NORDEN for the second quarter of 2024 generated a net profit of USD 46 million (USD 108 million). · EBITDA of USD 122 million (USD 175 million)

· Earnings per share of DKK 10 (DKK 21)

The financial performance was as expected. Assets & Logistics experienced positive contribution from the tanker activities and high earnings coverage in dry cargo, while in Freight Services & Trading margins were temporarily negative. · Freight Services & Trading: USD -18 million (USD 34 million)

· Assets & Logistics: USD 64 million (USD 74 million)

For the first half-year of 2024 the net profit was USD 108 million (USD 258 million).

Return on invested capital (ROIC) in the last twelve months (LTM) was 21% (50%).

Business highlights

• Positive market expectations due to an ageing global fleet and limited available shipyard capacity continues to underpin forward rates and especially asset values, which supported the value upside of NORDEN’s owned and leased fleet with purchase options.
• The estimated Net Asset Value (NAV) of Assets & Logistics was DKK 451 per share by end of Q2 2024, based on a revised methodology for valuation of the options.
• The Capesize fleet was expanded and renewed by acquiring 2 modern second-hand vessels while capitalising on the market selling an older vessel, bringing the total owned and leased Capesize fleet to 12 vessels including newbuildings.
• Strengthened the Projects & Parcelling activities by entering an agreement to acquire Norlat Shipping, a minor Scandinavian dry bulk operator specialised in shipment of forest products.
Guidance
• NORDEN narrows its expected full-year net profit guidance for 2024 to USD 160-240 million (previously USD 150-250 million). The guidance for 2024 includes gains from sale of vessels from already signed and agreed transactions of USD 61 million (previously USD 59 million).
• For the second half-year of 2024 Assets & Logistics are expected to continue to generate stable earnings from high coverage, especially in dry cargo, while margins in Freight Services & Trading are expected to gradually improve from the level in Q2 2024.
• By early August 2024, NORDEN had a total of 3,700 open tanker vessel days and a total of 7,100 open days in dry cargo, across both businesses for the remainder of 2024.
• In line with NORDENs pay-out policy, the Board has decided to return USD 23 million through an interim dividend of DKK 2 per share and a new share buy-back programme of USD 14 million, which will run until the end of October 2024.

“For the second quarter, NORDEN generated a net profit of USD 46 million and continued positive market developments supported our net asset values. Return on invested capital was 21% for the past twelve months. We have executed on our growth strategy by investing in modern Capesize vessels and in Projects & Parcelling by acquiring Norlat Shipping, while at the same time returning USD 23 million to shareholders for the second quarter. We narrow the full-year guidance range to USD 160-240 million expecting further gradual improvements in margins in our Freight Services & Trading business.”
CEO Jan Rindbo.

COMMENTS ON THE DEVELOPMENT OF THE SECOND QUARTER 2024

Earnings results
The time charter equivalent revenue (TCE) in the second quarter of 2024 increased by USD 18 million or 3% to USD 636 million (USD 618 million), driven by the higher activity level and partly offset by higher voyage costs. For the first half-year the TCE was USD 1,178 million (USD 1,253 million).

The contribution margin decreased by USD 63 million or -31% to USD 140 million (USD 203 million) related to the increasing charter costs primarily related to unwinding of the dry cargo position in Freight Services & Trading in the first quarter. The gross margin declined from 21% to 14%. For the first half-year the contribution margin was USD 253 million (USD 447 million) reflecting a margin of 13% (23%).

EBITDA was USD 122 million or USD 53 million lower compared to the same quarter in 2023, reflecting a margin of 12% (18%). For the first half-year the EBITDA was USD 213 million (USD 383 million) reflecting a margin of 11% (20%).

Operating profit (EBIT) was USD 54 million or USD 60 million lower compared to same quarter in 2023, partly offset by lower depreciations related to IFRS 16. Gains from sale of vessels was USD 7 million (USD 27 million) and sublease gains accounted for USD 28 million. For the first half-year the operating profit was USD 127 million (USD 270 million). The conversion ratio, excluding sale gains, was 34% down from 43% in Q2 2023.

