Hafnia Tankers Ltd. - otc.nfmf.nootc.nfmf.no/public/news/16591.pdf · Prepaid costs relating to future share issuance ... Hafnia Tankers Ltd. ... while the balance of Hafnia Tankers

Hafnia Tankers Ltd.

Interim Report

For the Three and Nine Months Ended September 30, 2016 and 2015

Hafnia Tankers Ltd.

Condensed Consolidated Balance Sheet

(Unaudited)

2

As of

September 30 December 31

Note 2016 2015

(in thousands of U.S. dollars)

ASSETS

Current assets

Cash and cash equivalents 106,673 122,856

Accounts receivable 5,514 12,919

Prepaid expenses and other receivables 10,715 13,282

Inventories 4,428 4,496

Total current assets 127,330 153,553

Non-current assets

Vessels and dry dock 4 973,307 845,245

Vessels under construction 4 41,163 96,393

Goodwill 3 6,003 6,003

Time charters acquired 3 1,045 4,141

Contract values vessels under construction 3 479 4,279

Prepaid financing fee - 920

Interests in associates 2,231 4,108

Pool working capital deposit 5 25,800 24,400

Deferred tax 303 338

Total non-current assets 1,050,331 985,827

Total assets 1,177,661 1,139,380

LIABILITIES & EQUITY

Current liabilities

Bank loans 6 47,355 41,340

Accounts payable 2,791 3,433

Accrued expenses and other payables 8,492 12,261

Deferred revenue 2,803 -

Tax payable 1,159 68

Total current liabilities 62,600 57,102

Non-current liabilities Bank loans 6 508,782 462,973

Derivatives 11 5,219 2,702

Total non-current liabilities 514,001 465,675

Total liabilities 576,601 522,777

Shareholders' equity

Issued, authorized and paid in share capital

Share capital 339 339

Additional paid in capital 352,423 351,743

Treasury shares (258) (200)

Accumulated profits 43,979 53,077

Cash flow hedging reserve (3,401) (1,767)

Translation reserve (34) (34)

Equity holders of the parent 393,048 403,158

Non-controlling interests 208,012 213,445

Total equity 601,060 616,603

Total liabilities and equity 1,177,661 1,139,380

Hafnia Tankers Ltd.

Condensed Consolidated Statement of Profit

(Unaudited)

3

For the three months ended For the nine months ended

September 30 September 30

Note 2016 2015 2016 2015

(in thousands of U.S. dollars) (in thousands of U.S. dollars)

Revenue

Revenue 44,375 59,578 149,326 158,740

44,375 59,578 149,326 158,740

Operating expenses

Vessel operating costs (18,213) (14,602) (53,234) (39,242)

Technical management fee (1,255) (1,018) (3,573) (2,761)

Charter hire 7 (8,146) (8,712) (24,125) (26,654)

Voyage expenses (154) (220) (428) (499)

Depreciation 4 (11,804) (9,062) (32,697) (23,694)

General and administrative expenses 8 (3,205) (3,281) (9,149) (9,693)

Total operating expenses (42,777) (36,896) (123,206) (102,543)

Other operating income

Other operating income 1,081 1,906 4,365 1,906

Share of associates profit 278 510 920 1,709

1,359 2,416 5,285 3,615

Operating profit 2,957 25,098 31,405 59,812

Financial expenses and income

Financial expenses (5,244) (4,360) (15,378) (11,937)

Financial income 5 40 40 244

Profit before tax (2,282) 20,778 16,067 48,119

Taxes (30) (104) (1,163) (696)

Profit for the period (2,312) 20,674 14,904 47,423

Attributable to:

Equity holders of the parent (1,501) 13,136 9,674 30,688

Non-controlling interests (811) 7,538 5,230 16,735

(2,312) 20,674 14,904 47,423

Earnings per share attributable to equity

holders of the parent:

Basic earnings per share (USD) 9 (0.04) 0.39 0.28 0.91

Diluted earnings per share (USD) 9 (0.04) 0.39 0.28 0.91

Shares used in computing earnings per

share attributable to equity holders of

the parent:

Basic (in thousands) 9 33,946 33,946 33,946 33,559

Diluted (in thousands) 9 33,946 33,946 33,946 33,559

Hafnia Tankers Ltd.

