FAR - Results 1Q 2005

Wednesday, 11. May 2005 15:16

Results for the 1st quarter 2005
This is the first quarter that Farstad Shipping ASA will prepare its
financial accounts in accordance with International Financial
Reporting Standards (IFRS). Below is a detailed description of how
this influences the accounts. For further details, we refer to the
company's Annual Report, note 20. The Annual Report can be found on
our web page: www.farstad.no. As a result of the transition to IFRS,
the corresponding figures for 2004 have been changed.

Farstad Shipping achieved an operating income of NOK 382.1 million
for the 1st quarter (NOK 379.3 million for the 1st quarter 2004). The
operating costs for the period were NOK 211.8 million (NOK 215.9
million). The reduced cost is partly due to the sale of 2 vessels in
4th quarter 2004. The operating profit (EBIT) was NOK 68.7 million
(NOK 54.8 million) after deferred maintenance and depreciation of NOK
101.6 million (NOK 108.6 million). Net finance was negative NOK 87.8
million (negative NOK 95.9 million). Currency gain of NOK 64.0
million is booked during the 1st quarter (gain of NOK 17.6 million).
Further an unrealized currency loss of NOK 120.0 million (loss of NOK
72.6 million) is booked due to the adjustment of the company's
long-term liabilities in foreign currency. The profit after taxes was
negative NOK 15.3 million (NOK 39.8 million). Taxes were positive NOK
3.8 mill. (positive NOK 1.3 mill.) due to a reduction of deferred
taxes in the balance sheet. The Group's cash flow*) for the period
was NOK 202.5 million compared to NOK 140.1 million for the same
period in 2004.

*) Pre-tax profit + depreciation and deferred maintenance + change on
revaluation of long-term liabilities in foreign currency.

Financing and capital structure
In the balance per 31.03.05, interest-bearing mortgage debt and
leasing liabilities together totals NOK 3.715.3 million (NOK 3,944.9
million at 31.03.04). Of the company's debt 26.4% is in USD, 19.3% in
GBP, 45.1% in NOK, 3.4% in AUD and 5.8% in EUR. The debt is serviced
from charter income in the same currency. Installments on debt and
leasing liabilities of NOK 142.1 million have been paid during the
1st quarter. Interest-bearing current assets at 31.03.05 were NOK
730.2 million (NOK 610.8 million).

The Group's booked equity at 31.03.05 was NOK 2,372.7 million (NOK
2,115.5 million) corresponding to NOK 60.84 (NOK 54.24) per share.
Equity ratio was 37.0% (33.2%).
Farstad Shipping obtains valuations of the fleet twice each year, as
at 30.06 and 31.12. Therefore no estimates are obtained at 31.03.05.
Based on the valuation of the vessels (charter-free) from 3
independent brokers in January 2005, the value-adjusted equity
capital per share before tax was calculated at NOK 98.80 (NOK 83.20).
Dividend with NOK 5.00 (NOK 2.50) is included in these figures. For
further information regarding the values at 31.12.04, we refer to the
company's annual report for 2004.

New legislation for taxation of currency gain
Effective from 1st January 2005, new legislation for taxation of
currency gains in Shipping Companies within the Norwegian tax regime
have been passed. According to former regulations, foreign exchange
gain was included when calculating the net taxable financial income.
After the new motion has been carried through, the exchange gain will
only partly be treated as taxable income. This proportional part is
calculated as "finance capital" divided on "total capital".

For those subsidiaries being within the Norwegian Shipping tax
regimes, this will, based on last year (2004), cause that 13-14% of
currency income will be regarded taxable.
Yet no transitional rules for taxation of currency gains earned as at
31.12.04 have been released. Consequently, in the accounts 28% tax
has been accrued on 100% of these currency gains. However, if these
gains are to be taxed according to the rules being effective from
01.01.05, the deferred tax will be reduced by NOK 57 millions
compared to year end 2004 accounts.

Implementation of IFRS
From the 1st quarter 2005 Farstad Shipping ASA will prepare its
financial accounts in accordance with IFRS. In order to present
comparable figures the opening balance as at 01.01.04 has been
adjusted according to IFRS principles. The opening balance at 1.1.05
has further been adjusted to allow for principles not required at
1.1.04.

Adjustments at 1.1.04 and 1.1.05:
According to IFRS the dividend shall be allocated when it is approved
by the Annual General Meeting. This increases the equity capital of
NOK 97.5 million at 1.1.04 (NOK 2.50 per share) and NOK 195.0 million
at 1.1.05 (NOK 5.00 per share).

