C
A N N UA L R E P O R T 2 0 1 5
TORM A/S · Tuborg Havnevej 18 · DK-2900 Hellerup · Denmark · Tel.: +45 3917 9200 · CVR: 22460218
TORM 2015
TORM’S RESTRUCTURING AND IMPACT
ON THE TORM A/S ANNUAL REPORT 2015
On 13 July 2015, TORM, its lenders and Oaktree Capital
Management (“Oaktree”) completed a comprehensive
restructuring (“Restructuring”) of TORM’s balance sheet
and a transformative merger between TORM and Oaktree.
In return for a vessel contribution by means of the shares in
OCM (Gibraltar) Njord Midco Ltd. (“Njord”), Oaktree
obtained a controlling equity stake in TORM of 62%. In
accordance with IFRS 10 and 3, Oaktree is considered to
control the combined entity, and the Restructuring has
therefore been accounted for as a reverse acquisition for
financial reporting purposes. This means that Njord is con-
sidered the accounting acquirer and the continuing report-
ing entity. For the period from 1 January 2015 to 13 July
2015 (“Restructuring Completion Date”), the financial infor-
mation presented by TORM in the consolidated financial
statements reflects the activity of Njord only, whereas the
period from the Restructuring Completion Date to 31
December 2015 reflects the combined activities of TORM
and Njord. Comparative figures for 2014 consist of the
activity of Njord only.
The Management and Financial review sections of the Annual
Report also contain pro forma figures for 2014 and 2015,
presenting TORM as if the Restructuring had been under-
taken as of 1 January 2014 and 1 January 2015, respectively.
The Management and Financial review sections (p. 4 – 47)
focus on the pro forma numbers, as they are deemed most
representative when evaluating both the Company’s
current and future financial performance and position. The
Financial review also contains a reconciliation between the
reported figures per the consolidated financial statements
(Income statement and Balance sheet) and the computed
pro forma figures, including the assumptions applied. The
Financial review also contains a brief review of the reported
figures.
In the Management review (p. 4 – 39), “TORM” or the
“Company” generally refers to pro forma figures adjusted
for non-recurring items for the combined group or for the
legal entity TORM A/S, unless stated otherwise.
In the Financial review (p. 40 – 47), references to the
historical financial statements of “TORM A/S” and “Njord”
are to the historical financial statements of Njord, the
accounting acquirer. References to the historical financial
statements of “Former TORM A/S” are to the historical
financial statements of TORM A/S, the accounting acquiree,
prior to the contribution of Njord.
SAFE HARBOR STATEMENTS AS TO THE FUTURE
Matters discussed in this release may constitute forward-
looking statements. Forward-looking statements reflect our
current views with respect to future events and financial
performance and may include statements concerning
plans, objectives, goals, strategies, future events or
performance, and underlying assumptions and statements
other than statements of historical facts. The words
“believe,” “anticipate,” “intend,” “estimate,” “forecast,”
“project,” “plan,” “potential,” “may,” “should,” “expect,”
“pending” and similar expressions identify forward-looking
statements.
The forward-looking statements in this annual report are
based upon various assumptions, many of which are based,
in turn, upon further assumptions, including without
limitation, management’s examination of historical
operating trends, data contained in our records and other
data available from third parties. Although the Company
believes that these assumptions were reasonable when
made, because these assumptions are inherently subject to
significant uncertainties and contingencies which are dif-
ficult or impossible to predict and are beyond our control,
the Company cannot guarantee that it will achieve or
accomplish these expectations, beliefs or projections.
Important factors that, in our view, could cause actual
results to differ materially from those discussed in the
forward-looking statements include the strength of the
world economy and currencies, changes in charter hire
rates and vessel values, changes in demand for “ton miles”
of oil carried by oil tankers, the effect of changes in OPEC’s
petroleum production levels and worldwide oil consump-
tion and storage, changes in demand that may affect
attitudes of time charterers to scheduled and unscheduled
dry-docking, changes in TORM’s operating expenses,
including bunker prices, dry-docking and insurance costs,
changes in the regulation of shipping operations, including
requirements for double hull tankers or actions taken by
regulatory authorities, potential liability from pending or
future litigation, domestic and international political con-
ditions, potential disruption of shipping routes due to acci-
dents, political events or acts by terrorists.
