Euronav announces final results 2019

31 Mar 2020 08:07 CEST

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2019 HIGHLIGHTS  

• Challenging summer freight market in 2019 ahead of IMO 2020 implementation
• Strong Q4 tanker dynamics – highest quarterly rate performance since 2008
• 2019 second half dividend set at USD 0.29 per share
• Returns to shareholder policy guidance to target 80% of net income and move to quarterly dividends going forward from Q1 2020
• Balance sheet strength retained with substantial liquidity to navigate the cycle and unprecedented situation created by Covid-19
• Underlying crude tanker market fundamentals remain constructive  

 

ANTWERP, Belgium, 31 March 2020 – Euronav NV (NYSE: EURN & Euronext: EURN) (“Euronav” or the “Company”) today reported its final financial results for the full year to 31 December 2019.

 

Hugo De Stoop, CEO of Euronav said: “Tanker market recovery gained traction in 2019 with Q4 delivering some of the strongest freight rates in recent years. Euronav is ideally positioned to benefit from strong freight rates thanks to its operational leverage to the upside and at the same time is perfectly positioned to seize opportunities when the markets are less attractive.

 

Our strong balance sheet and disciplined approach to fleet renewal and growth are critical in times of high volatility and uncertainty. With the adoption of the new Belgian corporate code we now have the capability to align the performance of Euronav more closely with expectations from shareholders with quarterly returns via dividends. Euronav looks forward to navigating the large tanker cycle and the Covid-19 situation with confidence during 2020 and beyond.”

 

The year of 2019 began with a strong baseline on the back of increased OPEC oil production towards the end of 2018, combined with a fairly balanced fleet profile following robust 2018 recycling activity. This all came to an abrupt end as OPEC and its allies began implementing agreed production cuts in January 2019, which saw OPEC production reduced by 1.4 mbpd in the first quarter of the year. OPEC production continued to decline through 2019 to an average of 29.9 mbpd across the year. This was 2 million barrels per day less than the average production in 2018. 

 

The official self-imposed supply constraints explain the majority of the OPEC production decline but it was also impacted by involuntary disruptions emanating from sanctions against Venezuela and Iran cutting close to 2.5 mbpd from global markets. This decline in OPEC supplied barrels was made up for by production increases primarily from the US. Infrastructure upgrades in the Gulf of Mexico have allowed increased access for US barrels to the Far East and Europe. Towards the end of the year, non-OPEC production received a further boost from new fields in Brazil and Norway.

 

The price of oil was relatively stable through 2019 with Brent fluctuating between USD 52 and USD 75 to average USD 64 per barrel. The price of WTI traded at a discount to Brent through the year and averaged USD 57 per barrel. The average price of the OPEC basket was in line with Brent at USD 64. Oil demand growth weakened during Q2 & Q3 of 2019 and is currently estimated at between 0.7-1.0 mbpd below the long-term growth average of 1.1 mbpd (since 1990). The first half of the year was particularly hard hit by weak oil demand, mainly due to a slowdown in the global economy and concerns around a US-China trade war, but rebounded in the second half as refineries across the world started ramping up their throughput in preparation for the IMO 2020 deadline for ships to burn bunker fuels with a maximum sulphur content of 0.5%.

 

The vessel supply side of the equation also experienced tightening in the second half of the year driven by three factors. Firstly, sanctions on Iranian tonnage continued to remove capacity from the trading fleet. Secondly, leading up to the implementation of the IMO 2020 regulation the market saw a significant number of large tankers moved into storage positions holding compliant fuel oil. A third temporary cause of fleet removal was vessels undergoing counter cyclical drydocking to retrofit scrubbers. These drydocking proved to take longer in many cases than originally anticipated.  

 

The catalyst that eventually sent freight rates surging was when the US imposed sanctions on two subsidiaries of COSCO Shipping at the end of September.

 

2019 closed out with a very strong freight market supported by a perfect storm of tight fundamentals, geopolitical events and IMO related market disruptions. The anticipated recovery in the crude tanker markets meant we could end the year on a high, and again enjoy the upward volatility and premium earnings that a more balanced tanker market has to offer.