Condensed Consolidated Statement of Comprehensive Income

(Unaudited)

4



2016 2015 2016 2015


Profit for the period (2,312) 20,674 14,904 47,423

Other comprehensive (loss)

Items that may be reclassified

subsequently to profit or (loss):

Fair value (losses) on cash flow hedges (323) (1,724) (3,328) (3,063)

Reclassification to profit or (loss) related

to cash flow hedges 270 270 811 270

Exchange differences on translating

foreign operations - - - -

Other comprehensive (loss) after tax (53) (1,454) (2,517) (2,793)

Total comprehensive income (2,365) 19,220 12,387 44,630

Attributable to:

Equity holders of the parent (1,535) 12,208 8,041 28,885

Non-controlling interests (830) 7,012 4,346 15,745

(2,365) 19,220 12,387 44,630

Hafnia Tankers Ltd.

Condensed Consolidated Statement of Changes in Equity

(Unaudited)

5

Attributable to the equity holders of the parent

Share Additional Cash flow Non-

capital paid in Accumulated Treasury hedging Translation controlling Total

(in thousands of U.S. dollars) nominal capital profits shares reserve reserve Total interests equity

Balance as of January 1, 2015 323 339,800 12,618 - - (23) 352,718 172,495 525,213

Profit for the period - - 30,688 - - - 30,688 16,735 47,423

Other comprehensive (loss) for the period - - - - (1,802) - (1,802) (991) (2,793)

Total comprehensive income - - 30,688 - (1,802) - 28,885 15,744 44,629

Capital contribution 16 13,183 - - - - 13,199 20,831 34,030

Cost related to capital contribution - (850) - - - - (850) - (850)

Prepaid costs relating to future share issuance - (885) - - - - (885) - (885)

Purchase of treasury shares - - - (200) - - (200) - (200)

Share-based compensation - - 1,891 - - - 1,891 - 1,891

Reallocation of non-controlling interests - 611 (666) - - - (55) 55 -

16 12,059 1,225 (200) - - 13,100 20,886 33,986

Balance as of September 30, 2015 339 351,859 44,532 (200) (1,802) (23) 394,705 209,125 603,830

Balance as of January 1, 2016 339 351,743 53,077 (200) (1,767) (34) 403,158 213,445 616,603

Profit for the period - - 9,674 - - - 9,674 5,230 14,904

Other comprehensive (loss) for the period - - - - (1,634) - (1,634) (883) (2,517)

Total comprehensive income - - 9,674 - (1,634) - 8,040 4,347 12,387

Expensed cost relating to share

issuance from previous periods - 1,048 - - - - 1,048 - 1,048

Purchase of treasury shares - - - (58) - - (58) - (58)

Share-based compensation - - 2,027 - - - 2,027 - 2,027

Dividend paid, $0.592 per share - - (30,947) - - - (30,947) - (30,947)

Reallocation of non-controlling interests - (368) 10,148 - - - 9,780 (9,780) -

- 680 (18,772) (58) - - (18,150) (9,780) (27,930)

Balance as of September 30, 2016 339 352,423 43,979 (258) (3,401) (34) 393,048 208,012 601,060

Hafnia Tankers Ltd.