Forward-looking statements are based on management’s
current evaluation, and TORM is not under an obligation to
update and change such forward-looking statements
except as required by law.
TORM 2015
CONTENTS
3
INTRODUCTION 4
PEOPLE 22
TANKER SEGMENT 14
FINANCIAL REVIEW 40
HIGHLIGHTS
Introduction
Key figures
Highlights
Outlook 2016
Strategic ambition
SEGMENTS
Tanker Segment
Tanker Segment – supply and demand
Bulk Segment
4
6
8
10
12
14
16
18
ABOUT TORM
Restructuring
People
Corporate social responsibility
Risk management
Corporate governance
Board of Directors
Executive Management and Chief Financial Officer
Investor information
FINANCIAL STATEMENTS 2015
Financial review 2015
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated cash flow statement
Notes
Statement by Management
Independent auditor’s reports
Parent Company 2015
Fleet overview
Glossary
20
22
24
27
30
33
34
35
40
48
49
50
52
53
54
86
87
89
102
104
TORM A/S · Tuborg Havnevej 18 · DK-2900 Hellerup · Denmark · Tel.: +45 3917 9200 · www.torm.com · Founded: 1889 · CVR: 22460218
TORM 2015
4
Highlights
INTRODUCTION
2015 marked a step change for the product tanker sector in
general and for TORM in particular, with freight rates
reaching the highest levels since 2008 and a strong
performance by the Company's integrated operational plat-
form. Further, TORM finalized its financial restructuring
(“Restructuring”), thereby securing financial and strategic
flexibility.
RESTRUCTURING
On 13 July 2015, TORM, its lenders and Oaktree Capital
Management (“Oaktree”) completed a comprehensive
restructuring of TORM’s balance sheet and a transformative
merger between TORM and Oaktree. The Restructuring
included a contribution of 25 on-the-water vessels and six
newbuildings by the Oaktree-controlled entity OCM
(Gibraltar) Njord Midco Ltd. (“Njord”) and a restructuring of
TORM’s balance sheet resulting in a strong capital struc-
ture. In connection with the Restructuring, TORM complet-
ed a share capital increase, published a listing prospectus,
elected a new Board of Directors, implemented a reverse
stock split with a consolidation ratio of 1,500:1 and, on 13
January 2016, conducted a subsequent share capital
decrease of the Company’s treasury shares.
Due to reverse acquisition accounting, the consolidated
financial results reflect the activities for Njord only for 2014
and the period from 1 January 2015 to 13 July 2015, whereas
the remaining period of 2015 reflects the combined
activities of TORM and Njord. The Annual Report also
contains pro forma figures for 2014 and 2015, representing
TORM as if the Restructuring had been undertaken as of 1
January 2014 and 1 January 2015, respectively.
2015 PRODUCT TANKER PERFORMANCE –
ONE TORM PLATFORM
In 2015, TORM’s product tanker fleet realized average pro
forma spot TCE earnings of USD/day 22,986 or up 48%
year-on-year driven by a strong market throughout the
year. The overall operational result for 2015 was positive
with a pro forma EBITDA of USD 319m. This is an increase
compared to a pro forma number in 2014 of USD 119m and
is mainly driven by an increase in freight rates and further
impacted by a reduction in administrative expenses. The
pro forma profit before tax of USD 188m is an increase
compared to pro forma profit before tax in 2014 of USD 1m.
TORM obtained a pro forma RoIC of 14.1% in 2015.
In the first half of 2015, product tanker freight rates were
driven by increasing refinery margins, strong growth in US
demand for gasoline, long-haul movement of naphtha from
Europe to the Far East and newly added Middle East
refinery capacity. This led to strong freight rates in the first
half of 2015. In the second half of the year, refinery margins
and freight rates peaked during the third quarter. During
the fourth quarter, freight rates softened though remained
at strong levels.
