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First quarter black ink not enough to brighten Norden's forecasts

First quarter black ink not enough to brighten Norden's forecasts
Norden has reported a $38.6m profit for the first quarter 2015, but the company's forecasts for the year remain unchanged at an EBIT of between negative $40m and positive $40m.

The strong first quarter was powered by the buoyant product tanker market, but recently-appointed president and ceo Jan Rindbo does not believe this will compensate for the dire dry bulk market.

"A strong tanker market and a high level of coverage in a very poor dry cargo market have provided Norden with a solid start to 2015," Rindbo stated in the company's earnings release. "The upswing in tankers has been broadly based, and with a large and modern fleet of product tankers, Norden is well positioned to benefit from this. However, the strong tanker market cannot balance out the historically poor dry cargo market in which especially a significant drop in Chinese imports of coal has further weakened the market.”

Profit for the dry bulk segment of the company was $13.6m, as the cost base of the unit was reduced by provisions made in the last quarter, where EBIT was negative $271m. Falling Chinese coal imports hit the dry bulk market, although Norden's main vessel sizes of supramax and panamax were less affected than others. The company's dry bulk time charter earnings were 44% above the one-year average rates, and 113% above spot rates on the Baltic Exchange.

For tankers a profit of $28.1m built on a postive $17m in Q4 2014, and was a significant improvement on Q1 2014's $3.4m profit. The company continues to be heavily exposed to the spot market, with 19% of ships for the rest of 2015 covered at the end of Q1, as it sees the short term spot gains to be of greater benefit than less attractive long-term charters.

The tanker segment's profit was more than double that of dry cargo, on significantly smaller revenue of $126.8m, compared to dry bulk with $329.1m. Norden operates 202 dry bulk ships, and 48 tankers.

In its outlook Norden has revised down its EBIT forecast for dry bulk to between negative $60m and breakeven, from the previous estimate of negative $40m to positive $20m. The tanker forecast moved the other way, up to between $35m and $65m from the preveious expectation of $5m to $45m.