
 
Niels Erik Nielsen, Chairman
 
Christian Frigast, Deputy Chairman
 
Peter Abildgaard
 
Kari Millum Gardarnar
 
Rasmus Johannes Hoffmann
 
Jesper Jarlbæk
 
Gabriel Panayotides
 
Angelos Papoulias
 
Nicos Zouvelos
 


  
Announcement No. 7 / 19 May 2011                      Interim report Q1 2011                         Page 10 of 18

 
 

 
Income statement

                   
Million USD
    Q1 2011       Q1 2010       2010  
                         
Revenue
    270.4       205.5       856.1  
Port expenses, bunkers and commissions
    -129.8       -59.9       -298.8  
Freight and bunkers derivatives
    6.9       1.9       3.3  
                         
Time charter equivalent earnings
    147.5       147.5       560.6  
                         
Charter hire
    -76.6       -51.7       -228.6  
Operating expenses
    -43.1       -39.9       -152.2  
                         
Gross profit (Net earnings from shipping activities)
    27.8       55.9       179.8  
                         
Profit from sale of vessels
    -5.7       18.2       1.9  
Administrative expenses
    -17.1       -18.1       -78.2  
Other operating income
    0.2       1.7       4.8  
Share of results of jointly controlled entities
    -1.1       -2.4       -11.5  
                         
EBITDA
    4.1       55.3       96.8  
                         
Impairment losses on jointly controlled entities
    0.0       0.0       -35.0  
Depreciation and impairment losses
    -36.6       -35.0       -141.4  
                         
Operating profit (EBIT)
    -32.5       20.3       -79.6  
                         
Financial items
    -12.4       -17.7       -56.6  
                         
Profit before tax
    -44.9       2.6       -136.2  
                         
Tax
    -0.4       -0.3       1.0  
                         
Net profit/(loss) for the period
    -45.3       2.3       -135.2  
                         
                         
Earnings per share, EPS
                       
Earnings per share, EPS (USD)
    -0.7       0.0       -2.0  
Earnings per share, EPS (DKK) *)
    3.6       0.2       -11.0  
                         
 
*) The key figures have been translated from USD to DKK using the average USD/DKK exchange change rate for the period in question.


 
Announcement No. 7 / 19 May 2011                      Interim report Q1 2011                         Page 11 of 18

 
 
 
 
 
Statement of comprehensive income


                   
Million USD
    Q1 2011       Q1 2010       2010  
                         
Net profit/(loss) for the period
    -45.3       2.3       -135.2  
                         
Other comprehensive income:
                       
                         
Exchange rate adjustment arising on translation
                       
   of entities using a measurement currency different
                       
   from USD
    0.0       0.0       0.0  
                         
Fair value adjustment on hedging instruments
    3.3       -4.3       -4.9  
                         
Value adjustment on hedging instruments transferred
                       
   to income statement
    0.9       1.6       6.3  
                         
Value adjustment on hedging instruments transferred
                       
   to assets
    0.0       0.0       0.0  
                         
Fair value adjustment on available for sale investments
    0.2       -0.2       -0.2  
                         
Transfer to income statement on sale of available for sale
                       
   investments
    0.0       0.0       0.0  
                         
Other comprehensive income after tax
    4.4       -2.9       1.2  
                         
Total comprehensive income
    -40.9       -0.6       -134.0  
                         


  
Announcement No. 7 / 19 May 2011                      Interim report Q1 2011                         Page 12 of 18

 
 
 

 
Income statement per quarter
                               
Million USD
    Q1 10       Q2 10       Q3 10       Q4 10     Q1 11  
                                       
Revenue
    205.5       201.3       225.7       223.6     270.4  
Port expenses, bunkers and commissions
    -59.9       -70.6       -77.4       -90.9     -129.8  
Freight and bunkers derivatives
    1.9       -0.5       0.9       1.0     6.9  
                                       
Time charter equivalent earnings
    147.5       130.2       149.2       133.7     147.5  
                                       
Charter hire
    -51.7       -54.4       -61.3       -61.2     -76.6  
Operating expenses
    -39.9       -34.7       -38.6       -39.0     -43.1  
                                       
Gross profit (Net earnings from shipping activities)
    55.9       41.1       49.3       33.5     27.8  
                                       
Profit from sale of vessels
    18.2       0.0       0.0       -16.3     -5.7  
Administrative expenses
    -18.1       -17.5       -24.5       -18.1     -17.1  
Other operating income
    1.7       1.3       0.9       0.9     0.2  
Share of results of jointly controlled entities
    -2.4       -1.3       -3.1       -4.7     -1.1  
                                       