TORM was well-positioned to take advantage of the strong
market and leveraged the Company’s integrated oper-
ational platform to perform well against the commercial
benchmarks. TORM believes that the strong commercial
performance is driven by a combin ation of well-maintained
vessels, a presence in all product tanker segments and its
integrated operating platform. This combination provides
the Company's commercial management team with
enhanced flexibility and responsiveness to customer
demands, thereby delivering TCE earnings and cash flows
above the average of industry peers.
TORM 2015 5
Highlights
introduction
5
Chairman of the Board, Christopher H. Boehringer (left), and CEO of TORM, Jacob Meldgaard (right).
We believe that TORM’s efficient integrated operational platform combined with
financial and strategic flexibility provides a basis for generating the best shareholder
returns in the product tanker segment,
says CEO Jacob Meldgaard.
PURE-PLAY PRODUCT TANKER OPERATOR
The Restructuring has provided TORM with sufficient
financial and strategic flexibility to pursue attractive
investment opportunities and dispose of non-core assets.
The planned wind-down of the Company's bulk activities
was completed with the sale of the two bulk vessels, TORM
Anholt and TORM Bornholm, thereby making TORM a
pure-play product tanker company.
In 2015, TORM also took delivery of three MR newbuildings
(TORM Thor, TORM Timothy and TORM Thunder) out of a
total of six newbuilding orders from Sungdong Shipbuilding
& Marine Engineering Co., Ltd. TORM has taken delivery of
the remaining three vessels during the first quarter of 2016.
***
FLEET EXPANSION
TORM has purchased three modern second-hand MR
vessels (TORM Loke (built 2007), TORM Atlantic (built
2010) and TORM Astrid (built 2012)) and ordered four
fuel-efficient LR2 newbuildings with an option for six
additional product tankers at Guangzhou Shipyard
International.
We believe that TORM’s efficient integrated operational
platform combined with financial and strategic flexibility
provides a basis for generating the best shareholder
returns in the product tanker segment.
Christopher H. Boehringer, Chairman of the Board
Jacob Meldgaard, CEO
TORM 2015
6
Highlights
KEY FIGURES*)
INCOME STATEMENT (USDm)
Revenue
Time charter equivalent earnings (TCE)
Gross profit
EBITDA
Operating profit (EBIT)
Financial items
Profit before tax
Net profit for the year
BALANCE SHEET (USDm)
Non-current assets
Total assets
Equity
Total liabilities
Invested capital
Net interest-bearing debt
Cash and cash equivalents
CASH FLOW (USDm)
From operating activities
From investing activities
thereof investment in tangible fixed assets
From financing activities
Total net cash flow
KEY FINANCIAL FIGURES***)
Gross margins:
TCE
Gross profit
EBITDA
Operating profit
Return on Equity (RoE)
Return on Invested Capital (RoIC) ****)
Equity ratio
Exchange rate DKK/USD, end of period
Exchange rate DKK/USD, average
SHARE-RELATED KEY FIGURES***)
Earnings per share, EPS (USD)
Diluted earnings/(loss) per share, EPS (USD)
Cash flow per share, CFPS (USD)
Share price in DKK, end of period (per share of DKK 15 each)
Number of shares, end of period (million)
Number of shares (excl. treasury shares), average (million)
2015
2014
2013
2015**)
2014**)
Pro forma
Pro forma
540
371
236
210
143
-16
127
126
1,579
1,867
976
891
1,588
612
168
214
-159
-254
75
130
68.6%
43.6%
38.9%
26.5%
17.4%
13.1%
52.3%
6.83
6.73
2.5
2.5
4.2
97.5
63.8
51.0
180
99
48
41
16
-4
13
13
537
626
470
156
573
103
38
17
-378
-378
397
36
23
11
6
5
2
0
2
2
184
202
201
1
200
-2
2
-11
-187
-187
200
2
54.9%
26.9%
22.8%
9.0%
3.8%
4.2%
48.3%
24.3%
20.5%
7.4%
1.7%
1.7%
75.0%
99.8%
6.12
5.62
0.4
0.4
0.5
-
39.6
32.5
5.41
5.62
0.2
0.2
-1.3
-
39.6
8.9
854
582
361
319
219
-31
188
187
1,579
1,867
976
891
794
414
172
119
24
-23
1
0
1,432
1,673
842
831
1,588
1,488
612
168
619
70
-
-
-
-
-
-
-
-
-
-
68.1%
42.3%
37.4%
25.6%
-
14.1%
52.2%
21.7%
14.9%
3.0%
-
1.6%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
*)
Key figures only consist of three years, as OCM (Gibraltar) Njord Midco Ltd. (the reporting entity) was incorporated on 30 April 2013.