 

In a short space of time 2020 has already experienced considerable volatility with geopolitical risk factors helping to drive freight rates to elevated levels, before the economic dislocation and uncertainty from Covid-19 gained traction from mid-January onwards. The large tanker market has been boosted by the move from Saudi Arabia to unilaterally increase oil supply which will underpin freight rates for much of Q2 2020. However, the duration and scale of the impact from economic dislocation from Covid-19 will be a key driver of tanker markets for the remainder of 2020. Euronav retains a very strong balance sheet and sufficient access to liquidity to manage such an environment.  

 

 

2019 Key figures

	The most important key figures are:
	(in thousands of USD)			Fourth Quarter 2019			Fourth Quarter 2018*			Full Year 2019			Full Year 2018*
	Revenue			355,154			236,107			932,377			600,024
	Other operating income			5,515			1,237			10,094			4,775
	Voyage expenses and commissions			(34,880)			(44,492)			(144,681)			(141,416)
	Vessel operating expenses			(53,471)			(53,812)			(211,795)			(185,792)
	Charter hire expenses			(604)			(7,844)			(604)			(31,114)
	General and administrative expenses			(15,542)			(15,977)			(66,890)			(66,232)
	Net gain (loss) on disposal of tangible assets			17			(237)			14,804			18,865
	Impairment on non-current assets held for sale			−			(2,995)			−			(2,995)
	Depreciation			(84,558)			(78,483)			(337,702)			(270,693)
	Net finance expenses			(20,907)			(23,828)			(99,231)			(74,389)
	Gain on bargain purchase			−			(13,202)			−			23,059
	Share of profit (loss) of equity accounted investees			4,640			3,783			16,460			16,076
	Result before taxation			155,364			257			112,832			(109,832)
	Tax benefit (expense)			(1,201)			22			(602)			(238)
	Profit (loss) for the period			154,163			279			112,230			(110,070)
	Attributable to:    Owners of the company			154,163			279			112,230			(110,070)
	The contribution to the result is as follows:
	(in thousands of USD)			Fourth Quarter 2019			Fourth Quarter 2018			Full Year 2019			Full Year 2018
	Tankers			150,173			(3,284)			96,419			(125,930)
	FSO			3,990			3,563			15,811			15,860
	Result after taxation			154,163			279			112,230			(110,070)
	Information per share:
	(in USD per share)			Fourth Quarter 2019			Fourth Quarter 2018			Full Year 2019			Full Year 2018
	Weighted average number of shares (basic) **			215,078,497			218,999,367			216,029,171			191,994,398
	Result after taxation			0.72			0.00			0.52			(0.57)
*The Group initially applied IFRS 16 at January 1, 2019, using the modified retrospective approach. Under this approach, comparative information is not restated. Due to the increased significance of inventory, the Group has re-presented the comparative information related to bunker inventory to align with the current year presentation. ** The number of shares issued on 31 December 2019 is 220,024,713.

 

 

 

	EBITDA reconciliation (unaudited):
	(in thousands of USD)			Fourth Quarter 2019			Fourth Quarter 2018			Full Year 2019			Full Year 2018
	Profit (loss) for the period			154,163			279			112,230			(110,070)
	+ Net interest expenses			21,048			20,905			90,134			70,652
	+ Depreciation of tangible and intangible assets			84,558			78,483			337,702			270,693
	+ Income tax expense (benefit)			1,201			(22)			602			238
	EBITDA (unaudited)			260,970			99,645			540,668			231,513
	+ Net interest expenses JV			1,185			1,322			4,588			3,635
	+ Depreciation of tangible and intangible assets JV			4,945			4,555			18,461			18,071
	+ Income tax expense (benefit) JV			362			354			1,581			1,598
	Proportionate EBITDA			267,462			105,876			565,298			254,817
	Proportionate EBITDA per share:
	(in USD per share)			Fourth Quarter 2019			Fourth Quarter 2018			Full Year 2019			Full Year 2018
	Weighted average number of shares (basic)			215,078,497			218,999,367			216,029,171			191,994,398
	Proportionate EBITDA			1.24			0.48			2.62			1.33
All figures, except for Proportionate EBITDA, have been prepared under IFRS as adopted by the EU (International Financial Reporting Standards) and have not been audited nor reviewed by the statutory auditor.