EBITDA
    55.3       23.6       22.6       -4.7     4.1  
                                       
Impairment losses on jointly controlled entities
    0.0       0.0       0.0       -35.0     0.0  
Depreciation and impairment losses
    -35.0       -34.4       -35.1       -36.9     -36.6  
                                       
Operating profit (EBIT)
    20.3       -10.8       -12.5       -76.6     -32.5  
                                       
Financial items
    -17.7       -13.6       -14.2       -11.1     -12.4  
                                       
Profit before tax
    2.6       -24.4       -26.7       -87.7     -44.9  
                                       
Tax
    -0.3       0.3       0.2       0.8     -0.4  
                                       
Net profit/(loss) for the period
    2.3       -24.1       -26.5       -86.9     -45.3  
                                       
                                       
Earnings per share, EPS
                                     
Earnings per share, EPS (USD)
    0.0       -0.3       -0.4       -1.3     -0.7  


  
Announcement No. 7 / 19 May 2011                      Interim report Q1 2011                  Page 13 of 18

 
 

 
Assets
 
                   
Million USD
 
31 March
   
31 March
   
31 December
 
   
2011
   
2010
   
2010
 
                   
NON-CURRENT ASSETS
                 
                   
Intangible assets
                 
Goodwill
    89.2       89.2       89.2  
Other intangible assets
    2.0       2.2       2.1  
Total intangible assets
    91.2       91.4       91.3  
                         
Tangible fixed assets
                       
Land and buildings
    3.6       3.7       3.6  
Vessels and capitalized dry-docking
    2,605.1       2,358.9       2,560.1  
Prepayments on vessels
    108.0       295.0       227.1  
Other plant and operating equipment
    8.7       9.9       9.5  
Total tangible fixed assets
    2,725.4       2,667.5       2,800.3  
                         
                         
Financial assets
                       
Investment in jointly controlled entities
    71.2       120.6       72.9  
Loans to jointly controlled entities
    9.8       37.7       10.2  
Other investments
    3.1       3.0       3.0  
Other financial assets
    6.0       6.0       6.0  
Total financial assets
    90.1       167.3       92.1  
                         
TOTAL NON-CURRENT ASSETS
    2,906.7       2,926.2       2,983.7  
                         
                         
CURRENT ASSETS
                       
                         
Bunkers
    52.7       26.5       41.1  
Freight receivables, etc.
    108.4       56.8       108.2  
Other receivables
    22.6       13.0       12.7  
Other financial assets
    0.0       0.0       0.0  
Prepayments
    27.0       16.9       20.4  
Cash and cash equivalents
    142.4       186.3       120.0  
TOTAL CURRENT ASSETS
    353.1       299.5       302.4  
                         
TOTAL ASSETS
    3,259.8       3,225.7       3,286.1  
 

  
Announcement No. 7 / 19 May 2011                      Interim report Q1 2011                   Page 14 of 18

 
 

 
Equity and liabilities

                   
Million USD
 
31 March
   
31 March
   
31 December
 
   
2011
   
2010
   
2010
 
                   
EQUITY
                 
                   
Common shares
    61.1       61.1       61.1  
Treasury shares
    -17.3       -17.9       -17.9  
Revaluation reserves
    -2.3       -2.4       -2.5  
Retained profit
    1,027.0       1,208.8       1,072.3  
Proposed dividends
    0.0       0.0       0.0  
Hedging reserves
    2.4       -6.0       -1.8  
Translation reserves
    4.1       4.1       4.1  
TOTAL EQUITY
    1,075.0       1,247.7       1,115.3  
                         
LIABILITIES
                       
                         
Non-current liabilities
                       
Deferred tax liability
    54.2       54.8       54.3  
Mortgage debt and bank loans
    1,750.9       1,631.3       1,750.4  
Finance lease liabilities
    30.7       31.6       31.0  
Acquired liabilities related to options on vessels
    0.0       1.5       0.0  
TOTAL NON-CURRENT LIABILITIES
    1,835.8       1,719.2       1,835.7  
                         
Current liabilities
                       
Mortgage debt and bank loans
    212.0       143.2       211.3  
Finance lease liabilities
    2.0       1.8       2.0  
Trade payables
    58.0       27.3       48.0  
Current tax liabilities
    1.1       3.2       1.7  
Other liabilities
    74.5       80.1       70.2  
Acquired liabilities related to options on vessels
    1.4       1.8       1.9  
Acquired time charter contracts
    0.0       1.4       0.0  
Deferred income
    0.0       0.0       0.0  
TOTAL CURRENT LIABILITIES
    349.0       258.8       335.1  
                         