**)
Please refer to ”Financial review” on page 40 for further description of pro forma figures.
***) Key figures are calculated in accordance with recommendations from the Danish Society of Financial Analysts.
****) Return on Invested Capital is defined as: Operating profit less tax expenses divided by average Invested capital, defined as average of beginning and
ending balances of (equity plus Net interest bearing debt less Non-operating assets).
TORM 2015 TORM’s identified key performance drivers – our strategic
outlook, our experienced people and our attention to detail.
Highlights
STRATEGIC OUTLOOK
7
STRATEGIC OUTLOOK
EXPERIENCED PEOPLE
ATTENTION TO DETAIL
TORM 2015 8
Highlights
HIGHLIGHTS
The positive market sentiments that started in the fourth quarter of 2014 continued
throughout 2015 with freight rates reaching the highest levels since 2008. The comple-
tion of TORM’s Restructuring has provided TORM with financial and strategic flexibility.
TORM realized a pro forma EBITDA of USD 319m and a RoIC of 14% in 2015, when
adjusting for the Restructuring,
says CEO Jacob Meldgaard.
• On 13 July 2015, TORM completed the Restructuring
• On 13 July 2015, TORM, its lenders and Oaktree com-
including the contribution of 31 vessels by the Oaktree-
controlled entity OCM (Gibraltar) Njord Midco Ltd.
(“Njord”). Due to reverse acquisition accounting, the
consolidated financial results reflect the activities for
Njord only for 2014 and the period from 1 January 2015
to 13 July 2015, whereas the remaining period of 2015
reflects the combined activities of TORM and Njord. The
Annual Report also contains pro forma figures for 2014
and 2015, presenting TORM as if the Restructuring had
been undertaken as of 1 January 2014 and 1 January
2015, respectively.
• In 2015, the Company realized a pro forma EBITDA of
USD 319m (2014, pro forma: USD 119m) and reported a
positive EBITDA of USD 210m. The 2015 pro forma profit
before tax amounted to USD 188m (USD 1m) with the
reported number being USD 127m. The performance is in
line with the forecasts provided as of 11 November 2015.
• In the first half of 2015, product tanker freight rates were
driven by increasing refinery margins, strong growth in
US demand for gasoline, long-haul movement of naphtha
from Europe to the Far East and newly added Middle
East refinery capacity. Refinery margins and freight rates
peaked during the third quarter, while freight rates
softened during the fourth quater though remained at
strong levels. For the full year 2015, TORM’s spot rates
reached the highest levels since 2008 with pro forma
spot rates of USD/day 22,986 (USD/day 15,565). The pro
forma gross profit for the Tanker Division was USD 365m
(USD 171m), corresponding to an increase of USD 194m
year-on-year, which was primarily due to increased
freight rates.
• In 2015, TORM completed the wind-down of its bulk
activities with the sale of the last two bulk vessels.