 

 

Difference between the preliminary results and final results

 

The final result of USD 112 million reported today is USD 7 million lower than the preliminary results reported on 30 January of USD 119 million. This difference is mainly due to the reversal of the capital gain on the sale and lease back of the 3 VLCCs (USD 9.3 million) originally recognized in full at year-end 2019 but which needs to be spread over the leaseterm. This change has no cash impact and no impact on the dividends related to 2019.

 

 

Procedures of the independent auditor

 

The statutory auditor, KPMG Bedrijfsrevisoren - Réviseurs d’Entreprises, represented by Patricia Leleu, has confirmed that the audit procedures, which have been substantially completed, have not revealed any material misstatement in the accounting information included in the Company’s annual announcement.

 

 

New Governance Structure

 

Following the coming into force of the new Belgian Code of Companies and Associations  ("BCCA"), Euronav formalized its two-tier corporate structure in line with the BCCA. These changes will not materially affect the governance of the company going forward. The former Board of Directors which will be composed of the same members will be called the Supervisory Board and the former members of the Executive committee will now compose the Management Board.

 

 

2019 Dividend

 

The Supervisory Board and Management Board of Euronav are proposing to pay a final cash dividend of USD 0.29 per share subject to shareholder approval at the AGM which will be held on 20 May 2020. This payment covers the second half of the financial year to December 2019. This payment includes Euronav’s fixed dividend policy of USD 0.12 per year (USD 0.06 for second half 2019). It also reflects a commitment by both the Management Board and Supervisory Board to target a return of 80% of net income to shareholders in the form of cash dividends and/or buy backs.

 

According to the Company’s dividend policy, it will be proposed to the Annual Shareholder’s meeting of 20 May 2020 to distribute a gross dividend in the amount of USD 0.29 per share to all shareholders. Subject to shareholder approval, this would bring the total gross dividend paid in relation to 2019 to USD 0.35.

 

Taking into account the dividend of USD 0.06 per share already paid in October 2019, a balance of an amount of USD 0.29 per share will be payable as from 9 June  2020. The share will trade ex-dividend as from 28 May 2020 (record date 29 May 2020). The dividend to holders of Euronav shares listed and tradeable on Euronext Brussels will be paid in EUR at the USD/EUR exchange rate of the record date.

 

With the coming into force of the BCCA in 2020, Euronav can distribute dividends on a quarterly basis starting from Q1 2020 and therefore repatriate cashflows to shareholders more quickly (than in the past) and be more aligned to the tanker cycle.

 

 

Euronav highlights in 2019

 

January

As part of its capital allocation strategy, Euronav continued purchasing its own shares on NYSE and Euronext Brussels stock exchanges. Several buybacks took place between January and July 2019.

 

On 9 January 2019 Euronav delivered the Suezmax Felicity (2009 – 157,667 dwt) to a global supplier and operator of offshore floating platforms. The vessel was converted into a FPSO and therefore left the worldwide trading fleet.

 

On 17 January 2019, for the second consecutive time, Euronav was included in the Bloomberg International Gender-Equality index.

 

February

On 11 February 2019 Euronav entered into a sale agreement regarding the LR1 Genmar Compatriot (2004 – 72,768 dwt) for USD 6.75 million. A capital gain was recorded of approximately USD 0.4 million.

 

April

On 12 April 2019 Euronav NV registered a branch office in Geneva, Switzerland with the purpose to conduct fleet supporting activities.

 

May

On 9 May 2019 Euronav CFO Hugo De Stoop stepped up to succeed Paddy Rodgers as CEO of the Company.

 

On 9 May 2019 the Annual General Meeting of Shareholders approved the annual gross dividend of USD 0.12 per share as proposed by the Board of Directors as well as the appointment of Anita Odedra and Carl Trowell to the Board.

 

June

On 14 June 2019 Euronav Luxembourg S.A. successfully completed a tap issue of USD 50 million under its existing senior unsecured bond with ISIN NO0010793888. The tap was placed at 101 to par value and has taken the total outstanding of the bond to USD 200 million with a maturity date in May 2022.