TOTAL LIABILITIES
    2,184.8       1,978.0       2,170.8  
                         
TOTAL EQUITY AND LIABILITIES
    3,259.8       3,225.7       3,286.1  
 

  
Announcement No. 7 / 19 May 2011                      Interim report Q1 2011                   Page 15 of 18

 
 
 

 
 
Equity as at 1 January - 31 March 2011

                                                 
Million USD
 
Common
   
Treasury
   
Retained
   
Proposed
   
Revaluation
   
Hedging
   
Translation
   
Total
 
   
shares
   
shares
   
profit
   
dividends
   
reserves
   
reserves
   
reserves
       
                                                 
Equity at 1 January 2011
    61.1       -17.9       1,072.3       0.0       -2.5       -1.8       4.1       1,115.3  
Changes in equity Q1 2011:
                                                               
Purchase treasury shares, cost
    -       -       -       -       -       -       -       0.0  
Disposal treasury shares, cost
    -       0.6       -       -       -       -       -       0.6  
Gain/loss from disposal treasury shares
    -       -       -0.6       -       -       -       -       -0.6  
Share-based compensation
    -       -       0.6       -       -       -       -       0.6  
Comprehensive income for the period
    -       -       -45.3       -       0.2       4.2       0.0       -40.9  
Total changes in equity Q1 2011
    0.0       0.6       -45.3       0.0       0.2       4.2       0.0       -40.3  
Equity at 31 March 2011
    61.1       -17.3       1,027.0       0.0       -2.3       2.4       4.1       1,075.0  
 

Equity as at 1 January - 31 March 2010

                                                 
Million USD
 
Common
   
Treasury
   
Retained
   
Proposed
   
Revaluation
   
Hedging
   
Translation
   
Total
 
   
shares
   
shares
   
profit
   
dividends
   
reserves
   
reserves
   
reserves
       
                                                 
Equity at 1 January 2010
    61.1       -18.1       1,205.1       0.0       -2.2       -3.3       4.1       1,246.7  
Changes in equity Q1 2010:
                                                               
Purchase treasury shares, cost
    -       -       -       -       -       -       -       0.0  
Disposal treasury shares, cost
    -       0.2       -       -       -       -       -       0.2  
Gain/loss from disposal treasury shares
    -       -       -0.2       -       -       -       -       -0.2  
Share-based compensation
    -       -       1.6       -       -       -       -       1.6  
Comprehensive income for the period
    -       -       2.3       -       -0.2       -2.7       -       -0.6  
Total changes in equity Q1 2010
    0.0       0.2       3.7       0.0       -0.2       -2.7       0.0       1.0  
Equity at 31 March 2010
    61.1       -17.9       1,208.8       0.0       -2.4       -6.0       4.1       1,247.7  


  
Announcement No. 7 / 19 May 2011                      Interim report Q1 2011                        Page 16 of 18

 
 

 
Statement of cash flows

                   
      Q1 2011       Q1 2010       2010  
Million USD
                       
                         
Cash flow from operating activities
                       
Operating profit
    -32.5       20.3       -79.6  
                         
Adjustments:
                       
Reversal of profit from sale of vessels
    5.7       -18.2       -1.9  
Reversal of depreciation and impairment losses
    36.6       35.0       141.4  
Reversal of impairment of jointly controlled entities
    0.0       0.0       35.0  
Reversal of share of results of jointly controlled entities
    1.1       2.4       11.5  
Reversal of other non-cash movements
    -6.7       -4.0       -8.0  
                         
Dividends received
    0.0       0.0       0.0  
Dividends received from joint controlled entities
    0.7       0.3       1.7  
Interest received and exchange rate gains
    3.6       0.1       0.5  
Interest paid and exchange rate losses
    -15.8       -14.2       -54.4  
Income taxes paid/repaid
    -1.2       -2.9       -3.6  
Change in bunkers, accounts receivables and payables
    -2.6       2.1       -43.2  
Net cash flow from operating activities
    -11.1       20.9       -0.6  
                         
Cash flow from investing activities
                       
Investment in tangible fixed assets
    -68.0       -23.6       -253.9  
Investment in equity interests and securities
    0.0       0.0       0.0  
Loans to jointly controlled entities
    0.5       1.1       3.3  
Payment of liability related to options on vessels
    0.0       0.0       0.0  
Received share on options on vessels
    0.0       0.0       0.0  
Sale of equity interests and securities
    0.0       0.0       0.0  
Sale of non-current assets
    100.6       63.6       63.7  
Net cash flow from investing activities
    33.1       41.1       -186.9  
                         
