DS Norden (CPSE:DNORD): Risk Upgraded as Tankers Erode Earnings

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Can Dry-Bulk Earnings Offset the Losses from the Tanker Segment?

Lead Analyst, Drewry Maritime Financial Research

Victoria Saraglis

Lead Analyst

Maritime Sector, Equity & Credit Research

Drewry Maritime Financial Research

With no ties to other players in the shipping, finance or banking world, we provide a uniquely impartial view of the markets and companies we cover. Our parent organization, Drewry is a leading independent provider of research services to the maritime and shipping industry, employing over 100 professionals across an international network of offices in London, Delhi, Singapore and Shanghai. Combining our market-leading resources with seasoned sector expertise DFRS offers a highly differentiated and comprehensive range of investment and financial research services to lenders and prospective investors in publicly listed maritime and shipping companies. The full service of reports, supporting resources and sector orientated webinars provides our clients with the most complete picture of the organisations under coverage as is possible. We have been charting and analysing the world’s maritime markets for more than 40 years. This unrivalled intelligence and understanding provides the foundation of our research service. Our analysts have access to one of the most up-to-date, comprehensive and reliable sources of market insight and research data available today. We look at globally listed companies within the following sectors: Port Operators, Container Shipping, Container Manufacturing & Leasing, LNG Shipping, Dry Bulk Shipping and Tanker Shipping. Combine in-depth sector expertise with financial analysis focusing on over 50 stocks globally.

Equity Bottom-Up

<ul>
<li>Earnings in the dry bulk segment remained strong on the back of robust trade of coal and minor bulk commodities. However, the story was very different for the tanker segment, where earnings went well into the negative territory with a negative margin of USD 10.2m in the second quarter of 2018. Although still positive, net profit contracted to USD 0.8m in the second quarter of 2018, much below the USD 18m in the first quarter of 2018.</li>
<li>Having opted to install scrubbers in its fleet, D/S Norden secured installation of 26 scrubbers with options for 5 more in 2018.</li>
<li>Amid lingering weakness in the product tanker market, the company lowered its adjusted result expectations for 2018 from USD 10-50m to USD 0-30m. The announcement created a negative impact on the stock price, which is trading at DKK 93.50 – close to its one-year low.</li>
</ul>


Earnings in the dry bulk segment remained strong on the back of robust trade of coal and minor bulk commodities. However, the story was very different for the tanker segment, where earnings went well into the negative territory with a negative margin of USD 10.2m in the second quarter of 2018. Although still positive, net profit contracted to USD 0.8m in the second quarter of 2018, much below the USD 18m in the first quarter of 2018.
Having opted to install scrubbers in its fleet, D/S Norden secured installation of 26 scrubbers with options for 5 more in 2018.
Amid lingering weakness in the product tanker market, the company lowered its adjusted result expectations for 2018 from USD 10-50m to USD 0-30m. The announcement created a negative impact on the stock price, which is trading at DKK 93.50 – close to its one-year low.


Tanker Earnings Weigh Down on Overall Picture