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TTA announces impairments and write-downs

Back Sep 26, 2013

Bangkok, Thailand, 26 September 2013 -- Thoresen Thai Agencies Public Company Limited (“TTA”) announced, following a meeting by its Board of Directors, a number of non-cash impairments and write-downs that will be taken in TTA’s 2013 audited statements. The first non-cash impairment of approximately USD 150 million will be taken against the dry bulk shipping fleet owned by Thoresen Shipping Singapore Pte. Ltd. (“Thoresen Shipping”), TTA’s wholly owned dry bulk shipping subsidiary. The decision is a result of the prolonged downturn and resultant low freight rates in the dry bulk industry, which have negatively affected the company’s vessel values, some of which have been recorded at a higher investment cost.

TTA remains committed to Thoresen Shipping’s growth and its plans to acquire three to six vessels at reasonable prices over the next 12-18 months as part of a continuing fleet growth initiative. In June, Thoresen Shipping acquired seven-year old Oshima-built Supramax M.V. Thor Fearless, and in August, took delivery of new-build Supramax M.V. Thor Breeze. Thoresen Shipping’s owned fleet consists of 18 vessels with an average age of 10.8 years. Approximately 50% of Thoresen Shipping’s vessels are positioned in higher-yielding Atlantic routes, following the opening of the Company’s first European chartering office in Copenhagen, Denmark. Thoresen Shipping plans to open its second office outside of Asia in the US during the second quarter of the next fiscal year.

In addition, TTA’s Board of Directors also announced a non-cash impairment of approximately USD 5.6 million against its investment in Merton Group (Cyprus) Limited (“Merton”), through which it holds an indirect stake in Indonesian coal mine venture Qing Mei Pte. Ltd. (“Qing Mei”). Qing Mei’s potential value is closely linked to a project bid near its mine site, the results of which remain uncertain at this time. Because of this uncertainty, a write-down is being taken in line with conservative accounting principles. Finally, the Board decided to take an additional write down of approximately THB 530 million against goodwill related to TTA’s acquisition of Unique Mining Services Public Company Limited (“UMS”).

TTA’s Board of Directors took a number of factors into these decisions, such as examining, with the assistance of outside consultants, the fair value of the Group’s coal operations and assets. Accounting standards stipulate that the Company review the value in use of its assets on an annual basis and the decisions announced today are a function of TTA’s strict adherence to conservative financial reporting standards.

Commented TTA President & CEO M.L. Chandchutha Chandratat, “The impairments we are announcing today follow an extensive assessment by management, the Board, and external advisors. Although we did not plan on any additional significant impairment this past year, the dry bulk shipping industry did not rebound as per market or our expectations, while our local coal operations continue to face challenges that we felt needed to be reflected in our financial statements. As a result, we were forced to consider impairments.”

While these moves will certainly have a negative impact on our earnings this year, they are strictly non-cash items, which means there will be no effect on our future cash flow generation or liquidity position.”

Added TTA Executive Vice Chairman Mr. Chalermchai Mahagitsiri, “Despite the impairments we are announcing today, TTA remains healthy and has ample cash. Post the impairment, the book value of our dry bulk shipping fleet will be in line with its market value, much better positioning Thoresen Shipping to capitalise in a recovery, while our diversified coal operations have the potential to increase value significantly in the next fiscal year through some key strategic initiatives.

The Company’s diversification strategy is reaping strong rewards, positioning us for an improved fiscal 2014 and overall long-term profitability for years to come. Already in fiscal year 2013, we have reported three straight quarters of positive EBITDA on the back of a rebound at Mermaid Maritime Public Company Limited (“Mermaid”), which counterbalanced weak results from Thoresen Shipping. Petrolift, Inc. (“Petrolift”), our Philippines oil tanker investment, continues to contribute excellent results quarter in, quarter out. Our USD 10 million investment in Baconco Co., Ltd (“Baconco”) has grown many times in value, while our investment in Asia Offshore Drilling Ltd. (“AOD”) will contribute significantly to next year’s earnings, once all three rigs are fully operational. Likewise, our push to position more of Mermaid’s subsea vessels in the Middle East and the North Atlantic will also have a positive impact on our earnings in 2014. While these successes may not yet be fully reflected on our financial statements, they are nonetheless important indicators of the very positive prospects still ahead for our diversified portfolio of businesses.”