Financial items net, amounted to USD -6 million (USD -4 million), impacted by the higher interest and lower cash position.

The net profit for the second quarter of 2024 amounted to USD
46 million (USD 108 million) with a loss of USD 18 million (USD 34 million) in Freight Services & Trading and Assets & Logistics contributing with USD 64 million (USD 74 million). Net profit for the first half-year was USD 108 million (USD 258 million).

Cash flows and Capital structure
Cash flow from operating activities was USD 135 million (USD 201 million), with positive contribution from reversal of the higher net working capital in the first quarter. For the first halfyear the operating cash flow was USD 85 million (USD 347 million) affected by the lower operating profit.

Cash flow from investing activities was USD -114 million (USD -77 million) due to investments in assets of USD 218 million (USD Return on invested capital

132 million), proceeds from sale of vessels of USD 61 million (USD 133 million) and change in financial investments (deposits) of USD 92 million (USD -5 million).

Free cash flow was USD -156 million (USD 28 million) negatively impacted by the lower earnings and higher investments, while offset by a reduction in net working capital and proceeds from sale of vessels. Free cash flow for the first half-year was USD -206 million (USD 139 million) affected by the lower operating profit and higher investments.
Net cash flow was USD -66 million (USD -98 million) impacted by cash distribution to shareholders through dividends of USD 9 million (USD 104 million), share buy-backs of USD 21 million (USD 17 million) and instalments on lease liabilities of USD 82 million (USD 96 million). For the first half-year the net cash flow was USD -113 million (USD -126 million) with a total distribution to shareholders of USD 94 million (USD 291 million).

During the second quarter of 2024, cash and cash equivalents decreased to USD 284 million (USD 557 million end FY 2023). Repayment of the outstanding issued bond impacted the cash position by USD 72 million in Q2 2024. As of 30 June 2024, NORDEN had committed credit facilities of USD 200 million of which USD 100 million were undrawn and directly accessible. Net interest-bearing debt increased to USD 329 million compared to USD 45 million by end of full-year 2023.

NORDEN shareholders’ share of equity on 30 June 2024 was USD 1,247 million (USD 1,198 million end FY 2023) reflecting the positive net profit for the period and allocation to shareholders during the quarter. The solvency ratio, excluding non-controlling interest, was 54% by the end of June 2024 compared to 51% by the end of full-year 2023.

Update on the Strategic Scorecard
The value creation based on the return on invested capital (ROIC) since Q3 2019 has been 24% per year and 21% in the last twelve months, outperforming our target of average min. 12% per year rolling over five years. The positive returns confirms the long-term value-creation from an agile and flexible business model, despite short-term fluctuations in earnings.

Growing the business in a profitable way is a core part of our strategy and on average we aim at growing the number of vessel days by 5% CAGR per year. In the last twelve months we have had a CAGR of 4%, slightly below our target of 5%. However, since Q3 2018 the CAGR on average has been 7% and we are thus in line with our long-term target.

During the quarter, the profitability in Freight Services & Trading as expected has gradually improved from a very low level and below our average min. target of USD 500 per day. Measuring the development over the past five years the average margin has been USD 1,181 per day and for the last twelve months USD -78 per day.

On the decarbonisation initiatives we have reduced the EEOI by 15% by end of June 2024 compared to our baseline in 2022, confirming that we are on track to deliver on the 2030-target of min. 16%. Fleet renewals in the Capesize segment and investing in fuel efficiency through paint upgrades and other initiatives added positively to the development.
While targeting a total shareholder returns (TSR) of min. 10% per year on average, the returns in the past twelve months have been negative by 2%. NORDEN have in the past five years generated a positive return of 416% or 39% per year.

