Third quarter report 2011

17 November 2011

TORM recognised a loss before tax of USD 70 million in the third quarter of 2011. “Third quarter of 2011 proved to be a particularly challenging quarter, as the uncertainty on the global economy continued and freight rates came under massive pressure. We are now working on a range of initiatives to improve the liquidity situation and strengthen the balance sheet,” says CEO Jacob Meldgaard. EBITDA for the third quarter of 2011 was a loss of USD 17 million, compared to a gain of USD 23 million in the third quarter of 2010. The result before tax for the third quarter of 2011 was a loss of USD 70 million, compared to a loss of USD 27 million in the same period of 2010. The third quarter of 2011 was negatively impacted by mark-to-market non-cash adjustments of USD 5 million, compared to USD 0 million in the same period of 2010. For the first nine months of 2011, a loss before tax of USD 139 million was recognised, compared to a loss of USD 49 million in the same period of 2010.

The product tanker market experienced freight rates at low levels during the third quarter of 2011. Especially the freight rates in the larger segments, LR2 and LR1, suffered from the global economic uncertainty and oversupply of vessels. The US products imports fell by 29% in the third quarter of 2011, compared to the third quarter of 2010. The MR markets were affected by the traditionally weaker summer months, but spot rates on the Continent were slightly better than in the larger segments. The release of the Strategic Petroleum Reserves announced in June 2011 affected the markets negatively in August and September. Further, only limited arbitrage opportunities arose during the third quarter of 2011.

The bulk market continued to be under pressure in July and the first half of August driven by a typical summer market and the remaining impact of a slowdown due to the Japanese earthquake in March. The freight rates in the Pacific and the Atlantic markets improved during the later part of August and September. The main drivers were the US led grain season and higher than usual sugar exports from Brazil plus a continued appetite for iron ore and coal in China. The third quarter of 2011 continued to see a high influx of newbuildings in all the main segments.

As mentioned in announcement no. 18 dated 17 November 2011, TORM pursues long-term comprehensive financing solution. Therefore, TORM has entered into discussions with its banks and other main stakeholders. It is anticipated that a rights issue of up to USD 300 million will be a part of the comprehensive financing solution.

Net interest-bearing debt was up in the third quarter of 2011 to USD 1,836 million from USD 1,824 million as at 30 June 2011.

Undrawn credit facilities and cash totalled USD 237 million at the end of the third quarter of 2011, compared to USD 288 million as at 30 June 2011. Outstanding CAPEX relating to the order book amounted to USD 167 million. Equity amounted to USD 958 million as at 30 September 2011, equivalent to USD 13.8 per share, (excluding treasury shares), giving TORM an equity ratio of 31%.

By 30 September 2011, TORM had covered 25% of the remaining tanker earning days in 2011 at USD/day 13,925 and 5% of earning days in 2012 at USD/day 16,122. 97% of the remaining bulk earning days in 2011 are covered at USD/day 15,402 and 64% of the 2012 earnings days at USD/day 14,257.

TORM forecasts a loss before tax of USD 175-195 million for 2011 as stated in announcement no. 16 dated 31 October 2011.

Full report at: www.torm.com

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 165 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.

TORM, press release