 

July

On 1^st of July 2019 Euronav announced share repurchases during the first semester of 2019 totaling 3.28 million shares or 1.5% of the total number of shares outstanding.

 

August

On 6 August 2019 Euronav sold and delivered the VLCC vessel VK Eddie (2005 – 305,261 dwt) to a global supplier and operator of offshore floating platforms. The vessel was converted into an FPSO and therefore left the worldwide trading fleet. A capital gain on the sale of approximately USD 14.4 million was recorded during the third quarter.

 

October

Euronav announced that Mrs. Lieve Logghe would join the Company as Chief Financial Officer, succeeding Hugo De Stoop who was appointed CEO in May 2019.

 

November

Euronav announced it has entered into a joint venture together with affiliates of Ridgebury Tankers and clients of Tufton Oceanic. Each 50%-50% joint venture company has acquired one Suezmax vessel, Bari and Bastia. Euronav provided financing for the joint ventures on commercially attractive terms.

 

December

On 30 December 2019 Euronav delivered three VLCC vessels to Taiping & Sinopec Financial Leasing Ltd Co as part of a sale and leaseback transaction. The three VLCCs are the Nautica (2008 – 307,284), Nectar (2008 – 307,284) and Noble (2008 – 307,284). The vessels were sold for a net en-bloc purchase price of USD 126 million. Euronav has leased back the three vessels under a 54-months bareboat contract at an average rate of USD 20,681 per day per vessel. At the end of the bareboat contract, the vessels will be redelivered to their new owners.

 

 

Events occurred after the end of the financial year ending 31 December 2019  

 

On 9 January 2020 Euronav provided guidance to its returns to shareholders policy. Total return to shareholders policy will target 80% of net income to be returned to shareholders including the final 2019 dividend and for Q1 2020 results onwards. From Q1 2020 dividends will be paid quarterly with the ex-date and payment profile following within a month of the announcement.

 

22 January 2020 saw Euronav, for the third consecutive year, included in the Bloomberg International Gender-Equality Index. The reference index measures gender equality across internal company statistics, employee policies, external community support and engagement, and gender-conscious product offerings. Recognition by Bloomberg is an important accreditation to our Company on the continued progress made in supporting and maintaining gender equality throughout Euronav.  

 

On 30 January 2020, the International Health Regulations Emergency Committee of the World Health Organisation declared the outbreak of the Coronavirus, a “public health emergency of international concern” following the outbreak of a new strain of coronavirus, (“COVID-19”).

 

On 12 February 2020, the announcement was made of the acquisition of three VLCCs currently under construction in South Korean yard DSME. The three VLCCs are being acquired for an aggregate purchase price of USD 280.5 million or USD 93.5 million per unit. The vessels are due to be delivered early in the fourth quarter 2020 and in January and February 2021 respectively.

 

On 25 February 2020, Euronav announced the sale of the Suezmax vessel M/T Finesse (2003 – 149,994 dwt) for USD 21.8 million.

 

On 6 March 2020, Euronav announced another purchase of a VLCC under construction at the DSME yard for USD 93 million with delivery in Q1 2021.

 

 

 

Covid-19 update and impact on oil demand

 

The wellbeing and health of our staff, seafarers, their families and the broader community is Euronav’s priority. We have applied a number of precautionary measures across our offices and fleet in order to protect our employees and seafarers in response to Covid-19. To date, Euronav’s operations have not been materially impacted.

 

A combination of rapidly increasing crude supply and a buoyant market for crude storage is underpinning a very robust tanker freight market and strong cash generation presently. Management is however cognisant that there is currently a substantial reduction in crude demand due to the worldwide impact of the Covid-19 outbreak and more specifically to the policies to restrict the movement of people. As a consequence, a significant portion of the oil currently produced and transported is destined to crude inventories. The build-up of these inventories could in the future impact the demand for the oil transportation sector and in particular the tanker markets.  At the same time, a lower crude price environment is beneficial for the shipping companies in general as it leads to lower fuel costs.