Thereby, TORM has become a pure-play product tanker
company. In line with TORM’s expectations, the dry bulk
market was under pressure in 2015 with freight rates
reaching historically low levels. TORM achieved pro
forma TCE earnings of USD/day 5,805 (USD/day 10,831)
and a gross profit/(loss) of USD -4m from its bulk
activities.
pleted a comprehensive restructuring of TORM’s balance
sheet and a transformative merger between TORM and
Oaktree. The Restructuring included among other things
a debt write-down of USD 536m, a USD 312m debt
conversion into new equity in TORM and a contribution
of 25 on-the-water vessels and six newbuildings by
Oaktree. In return for the vessel contribution and the
debt-to-equity conversion, Oaktree and TORM’s lenders
obtained equity stakes in TORM of 62% and 37%
respectively following a share capital increase. Further,
TORM has adopted new corporate governance provi-
sions including minority shareholder protection rights,
published a listing prospectus, elected a new Board of
Directors, implemented a reverse stock split with a
consolidation ratio of 1,500:1 and, on 13 January 2016,
conducted a subsequent share capital decrease of the
Company’s treasury shares.
• During the fourth quarter of 2015, TORM took delivery of
three modern second-hand MR vessels (TORM Loke
(built 2007), TORM Atlantic (built 2010) and TORM
Astrid (built 2012)) for a total consideration of USD
79.3m. Of the six MR newbuildings contributed by
Oaktree, three were delivered during the fourth quarter
of 2015. The last three were delivered during the first
quarter of 2016.
• On 30 November 2015, TORM ordered four fuel-efficient
LR2 newbuildings from Guangzhou Shipyard Inter-
national with expected delivery in the period between
the fourth quarter of 2017 and the second quarter of
2018. The agreement includes the option to purchase
up to six additional vessels within the LR2, LR1 or MR
segments with expected delivery in 2018 and 2019.
TORM expects to have a total CAPEX relating to the four
firm vessels below USD 200m.
TORM 2015
Highlights
9
• As of 31 December 2015, TORM’s available liquidity was
USD 243m and consisted of USD 168m in cash and USD
75m in undrawn credit facilities. Outstanding CAPEX
relating to the order book and vessel purchases amount-
ed to USD 224m.
• As of 31 December 2015, net interest-bearing debt
• TORM’s book equity amounted to USD 976m as of 31
December 2015. This corresponds to book equity/share
of USD 15.3 or DKK 104.4.
• As of 31 December 2015, 8% of the total earning days in
2016 were covered at USD/day 23,638.
amounted to USD 612m. In addition to the financial
restructuring of TORM’s debt, the Company has secured a
total new financing of USD 93m against collateral in three
MR newbuildings and two second-hand MR vessels. As of
31 December 2015, TORM's loan-to-value ratio was 52%.
• For the full year 2016, TORM forecasts an EBITDA of USD
250-330m and a profit before tax of USD 100-180m. As
26,657 earning days are uncovered at year-end 2015, a
change in freight rates of USD/day 1,000 would impact
EBITDA and the profit before tax by USD 27m.
• The book value of the fleet was USD 1,565m as of 31
• The Board of Directors proposes that no dividend be
December 2015 excluding outstanding installments on
the newbuildings of USD 224m. Based on broker
valuations, TORM’s fleet including newbuildings had a
market value of USD 1,951m as of 31 December 2015.
distributed for 2015.
• Based on broker valuations, TORM’s net asset value
(NAV), excluding charter commitments, is estimated at
USD 1,169m. This corresponds to a NAV/share of USD 18.3
or DKK 125.1.
TORM 2015 10
Highlights
OUTLOOK 2016
• For 2016, TORM forecasts a positive EBITDA of USD 250-330m and a profit before tax
of USD 100-180m
• As of 31 December 2015, TORM had covered 2,354 earning days (8% of total earning
days) at an average rate of USD/day 23,638 for 2016
OUTLOOK
Taking the increased economic uncertainty into account,
especially with regard to the financial markets and an
increased volatility in the oil price, the supply and demand
balance within the product tanker market is expected to
remain relatively stable. Going forward, TORM expects
increasing oil consumption and increased ton-mile effects
from relocation of refinery capacity to have a positive
effect on the demand for product tankers. The product
tanker ton-mile demand is estimated to grow by a com-
pound annual rate of slightly above 6% during 2016-2018.
The estimated net growth in tonnage supply is approxi-
mately 6%. Especially during the first part of that period,
the demand is expected to contribute with a positive
development in the product tanker fleet utilization, while
the second part might see momentum soften somewhat.