Condensed Consolidated Statement of Cash Flow

(Unaudited)

6

For the nine months ended

September 30

Note 2016 2015


Operating activities

Profit for the period 14,904 47,423

Depreciation 4 32,697 23,694

Amortization of time charters acquired 3 3,096 3,478

Share-based compensation 2,027 1,891

Expensed cost relating to share issuance from previous periods 1,048 -

Financial expenses 15,378 11,937

Tax expense 1,163 696

Share of associates profit 1,880 (1,709)

72,193 87,410

Changes in assets and liabilities:

Decrease / (increase) in inventories 68 (2,358)

Decrease / (increase) in accounts receivable 7,402 (2,442)

Decrease / (increase) in prepaid expenses and other receivables 1,169 (10,789)

(increase) in pool working capital deposit 5 (1,400) (5,550)

(decrease) / increase in accounts payable (607) 3,235

(decrease) / increase in accrued expenses and other payables (2,545) 4,975

Increase in deferred income 2,803 1,227

6,890 (11,702)

Financial expenses paid (16,602) (11,765)

Taxes paid (37) (393)

Net cash inflow from operating activities 62,444 63,550

Investing activities

Payments for vessels under construction (97,552) (136,808)

Payments for vessels including drydock (4,177) (142,790)

Net cash (outflow) from investing activities (101,729) (279,598)

Financing activities

Bank loan repayment (57,080) (45,393)

Draw down on credit facility 113,717 273,453

Cost relating to share issuance - (1,539)

Prepaid financing fee (2,495) (4,818)

Dividend paid (30,947) -

Proceeds from share capital increase - 34,030

Purchase of treasury shares (58) (200)

Net cash (outflow) / inflow from financing activities 23,137 255,533

Net cash flow from operating, investing and financing activities (16,148) 39,485

Cash and cash equivalents at January 1 122,856 73,746

Effects of exchange rate changes on the balance of cash held in foreign

currencies (35) (35)

Cash and cash equivalents at September 30 106,673 113,196

Hafnia Tankers Ltd.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

7

(All amounts other than share data are provided in thousands of U.S. dollars, unless otherwise indicated)

Consolidated Financial Statements

1 — General Information

Hafnia Tankers Ltd. (the “Company”) is a private limited company incorporated on October 15, 2013 in the Republic of

the Marshall Islands.

The Company and its subsidiaries (together, the “Group”) provide seaborne transportation of petroleum products

worldwide.

The Company currently holds Class A Units representing approximately 64.9% of the outstanding membership interests

of the Company’s direct subsidiary Hafnia Tankers LLC, while the balance of Hafnia Tankers LLC’s outstanding

membership interests consists of exchangeable Class B and Class C Units held by existing investors representing an

interest of approximately 34.8% and 0.3%, respectively, which are presented as non-controlling interests in the

Company’s financial statements.

2 — Accounting Policies

Basis of Preparation

These unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2016

and 2015 have been prepared in accordance with International Accounting Standard (“IAS”) 34 “Interim Financial

Reporting” as issued by the International Accounting Standards Board (“IASB”). Certain information and footnote

disclosures required by International Financial Reporting Standards as issued by the IASB (“IFRS”) for a complete set of

annual financial statements have been omitted, and therefore, these unaudited condensed consolidated financial

statements should be read in conjunction with the Group’s annual consolidated financial statements for the year ended

December 31, 2015.

Accounting Policies

The same accounting policies and methods of computation have been followed in these condensed consolidated financial

statements as were applied in the preparation of the Group’s financial statements for the year ended December 31, 2015,

except for the adoption of accounting policies required by IFRS standards effective for accounting periods beginning after

January 1, 2016. The new standards have not had any material effect on the Group’s financial statements.

Accounting Standards and Interpretations Not Yet Adopted

The IASB has issued new or revised accounting standards (IAS and IFRS) and interpretations (IFRICs) that are not

compulsory for the Group in the preparation of the financial statements for the current period. None of them are expected

to have a material impact on the financial reporting for the Group.

Hafnia Tankers Ltd.