MARKET DEVELOPMENTS

Dry cargo market

Market development
The dry cargo market continued the positive trend from the past quarters with overall high spot and charter rates and increasing asset values driven by solid demand growth, longer distances for iron import to China, diversions related to the situation around the Red Sea, and positive impact from the increase in container freight rates.
Total demand grew by around 4% Y/Y in tonnes and 7% Y/Y in tonnemiles with tonnes imported to China up 5% Y/Y due to solid demand for import of iron ore of 6% Y/Y and coal of 8% Y/Y. Demand growth from RoW grew by 3% Y/Y driven by higher import of minor bulks.
The spot rates increased with average Supramax spot rates up 39% Y/Y to USD 15,005 per day and despite average Capesize rates being lower compared to Q1 2024, the rates were up 48% Y/Y to USD 22,665 per day.

Period rates and asset prices
Positive market expectations and limited shipyard capacity was reflected in both T/C rates and asset values. The 1-year T/C rate for Supramax and Capesize vessels increased by 16% Y/Y and 48% Y/Y, respectively to USD 15,876 per day and USD 26,263 per day, while 5-year second-hand values increased by 17% for Supramax vessels to USD 33 million and 33% Y/Y for Capesize vessels to USD 62 million.

Market outlook
Secondhand vessel prices are expected to benefit from continued support from a low orderbook and limited yard capacity. Spot markets continuing to be supported by growth, combined with geopolitical disruptions which are leading to longer distances.

Product tanker market

Market development
In general, the tanker market continued the positive trend with freight rates at very attractive levels during the quarter. The product tanker market was still impacted by longer distances due to market inefficiency related to the Russian export ban, underlying demand growth, and diversions from the Red Sea. The situation around the Panama Canal continued to normalise during the quarter. Short-term headwinds from weak crude led to larger tankers switching from crude to clean trades.
In the first quarter, the average spot rates for MR vessels increased by 28% Y/Y to USD 36,989 per day, with still large differences and fluctuations seen in rates between East and West due to difficulties in ballasting from the situation in the Red Sea. Compared to Q1 2024, average spot rates were marginally lower by 3%.

Period rates and asset prices
The 1-year T/C rate for MR Eco vessels increased by 9% Y/Y to USD 33,546 per day, while asset prices for 5-year MR vessels increased to USD 48 million or 12% Y/Y.

Market outlook
Product tanker market conditions are expected to remain attractive but volatile in the near-term future, driven by low fleet growth and positive vessel demand, based on longer transport distances due to the situation in the Red Sea and senctions on Russian product exports.

An increase in contracting has increased the orderbook-to-fleet ratio to 16% which will put some downward pressure on rates in 2025/26. However, a stronger expected crude tanker market will keep product tanker rates supported. The crude tanker orderbook is still only 11% and will in combination with anticipated higher OPEC crude exports lead to a better market balance. In addition, the negative effect of crude tankers trading clean should diminish as crude rates increase.

Results
As expected the net result in the second quarter gradually improved to USD -18 million (USD 34 million) compared to USD -27 million in the first quarter, with still temporarily negative margins in the dry cargo activities, while the Projects & Parcelling and tanker activities contributed with positive results.

The result per vessel day was USD -420 compared to USD -630 per day in Q1 2024 and below the long-term average result per vessel day since Q3 2019 of USD 1,181 per day. EBITDA for the second quarter was USD 26 million (USD 87 million).
Activity levels were 8% higher in the second quarter compared to the same period last year with 43,138 vessel days (40,114 days) with an average operating fleet of 474 vessels split between 383 dry cargo vessels and 91 product tanker vessels. Business highlights
The positive market conditions in dry cargo in the second quarter resulted as expected in still negative margins in the dry cargo activities due to higher charter costs from covering the short position from the first quarter, combined with higher voyage costs related to weather and ballast. Margins were further impacted by costs related to new vessel charters and repositioning of tonnage on lower-paying back-haul voyages with expected future benefits.

Looking ahead, the dry cargo position for the remaining part of the year and 2025 is based on positive market expectations which is reflected in the overweight of open vessel days.

The Projects & Parcelling activities continued the positive development with an EBITDA of USD 9 million in Q2 2024 and accumulated an EBITDA of USD 24 million in the first year since the acquisition.

Source: NORDEN