Please see the “supply and demand section” on page 16-17
for more detail.
As of 31 December 2015, the interest-bearing bank debt
totaled USD 767m, and TORM had fixed 65% of the
interest exposure for 2016. A change in interest rates of
25 basispoints would impact the result before tax by USD
0.8m.
The most important factors affecting TORM’s earnings in
2016 are:
• Global economic growth
• Consumption of refined oil products
• Oil trading activity and developments in ton-mile trends
• Fleet growth, scrapping of vessels and delays to
deliveries from the order book
• Bunker price developments
• One-off market-shaping events such as strikes, em-
bargoes, political instability, weather conditions, etc.
• Potential difficulties of major business partners
EARNINGS AND COVERAGE FOR 2016
For the full year 2016, TORM forecasts a positive EBITDA of
USD 250-330m and a profit before tax of USD 100-180m.
As of 29 February 2016, the one-year time charter market
can be seen in the table below, which corresponds to a
weighted average 1-year T/C rate for TORM's vessels of
USD/day 18.457.
As of 31 December 2015, TORM had covered 2,354 earning
days (8% of total earning days) at an average rate of USD/
day 23,638 for 2016. This means that a change in freight
rates of USD/day 1,000 would impact the financial
forecasts by USD 27m.
2016 PROFIT SENSITIVITY TO CHANGES IN FREIGHT
RATES
ONE-YEAR TIME CHARTER MARKET
Source: average of selected broker assessments.
USDm
LR2
LR1
MR
Handysize
Total
Change in freight rates (USD/day)
-2,000
-1,000
1,000
2,000
USD/day
One-year T/C rate as of
29 February 2016
-4
-5
-36
-8
-53
-2
-2
-19
-4
-27
2
2
19
4
27
4
5
36
8
53
LR2
LR1
MR
Handysize
25,250
21,400
17,300
15,975
Note: The time charter market has limited liquidity.
TORM 2015
COVERED AND CHARTERED-IN DAYS IN TORM – DATA AS OF 31 DECEMBER 2015
2016
2017
2018
2016
2017
2018
Highlights
11
LR2
LR1
MR
Handysize
Total
LR2
LR1
MR
Handysize
Total
LR2
LR1
MR
Handysize
Total
LR2
LR1
MR
Handysize
Total
LR2
LR1
MR
Handysize
Total
2,889
2,546
18,262
3,935
27,632
Owned days
2,987
2,531
18,490
4,004
4,231
2,555
18,615
4,015
28,012
29,416
T/C-in days at fixed rate
T/C-in costs, USD/day
-
-
703
-
703
-
-
286
-
286
-
-
-
-
-
-
-
-
-
16,153
16,250
-
-
16,153
16,250
-
-
-
-
-
T/C-in days at floating rate
676
729
340
-
-
-
-
-
-
-
-
-
676
729
340
Total physical days
Total covered days
3,716
2,531
18,776
4,004
4,571
2,555
18,615
4,015
1,317
121
851
65
730
727
-
-
-
-
-
-
29,027
29,756
2,354
730
727
Covered, %
Coverage rates, USD/day
20%
0%
0%
0%
3%
16%
0%
0%
0%
2%
24,427
29,331
21,956
19,068
23,638
24,011
24,010
-
-
-
-
-
-
24,011
24,010
3,565
2,546
18,965
3,935
29,011
37%
5%
4%
2%
8%
Fair value of freight rate contracts that are mark-to-market in the income statement: Contracts not included above USD 0.2m, contracts included above USD
0.0m.
Notes: Actual no. of days can vary from projected no. of days primarily due to vessel sales and delays of vessel deliveries. T/C-in days at fixed rate do not
include effects from profit split arrangements. T/C-in days at floating rate determine rates at the entry of each quarter, and then TORM will recieve
approximately 10% profit/loss compared to this rate.