(Unaudited)

8

3 — Intangible Assets

Contract values

vessels under Time charters

(in thousands of U.S. dollars) Goodwill construction acquired Total

Cost

Balance at January 1, 2015 6,003 47,932 13,315 67,250

Addition - - - -

Disposals - (21,383) (982) (22,365)

Cost at December 31, 2015 6,003 26,549 12,333 44,885

Accumulated amortization

Balance at January 1, 2015 - (28,673) (4,657) (33,330)

Amortization - (14,980) (4,517) (19,497)

Disposals - 21,383 982 22,365

Accumulated amortization at December 31, 2015 - (22,270) (8,192) (30,462)

Carrying amount at December 31, 2015 6,003 4,279 4,141 14,423

Cost


Addition - - - -

Disposals - (16,224) - (16,224)

Cost at September 30, 2016 6,003 10,325 12,333 28,661

Accumulated amortization

Balance at January 1, 2016 - (22,270) (8,192) (30,462)

Amortization - (3,800) (3,096) (6,896)

Disposals - 16,224 - 16,224

Accumulated amortization at September 30, 2016 - (9,846) (11,288) (21,134)

Carrying amount at September 30, 2016 6,003 479 1,045 7,527

Goodwill has been allocated for impairment testing purposes to the following cash-generating units (CGUs), short-

range (“SR”), medium-range (“MR”) and long-range 1 (“LR1”). As of September 30, 2016, the fair value less cost to

sell the LR1 fleet was greater than its carrying amount, and the value in use test for the SR and MR CGUs was greater

than its carrying amount and thus no impairment losses have been recognized during the period ended September 30,

2016.

Contract values for vessels under construction are related to newbuild contracts which were acquired as a result of the

merger between BTS Tanker Partners Limited and Hafnia Tankers LLC on December 31, 2013 (the “Combination”).

The value of the contracts is added to the cost of vessels under construction on a straight line until the time when the

vessels are delivered. The final vessel is expected to be delivered in the first quarter of 2017.

Time charters acquired are related to time charter contracts which were acquired as a result of the Combination. The

value of the contracts is amortized on a straight line over the remaining contract period. The amortization expense of

USD 3,096 for the period ended September 30, 2016 is recognized as charter hire. The final time charter contract

acquired is expected to run until the second quarter of 2017.

Hafnia Tankers Ltd.


(Unaudited)

9

4 — Tangible Assets

Vessels under

(in thousands of U.S. dollars) Vessels Dry dock construction Total

Cost


Additions 136,653 8,254 203,674 348,581

Transfers 256,390 5,600 (261,990) -

Disposals - (725) - (725)

Cost at December 31, 2015 890,029 24,636 96,393 1,011,058

Accumulated depreciation

Balance at January 1, 2015 (32,513) (3,728) - (36,241)

Depreciation (29,713) (4,191) - (33,904)

Disposals - 725 - 725

Accumulated depreciation at December 31, 2015 (62,226) (7,194) - (69,420)

Carrying amount at December 31, 2015 827,803 17,442 96,393 941,638

Cost

Balance at January 1, 2016 890,029 24,636 96,393 1,011,058

Additions 328 3,849 101,352 105,529

Transfers 153,382 3,200 (156,582) -

Disposals - (2,095) - (2,095)

Cost at September 30 2016 1,043,739 29,590 41,163 1,114,492

Accumulated depreciation

Balance at January 1, 2016 (62,226) (7,194) - (69,420)

Depreciation (28,617) (4,080) - (32,697)

Disposals - 2,095 - 2,095

Accumulated depreciation at September 30, 2016 (90,843) (9,179) - (100,022)

Carrying amount at September 30, 2016 952,896 20,411 41,163 1,014,470

Vessels are pledged to secure the bank loans of the Group.

