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UPDATE 2-Norden cuts 2010 outlook, sees lower spot rates

Published 11/16/2010, 07:21 AM
Updated 11/16/2010, 07:24 AM

* Q3 EBIT $44.9 million, vs forecast $53.1 million

* Cuts 2010 operating profit, EBITDA outlooks

* CEO says group to be hit by lower freight rates in Q4

* Shares down 4.7 percent to four-month low

(Adds detail, CEO, analyst comments, shares)

By Mette Fraende

COPENHAGEN, Nov 16 (Reuters) - Danish shipper Norden cut its outlook for 2010 and said it expected to be hit by lower spot market rates in the fourth quarter, sending its shares to a four-month low on Tuesday.

Operating profit was mainly hit by unsuccessful speculation in the dry cargo spot market, with a significant number of vessels performing so-called repositioning voyages.

That meant vessels were sent on trips at unattractive freight rates, in the hope of being positioned for better contracts somewhere else in the world.

Third-quarter operating profit rose 58 percent to $44.9 million, compared with a forecast for $53.1 million in a Reuters poll.

The dry bulk shipper said it now expected full-year 2010 EBITDA of $220-$250 million, having previously expected $240-$270 million, and an operating profit of $210-240 million, versus $225-255 million forecast in August.

"The third quarter was affected by deferrals. In the fourth quarter, we will be hit by lower rates," Chief Executive Carsten Mortensen said in the statement.

Norden shares fell 4.7 percent to 200 crowns at 1033 GMT, underperforming a 0.6 percent fall in Copenhagen's benchmark index, as the downgrade disappointed and took analysts by surprise. The shares touched a nearly four-month low at 198 crowns per share earlier in the day.

"I did not expect that downgrade. I had thought they would be able to up their expectations to the high end of the interval. So that is clearly disappointing," said Jacob Pedersen, analyst at Sydbank.

"We can probably expect a weaker market which will put pressure on earnings. I fear a situation with significant overcapacity, and that can put preassure on freight rates and earnings," said Pedersen.

SPECULATION FAILED

Norden attributed the fall in third quarter operating profits to a significant number of recently chartered dry cargo vessels having performed repositioning voyages from Asia to the Atlantic, it said in the statement.

"They have been active in the spot market and they have not been doing a good job. That has hit dry bulk results and forced them to downgrade their outlook," Jyske bank trader Martin Munk said.

"This is a surprise. We were hoping they were doing good in the dry bulk area. The share reaction is fair," Munk said.

In spite of its downgrade, Norden was in a financially strong position, and ready for acquisitions, the chief executive told Reuters.

"We do not have to ask any bank for permission to do anything. We will of course carry out acquisitions when market conditions are right. That is what it is about in a cyclical sector," Mortensen said.

He said the group expected an increase in full-year EBITDA of 75-98 percent compared with 2009.

"Looking forward, we have covered 78 percent of the known ship days in Dry Cargo in 2011 and 42 percent in 2012," he said.

Norden's third-quarter sales rose to $496 million, against $433 million forecast by analysts. Net profit rose to $52.3 million, in line with expectations. (Additional reporting by Ole Mikkelsen and Anna Ringstrom; Editing by David Hulmes and Jon Loades-Carter)

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