Cash flow from financing activities
                       
Borrowing, mortgage debt
    26.7       25.7       344.7  
Borrowing, finance lease liabilities
    0.0       0.0       0.0  
Repayment/redemption, mortgage debt
    -25.5       -22.0       -153.7  
Repayment/redemption, finance lease liabilities
    -0.8       -1.2       -5.3  
Dividends paid
    0.0       0.0       0.0  
Purchase/disposals of treasury shares
    0.0       0.0       0.0  
Net cash flow from financing activities
    0.4       2.5       185.7  
                         
Net cash flow from operating, investing and financing activities
    22.4       64.5       -1.8  
                         
Cash and cash equivalents, beginning balance
    120.0       121.8       121.8  
                         
Cash and cash equivalents, ending balance
    142.4       186.3       120.0  


  
Announcement No. 7 / 19 May 2011                      Interim report Q1 2011                    Page 17 of 18

 

 

 
Quarterly statement of cash flows

      Q1 10       Q2 10       Q3 10       Q4 10       Q1 11  
Million USD
                                       
                                         
Cash flow from operating activities
                                       
Operating profit
    20.3       -10.8       -12.5       -76.6       -32.5  
                                         
Adjustments:
                                       
Reversal of profit from sale of vessels
    -18.2       0.0       0.0       16.3       5.7  
Reversal of depreciation and impairment losses
    35.0       34.4       35.1       36.9       36.6  
Reversal of impairment of jointly controlled entities
    0.0       0.0       0.0       35.0       0.0  
Reversal of share of results of jointly controlled entities
    2.4       1.3       3.1       4.7       1.1  
Reversal of other non-cash movements
    -4.0       -3.8       -0.3       0.1       -6.7  
                                         
Dividends received
    0.0       0.0       0.0       0.0       0.0  
Dividends received from joint controlled entities
    0.3       0.9       0.2       0.3       0.7  
Interest received and exchange rate gains
    0.1       0.3       2.2       -2.1       3.6  
Interest paid and exchange rate losses
    -14.2       -12.7       -14.0       -13.5       -15.8  
Income taxes paid/repaid
    -2.9       0.0       -0.3       -0.4       -1.2  
Change in bunkers, accounts receivables and payables
    2.1       -9.8       7.8       -43.3       -2.6  
Net cash flow from operating activities
    20.9       -0.2       21.3       -42.6       -11.1  
                                         
Cash flow from investing activities
                                       
Investment in tangible fixed assets
    -23.6       -69.6       -66.8       -93.9       -68.0  
Investment in equity interests and securities
    0.0       0.0       0.0       0.0       0.0  
Loans to jointly controlled entities
    1.1       1.2       0.4       0.6       0.5  
Payment of liability related to options on vessels
    0.0       0.0       0.0       0.0       0.0  
Received share on options on vessels
    0.0       0.0       0.0       0.0       0.0  
Sale of equity interests and securities
    0.0       0.0       0.0       0.0       0.0  
Sale of non-current assets
    63.6       0.1       0.0       0.0       100.6  
Net cash flow from investing activities
    41.1       -68.3       -66.4       -93.3       33.1  
                                         
Cash flow from financing activities
                                       
Borrowing, mortgage debt
    25.7       54.8       92.1       172.1       26.7  
Borrowing, finance lease liabilities
    0.0       0.0       0.0       0.0       0.0  
Repayment/redemption, mortgage debt
    -22.0       -50.3       -23.6       -57.8       -25.5  
Repayment/redemption, finance lease liabilities
    -1.2       -1.2       -1.3       -1.6       -0.8  
Dividends paid
    0.0       0.0       0.0       0.0       0.0  
Purchase/disposals of treasury shares
    0.0       0.0       0.0       0.0       0.0  
Net cash flow from financing activities
    2.5       3.3       67.2       112.7       0.4  
                                         
Net cash flow from operating, investing and financing activities
    64.5       -65.2       22.1       -23.2       22.4  
                                         
Cash and cash equivalents, beginning balance
    121.8       186.3       121.1       143.2       120.0  
                                         
Cash and cash equivalents, ending balance
    186.3       121.1       143.2       120.0       142.4  
 
 

 
Announcement No. 7 / 19 May 2011                      Interim report Q1 2011                   Page 18 of 18