 

The LSFO (low sulphur fuel oil) purchased by Euronav last year in anticipation of IMO 2020 price volatility and which has not been consumed yet will be subject to a mark to market valuation at the end of the first quarter and will lead to a write down  as the current market is significantly below the acquisition cost. The purchase of this compliant fuel provided protection for Euronav in Q4 2019 and Q1 2020 during periods of very high fuel spreads and Euronav is currently using cheaper feedstock from buying LSFO in the open market. Euronav will provide more detail with the publication of the Q1 results in May.

 

Overall and at this stage it is still too early to quantify the impact due to the Covid-19 outbreak on our future results and any forward-looking statements should be regarded with caution because of the inherent uncertainties in economic trends and business risks related to the current Covid-19 outbreak.   

 

Euronav does not only maintain a strong balance sheet with which to navigate tanker market cycles but also a very strong liquidity with more than 1 billion USD available in the form of cash and of undrawn  revolving credit facilities. Thanks to this strong balance sheet combined with the current high freight market, we are confident about the future and will continue to monitor the situation carefully and remain fully committed to adapt our actions in the best interest of our stakeholders. 

 

 

 

Financial calendar 2020

 

Thursday 16 April 2020

Annual report 2019 available on website

 

Thursday 7 May 2020

Announcement of first quarter results 2020

 

Wednesday 20 May 2020

Annual General Meeting of Shareholders 2020

 

Thursday 6 August 2020

Announcement of final half year results 2020

 

Tuesday 11 August 2020

Half year report 2020 available on website

 

Thursday 5 November 2020

Announcement of third quarter results 2020

 

Thursday 4 February 2021

Announcement of fourth quarter results 2020

 

 

 

 

The Supervisory Board, represented by Carl E. Steen, its Chairman, and the Management Board, represented by Hugo De Stoop, Chief Executive Officer, and Lieve Logghe, Chief Financial Officer, hereby confirm, in the name and for account of Euronav that, to the best of their knowledge the consolidated financial statements as of and for the year ended 31 December 2019 presented herein were established in accordance with applicable accounting standards (IFRS as adopted by the EU) and give a true and fair view, as defined by these standards, of the assets, liabilities, financial position and results of Euronav NV.

 

On behalf of the Supervisory Board and the Management Board:

 

 

Hugo De Stoop                                                  Carl E. Steen

Chief Executive Officer                                       Chairman of the Supervisory Board

 

 

 

 

Forward-Looking Statements

 

Matters discussed in this press release may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The Company desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words "believe", "anticipate", "intends", "estimate", "forecast", "project", "plan", "potential", "may", "should", "expect", "pending" and similar expressions identify forward-looking statements.

 

The forward-looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, our management's examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections.

 

In addition to these important factors, other important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the failure of counterparties to fully perform their contracts with us, the strength of world economies and currencies, general market conditions, including fluctuations in charter rates and vessel values, changes in demand for tanker vessel capacity, changes in our operating expenses, including bunker prices, dry-docking and insurance costs, the market for our vessels, availability of financing and refinancing, charter counterparty performance, ability to obtain financing and comply with covenants in such financing arrangements, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, vessels breakdowns and instances of off-hires and other factors. Please see our filings with the United States Securities and Exchange Commission for a more complete discussion of these and other risks and uncertainties.

 

 

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Contact:

Brian Gallagher – Head of IR, Research and Communications & Management Board member                                                               

Tel: +44 20 78 70 04 36                                                                        

Email: IR@euronav.com

 

 

 

Annual report 2019 available on website: Thursday, 16 April 2020

 

 

About Euronav

Euronav is an independent tanker company engaged in the ocean transportation and storage of crude oil. The Company is headquartered in Antwerp, Belgium, and has offices throughout Europe and Asia. Euronav is listed on Euronext Brussels and on the NYSE under the symbol EURN. Euronav employs its fleet both on the spot and period market. VLCCs on the spot market are traded in the Tankers International pool of which Euronav is one of the major partners. Euronav’s owned and operated fleet consists of 2 V-Plus vessels, 42 VLCCs (with four more due for delivery Q4 2020/Q1 2021), 26 Suezmaxes (two of which are in a joint venture) and two FSO vessels (both owned in 50%-50% joint venture).

 

Regulated information within the meaning of the Royal Decree of 14 November 2007.

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