In accordance with IAS 36 Impairment of Assets, the Company has determined its cash-generating units (CGUs) based

on the vessel classes, namely SR, MR and LR1. As of September 30, 2016, the fair value less cost to sell of the LR1

fleet was greater than its carrying amount. However, the fair value less cost to sell of the SR and the MR vessels were

less than their carrying amounts and accordingly, a value in use calculation was performed. The significant assumptions

applied in determining the value in use of the SR and MR fleet are the future charter rates, vessel operating expenses

and the discount rate. The Company estimated the future cash flows of the SR and MR CGUs based on a combination

of the current time charter rates for the next three years and the most recent ten-year historical average for one-year time

charter rates for periods thereafter. The Company estimated the operating expenses based on budgets agreed with third

party technical managers for 2016 adjusted for an escalation factor. The future cash flows were then discounted to their

present value.

The value in use calculation was greater than the carrying amount for both SR and MR vessels and as a result of this

testing, no impairment charge was recorded.

Vessels under construction

As of September 30, 2016, the Group has three vessels under construction. These vessels are expected to be delivered to

the Group no later than the first quarter of 2017.

The contractual obligation arising from these newbuild contracts amounted to USD 70,378 as of September 30, 2016.

Hafnia Tankers Ltd.


(Unaudited)

10

5 — Other Assets

As of


2016 2015


Deposit of working capital to the pools, long term 25,800 24,400

25,800 24,400

Participating in pools requires a deposit of working capital. The deposit ranges from USD 600 to USD 1,000 per vessel.

The deposit is paid upon entrance to the pool and is repaid when the pool is exited. The amount is non-interest bearing.

6 — Bank Loans

In February 2016, the Group signed a USD 360,000 credit facility. The facility refinanced an existing USD 340,584

credit facility. The credit facility will mature in March 2023 and is priced at LIBOR plus a margin of 2.25%. The

refinanced USD 360,000 credit facility has in accordance with IFRS 9 been treated as a modification to the previous

USD 340,584 credit facility.

For the nine months ended September 30, 2016, the Group drew down USD 21,000 on the USD 236,775 credit facility

and USD 65,550 on the USD 360,000 credit facility to finance newbuild vessels delivered in the quarter.

The interest rates on the drawn amounts are LIBOR plus a margin ranging from 2.25% to 2.60% and are to be repaid in

quarterly installments with a balloon payment at the end of the seventh year.

The drawn amounts are secured by first priority mortgages on vessels.

The drawn amounts are subject to the following significant financial covenants:

Working capital above zero

A minimum liquidity above USD 10,000 and above 5% of total debt

Equity above USD 100,000 and above 30% of the total assets

The Group was fully compliant with all loan covenants at September 30, 2016.

The Group is subject to a minimum security value clause under which the vessel values must not exceed a percentage of

the debt. The Group was fully compliant with this clause at September 30, 2016.

The following table summarizes the current contractual maturities of the Group’s bank loans and presents the total

principal amount based on the earliest date on which the Group can be required to pay.

As of September 30, 2016 <1 year 1-5 years >5 years Total


Bank loans 47,355 191,524 317,258 556,137

As of December 31, 2015 <1 year 1-5 years >5 years Total


Bank loans 41,340 196,552 266,421 504,313

Hafnia Tankers Ltd.


(Unaudited)

11

7 — Charter Hire

The table below shows the Group’s time chartered-in vessel commitments as of September 30, 2016, assuming no off-

hire days:

Optional

Earliest extension Subject to Purchase

Type Delivery re-delivery period profit split option

MR 1-16-2014 12-24-2016 No Yes No

MR 1-16-2014 2-21-2017 No Yes No

MR 1-16-2014 5-11-2017 No Yes No

MR 9-15-2017 9-14-2025 2 years No Yes

MR 9-15-2017 9-14-2025 2 years No Yes

LR1 9-15-2012 9-5-2018 No No No

LR1 9-9-2012 8-29-2018 No No No

Year Minimum charter hire


2016 7,025

2017 18,328

2018 19,431

2019 11,607

2020 11,639

2021 11,607

2022 11,607

2023 11,607

2024 11,639

2025 8,173

Total as of September 30, 2016 122,663

Total as of December 31, 2015 133,710

8 — General and Administrative Expenses



2016 2015 2016 2015


Wages and salaries (638) (1,612) (3,514) (4,956)