First year's instalment on long-term debt has been posted under
short-term debt according to IFRS. The effect is that NOK 527.8
million at 1.1.05 will be transferred from long-term debt to
short-term debt.

The fleet's booked value at 1.1.04 and 1.1.05 will remain unaltered
after the introduction of IFRS.

Ordinary depreciations will increase as a consequence of deferred
maintenance being charged as depreciation as opposed to operating
expenses. The operating expenses are reduced by an amount
corresponding to the increase in depreciation. For 1st quarter 2005
the effect is NOK 14.8 mill (NOK 19.1 mill).

Pension obligations are earlier estimated to be over-financed. This
over-financing has not been included in the balance. According to
IFRS not posted estimate changes are to be booked directly against
the equity. Preliminary estimates show that pension obligation will
not give any significant changes in the equity capital.

Adjustment only to the balance sheet at 1.1.05:
The hedging principle the company has used regarding the cash flow in
foreign currency is now considered not to fulfil the hedging criteria
according to IFRS. As a consequence the company has decided that
this hedging principle shall come to an end. According to IFRS all
foreign currencies have to be booked at the exchange rate on closing
date. The total effect of this is that long-term debt is reduced by
NOK 145.4 million. Deferred tax will as a consequence increase by NOK
40.7 million. The equity capital at 1.1.05 will consequently increase
by NOK 104.8 million (NOK 2.69 per share).

The company use foreign exchange contracts to secure future freight
income in foreign currency. The income is related to signed charter
contracts. The discounted value of these currency contracts at 1.1.05
shall be included as a current asset. This increased the equity
capital by NOK 50.9 million (NOK 1.30 per share).

The above effect on the equity capital at 1.1.05 is a total increase
by NOK 350.7 million (NOK 8.99 per share) from NOK 2,037.3 million
(NOK 52.24 per share) to NOK 2,388 (NOK 61.23 per share).

The abovementioned changes have been included in the profit and loss
account and balance sheets at 31.03.04, 31.12.04 and 31.03.05
respectively.

The Fleet
There have been no changes in the fleet during the period.

Of the company's fleet only AHTS Far Sky has traded the North Sea
spot market the whole quarter. AHTS Far Sovereign traded the spot
market the first two month. AHTS Far Scout returned to the North Sea
at the end of March from operations in Brazil. PSV Far Scotsman
arrived in the North Sea from Singapore at the end of January. Both
vessels have been trading the spot market.

The vessels in the Far East/Australia fleet have had a good
utilization this quarter except for 4 vessels that have been
dry-docked this quarter.

The Market
The demand for supply vessels in the North Sea during the 1st quarter
was 13% higher than the 1st quarter in 2004 and 2.5% higher than the
4th quarter of 2004.

The number of supply vessels in the North Sea has increased during
1st quarter and was on an average 7 vessels more compared with 4th
quarter 2004 and 10 vessels more compared with 1st quarter 2004. The
average utilization ratio for the quarter for the total North Sea
tonnage was approx. 90% (84%). The average for 4th quarter 2004 was
91%.

The increased activity in the North Sea during 1st quarter has
improved the rates to an acceptable level. A further increase in the
activity is expected. The increased rig activity combined with high
pipe-laying activity will give increased demand for supply vessels.
The development in the rate level in 2005 and 2006 will depend on
whether the increased activity is sufficient to absorb in particular
the number of platform vessels to be delivered. An enduring high
utilization and rate levels in the North Sea also rely on other
markets continuing to develop positively. Based on the high oil price
the expectations about increased activity in these markets are very
positive.

The contract coverage for the Farstad-fleet for the 2nd quarter is
approx. 87% and approx. 60% for the second half year. For 2006 the
contract coverage is now approx. 43%. The contract coverage is
highest for the PSV-fleet.

Shareholder matters
The company's share has during the quarter been traded between NOK
75.00 and NOK 87.50 and was NOK 84.50 at the end of the quarter. The
share price at 31.03.05 values the company to approx. NOK 3.3
billion. The number of shareholders is approx. 1,700. Foreign
shareholders own approx. 15.5% of the shares.


The Board of Directors

The full report with tables can be downloaded from the following
link:
View document
Contacts:
CEO Terje J.K. Andersen - tel. 90 03 05 11
CFO Torstein L. Stavseng - tel. 91 10 70 01
Related Links: 
Author:
Hugin
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