TORM 2015 12
Highlights
STRATEGIC AMBITION
• TORM aims to be regarded as the reference company in the product tanker segment
• Pure-play product tanker owner focusing on selective fleet growth opportunities
• Strong capital structure provides TORM with financial and strategic flexibility
PURE-PLAY PRODUCT TANKER OWNER-OPERATOR
TORM is one of the world’s largest product tanker com-
panies with an owned fleet as of 31 December 2015 of 74
vessels on-the-water and seven newbuildings. TORM is
active within all large product tanker segments (LR2, LR1,
MR and Handy), which is an improtant factor in meeting
customer demands, as most global customers move
between segments depending on market level and trading
requirements. During 2015, the Company completed the
transformation to a pure-play product tanker company in
order to take full advantage of the promising long-term
supply-and-demand fundamentals in this particular segment
and TORM’s tanker expertise.
Our chartering strategy is to employ vessels primarily in the
spot market, as this will enable TORM to take advantage of
the currently strong freight rate environment. TORM may
seek to employ its vessels on longer-term time charters, if
customer needs and expected returns make it attractive.
TORM will only to a limited extent enter into long-term
T/C-ins or other off-balance sheet commitments due to its
own scale. Short-term charter-in agreements (<12 months)
are considered and evaluated as an active part of the spot
market approach.
ONE TORM – SUPERIOR INTEGRATED OPERATING
PLATFORM
TORM’s fleet is managed cost-efficiently and effectively by
the in-house commercial and technical management team,
which has a reputation for strong commercial performance,
safety and a high level of operational expertise. Under the
One TORM approach, employees cooperate to ensure the
high quality of the product tanker fleet that is essential for
acceptance by customers under their strict vetting criteria.
TORM believes that the largest customers prefer the
integrated operating model, as it provides them with better
insight and accountability into safety and vessel performance.
Management believes that the combination of well-main-
tained vessels, presence in all product tanker segments and
the integrated operating platform provide the commercial
management team with enhanced flexibility and respon-
siveness to customer demands. As a result, TORM has
consistently delivered TCE earnings and cash flows that are
better than the industry average.
The integrated nature of TORM’s operating platform
provides additional alignment of management and
shareholder interests and transparency, which the
Company believes mitigates the potential for actual
or perceived conflicts of interests with related parties.
In addition, it allows for closer control over operating
expenses.
TORM has critical mass with a diverse fleet of well-main-
tained product tankers spanning all product tanker seg-
ments. The Company believes that the largest customers
prefer that we manage our own vessels, as this structure
provides TORM with a competitive advantage versus
smaller operators, including greater access to information
and reduced operating costs.
SELECTIVE FLEET GROWTH
TORM may selectively grow the product tanker fleet and
serve as a consolidator in the product tanker segment if the
right opportunities arise. TORM’s vessel sale and purchase
activities are conducted by an in-house team lever aging
relationships with shipbrokers, shipyards, financial institutions
and shipowners. TORM is continuously scanning the market
for attract ive opportunities to acquire high-specification
second-hand product tankers that will be franchise
enhancing and financially accretive. The specific acquisition
criteria include for example:
• Price point attractiveness
• Complementarity to the current fleet
• Vessel quality level and origin (quality yard)
• Operational characteristics incl. main engine design,
bunker consumption and cargo intake
TORM may also selectively pursue attractive newbuilding
programs with high-quality shipyards, where second-hand
purchases do not meet TORM’s return thresholds, or where
the second-hand market has insufficient liquidity in vessels
that meet customer requirements. TORM’s in-house technical
management has significant experience in newbuilding
projects from design to delivery.
TORM will from time to time sell vessels that no longer fit
the commercial strategy, or if the price obtained is deemed
attractive.
STRONG CAPITAL STRUCTURE
TORM has a strong capital structure with a moderate debt
level, consistent with our strategy. The Company has an
attractive debt profile with favorable interest rates,
amortization schedule and covenants. This gives TORM the
financial and strategic flexibility to selectively grow. In
addition, the balance sheet strength gives a competitive
advantage when pursuing vessel acquisitions, as counter-
parties have recently displayed a preference for contracting
with well-capitalized counterparties. TORM plans to finance
its business and fleet growth with a mix of cash on hand as
well as financing from lenders and from the capital
markets.