Outsourced functions (83) (99) (283) (252)

Contributions to defined contribution plans (51) (53) (151) (150)

Other social security costs (6) (6) (18) (13)

Other administrative costs (277) (333) (908) (1,002)

Auditors, consultants and legal fees (1,478) (548) (2,249) (1,428)

(2,533) (2,651) (7,123) (7,801)

Share based compensation (non-cash) (672) (630) (2,026) (1,892)

(672) (630) (2,026) (1,892)

(3,205) (3,281) (9,149) (9,693)

Hafnia Tankers Ltd.


(Unaudited)

12

9 — Earnings Per Share

For the three months ended

September 30

2016 2015

Profit for the period (USD thousand) (2,312) 20,674

Consolidated profit attributable to non-controlling interests (811) 7,538

Profit attributable to equity holders of the parent (USD thousand) (1,501) 13,136

Weighted average number of shares (in thousands) 33,946 33,946

Diluted weighted average number of shares in issue (in thousands) 33,946 33,946

Earnings per share (USD) (0.04) 0.39

Diluted earnings per share (USD) (0.04) 0.39

For the nine months ended

September 30

2016 2015

Profit for the period (USD thousand) 14,904 47,423

Consolidated profit attributable to non-controlling interests 5,230 16,735

Profit attributable to equity holders of the parent (USD thousand) 9,674 30,688

Weighted average number of shares (in thousands) 33,946 33,559

Diluted weighted average number of shares in issue (in thousands) 33,946 33,559

Earnings per share (USD) 0.28 0.91

Diluted earnings per share (USD) 0.28 0.91

During the period ended September 30, 2016, potentially dilutive securities include 18,191,712 Class B Units and

162,911 Class C Units. The Class B Units and the Class C Units have not had a dilutive effect for the period ended

September 30, 2016. The Class B Units and the Class C Units are exchangeable on a one-for-one basis for the

Company’s common shares. The Class B Units and the Class C Units are considered in computing diluted profit or loss

per share on an “if-converted” basis. During the period ended September 30, 2016, a total of 2,300,000 warrants,

200,000 options and 34,291 Restricted Stock Units with a potential dilutive effect has been granted to employees. The

warrant and options have not had a dilutive effect in 2016 as they are not in the money.

10 — Categories of Financial Instruments

As of


2016 2015

Financial assets (in thousands of U.S. dollars)

Cash and cash equivalents 106,673 122,856

Receivables 34,228 40,122

Financial liabilities

Bank loans 556,137 504,313

Financial liabilities measured at amortised cost 8,766 12,974

Derivative instruments in designated hedge accounting relationships 5,219 2,702

Hafnia Tankers Ltd.


(Unaudited)

13

11 — Cash Flow Hedging

The Group has agreements to hedge part of the interest rate exposure to comply with the adopted Risk Management

Policy. The cost of the hedging instruments is paid over the period of the contracts.

The fair market value of the total hedging agreements as of September 30, 2016 was negative USD 5,219. The fair

market value of the hedging agreement is comprised of discounted premiums, negative USD 7,511, and the value of the

hedging instruments, USD 2,292.

12 — Fair Value Measurements

Except for the hedge agreements entered into in the second quarter of 2015 and the first quarter of 2016, no assets or

liabilities are measured at fair value after initial recognition, and the carrying values of financial instruments

approximate their respective fair values. Therefore, no additional disclosure related to fair value measurement has been

provided in these financial statements.

13 — Subsequent Events

There have not been any significant events after the balance sheet date at September 30, 2016.

The Condensed Consolidated Financial Statements were authorized for issuance by the Board of Directors on

November 17, 2016.

Documents

Hafnia Tankers Ltd. - otc.nfmf.nootc.nfmf.no/public/news/16591.pdf · Prepaid costs relating to future share issuance ... Hafnia Tankers Ltd. ... while the balance of Hafnia Tankers