Interim financial report for the first half of 2010

9 September 2010

Highlights:

J. Lauritzen A/S (JL) enjoyed a good start to the year and JL’s share of results totaled USD 99.6m for the first six months of the year compared to USD 1.5m for the first half-year in 2009.

The result for the period was better than expected primarily due to improved earnings from Lauritzen Bulkers’ handysize bulk carrier operations and non-recurring income from counterparty settlements.

Return on invested capital (ROIC) was 13.2% compared to 1.6% in the same period in 2009. Excluding installments on vessels under construction return on invested capital amounted to 17.5% compared to 3.4% in the first half of 2009. Cash and securities amounted to USD 282m at the end of June 2010 up from USD 218m at year-end 2009.

Average invested capital amounted to USD 1,924m compared to USD 1,318m in the first half of 2009. The increase was in line with plans for fleet expansion and renewal.

Main events during the first six months:

• JL took delivery of four handysize bulk carriers and two MR product tankers.
• Seven long-term time-chartered bulk carriers (one handysize, five handymax and one capesize) were also added to the fleet.
• An order for two handysize bulk carrier newbuildings for delivery in 2012 was placed with Jiangmen Nanyang Ship Engineering in China together with Dansk Rederi A/S, a close partner of Lauritzen Bulkers.
• A loan agreement backed by Nippon Export and Investment Insurance (NEXI), one of two Japanese export credit agencies was signed. The agreement was the first of its kind with a company located in an OECD country for which NEXI provides its cover without the cooperation of Japan Bank for International Cooperation.
• An unsecured bond issue was successfully completed for listing on the Oslo Børs (the Oslo Stock Exchange). Demand for seaborne transportation is expected to remain fairly strong in the second half of 2010. However, market conditions are expected to be affected by a significant delivery schedule of new tonnage, in particular of bulk carriers and product tankers.

JL’s share of the result for the full year 2010 is expected to be USD 120-125m subject to possible gains and/or losses from sale of vessels.

EBITDA and operating income by business segment



Lauritzen Bulkers
The dry bulk market experienced high volatility during the first half of the year, primarily assessed to be due to the new quarterly price settlement structure for iron ore and due to port congestion. Total number of ship days increased to 15,148 compared to 14,255 in the first half of 2009.
EBITDA was USD 106.2m compared to USD 42.8m in 2009 and operating income was USD 96.9m compared to USD 19.8m in 2009. The increase was primarily due to improved earnings from Lauritzen Bulkers’ handysize bulk carrier operations and non-recurring income from counterparty settlements.

Lauritzen Kosan
The open market for smaller gas carriers held up quite well during the first half of the year taking the normal seasonal pattern into consideration. Total number of ship days amounted to 8,657 compared to 8,243 in the first half of 2009.
EBITDA was USD 13.1m compared to USD 16.1m in 2009 and operating income was USD (1.1)m compared to USD 4.3m in 2009. Results were negatively affected by higher than expected unscheduled off-hire.

Lauritzen Tankers
After some improvement at the beginning of the year market conditions for medium range product tankers continued on a downward slope during the first half of 2010. Total number of ship days amounted to 2,357 compared to 2,018 in the first half of 2009.
EBITDA was USD 5.4m compared to USD 1.8m in 2009 and operating income was USD 3.0m compared to USD 0.9m in 2009. Results were better than expected due to higher spot earnings at the beginning of the period.

Lauritzen Offshore Services
Total number of ship days amounted to 362 compared to 171 in the first half of 2009 as both the Accommodation and Support vessel Dan Swift and the shuttletanker Dan Eagle were fully operational and performed very well.
EBITDA was USD 29.7m compared to USD (0.5)m in 2009 and operating income was USD 21.7m compared to USD (2.6)m in 2009. Results were in line with expectations.

Net financials and debt financing
Net financial income for the first half of 2010 was USD (20.7)m compared to USD (5.0)m in the same period in 2009. The decline was mainly due to increasing financing costs, currency hedging and other exchange rate differences. JL’s share of results totaled USD 99.6m for the first half-year compared to USD 1.5m in same period in 2009.
As of 30 June 2010 cash and securities totaled USD 282m compared to USD 218m at year-end 2009.
Total liabilities amounted to USD 1,240m of which interest bearing debt amounted to USD 1,125m (including financial lease liabilities).
Total non current interest bearing debt amounted to USD 1,072m compared USD 883m at year 2009.
JL’s share of equity amounted USD 1,206m at period-end compared to USD 1,126m at year-end 2009.

Outlook for 2010
Demand for seaborne transportation is expected to remain fairly strong in the second half of 2010. However, market conditions are expected to be affected by a significant delivery schedule of new tonnage, in particular of bulk carriers and product tankers.
JL’s share of the result for the full year 2010 is expected to be USD 120-125m subject to possible gains and/or losses from sale of vessels.

J. Lauritzen A/S