February 15, 2020 [Hellenic Shipping News] – Odfjell posted 4Q19 results this morning with EBITDA increasing to USD 50m thanks to improved spot rates towards the end of the quarter and improved COA rates and composition in the Tanker segment.

 
Terminals were said to be operating as normal regarding the virus in China, while the positive outlook was also reiterated for the short term QoQ improvement as well as for the longer period, driven by positive supply/demand balance. We will make minimal changes to our estimates and our long term Buy recommendation for the stock is likely to be reiterated.

Results spot on our expectations despite a disrupted start of 4Q

Odfjell reached EBITDA of USD 50m in 4Q19 (equity method), just as we predicted, under revenues of USD 216m (USD 222m our expectations). The start of 4Q was said to have been negatively impacted by the attacks on oil installations in Saudi Arabia that led to lower activity into the quarter, but the market recovered through reduced swing tonnage.
 
Spot rates improved towards the end of the quarter, while COA rates followed, as all contracts now include the bunker adjustment clauses. Terminals showed a significant improvement QoQ in EBITDA figures (USD 7.8m vs. USD 6.0m in 3Q19), but ended up with the bottom line slightly below the breakeven line. Nevertheless, the terminals that are located in China were said to be operating as normal regarding Coronavirus, but are monitored closely.
 

ST & LT Outlook Positive

The results in 1Q20 were guided to continue improvement driven by stronger contract portfolio and a continued recovery in the chemical tanker markets.
 
The long term projections are also unchanged and positive – the supply is forecasted to grow by a modest 1.5% in 2020 before adjusting for swing tonnage effect, while the 2% annual growth line on average should not be breached through 2022. Demand is still expected to significantly outpace the supply growth and is forecasted to grow by 5% on average by 2022. Unless the Coronavirus thrives.

Following the in-line report and continuously positive mood towards the chemical tanker market, we are likely to reiterate our Buy recommendation for the stock with minimal changes to estimates.

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