TORM 2015 13
Our STRATEGIC OUTLOOK includes
an ambition to be regarded as the
reference company in the product
tanker segment. We believe that the
competitive advantages from our low
cost structure, the global scale of
our fleet, our integrated operational
platform, our long track record and our
strong capital structure will position us
to generate financial returns, which are
unrivaled in our industry,
says CEO Jacob Meldgaard.
TORM 2015 14
Segments
TANKER SEGMENT
• Product tanker freight rates reached the highest level since 2008
• Optimized TCE results across the One TORM platform
• Selective fleet growth with six additions to the owned fleet during 2015
In 2015, TORM’s product tanker fleet realized average pro
forma spot TCE earnings of USD/day 22,986 or up 48%
year-on-year, with the LR2 segment at USD/day 27,884, the
LR1 segment at USD/day 26,047, the MR segment at US D/
day 21,998 and the Handy segment at USD/day 20,942.
TORM’s Tanker Division achieved a pro forma gross profit
of USD 365m (USD 171m), which was an increase of USD
194m year-on-year and primarily due to increased freight
rates.
In the first half of 2015, the product tanker market benefit-
ted from higher refinery margins due to falling crude oil
prices. The higher refinery margins resulted in increased
production of clean petroleum products on a global scale.
In addition to an increase in US consumer demand for
gasoline, the market saw increased volumes of gasoline
and gasoil moving towards South and Latin America from
the USA, high European exports of products to West Africa
and large volumes of naphtha to the Far East on the larger
vessels. The newly added refinery facilities in the Middle
East also contributed to an increase in export volumes. Due
to the increased oil supply, freight rates for dirty vessels in
all sizes showed remarkable strength. This caused a larger
part of the LR2 fleet to switch into dirty trade, thereby
strengthening the clean tanker freight rates.
During the second half of 2015, product tanker freight rates
reached the highest level since 2008. Subsequently, a
seasonal reduction in US gasoline demand as well as sharp
declines in West African demand caused the markets to
soften in the western hemisphere. In the Middle East,
seasonal maintenance of refineries reduced output despite
continuous high refinery margins. During the fourth quarter
of 2015, global petroleum product stocks in consuming
areas rose to record levels and refinery margins contracted,
resulting in a reduction of long-haul arbitrage movements.
Asset prices on second-hand product tankers have been
relatively flat in 2015 compared to 2014 despite freight rate
improvements (source: Clarksons).
TORM’s integrated platform ensured close cooperation
between the commercial and technical divisions to optimal-
ly employ and operate the entire fleet across all segments,
thereby delivering TCE earnings and cash flows that are
better than the average of industry peers. In fact, TORM
has been able to obtain freight rates in line with or above
product tanker peers with an average fleet age lower than
TORM’s.
In 2015, 28 TORM vessels spent time in planned dry-dock.
Close coordination across the One TORM platform enabled
the Company to optimize cash flows by assessing the
TANKER FREIGHT RATES 2015
Source: Clarksons
ASSET PRICES ON FIVE-YEAR-OLD SECOND-HAND PRODUCT
TANKERS IN 2015
Source: Clarksons
USD/day
60,000
50,000
40,000
30,000
20,000
10,000
0
Jan
Feb Mar
Apr May
Jun
Jul Aug Sep
Oct Nov Dec
USDm
55
50
45
40
35
30
25
20
Ras Tanura Chiba Clean 75K Average Earnings - LR2
Jan
Feb Mar
Apr May
Jun
Jul Aug Sep
Oct Nov Dec
Ras Tanura Chiba Clean 55K Average Earnings - LR1
Average MR Clean Earnings
LR2
LR1
MR
Handysize
TORM 2015 15
trade-off between TCE earnings on the voyages to and
from the dry-docks and dry-docking costs by ensuring that
dockings were performed at optimal locations.
During the second half of 2015 and following the Restruc-
turing, TORM started to grow its fleet of product tankers
on a selective basis. Contracts for six MR newbuildings
were taken over as part of the Restructuring of which three
were delivered during the fourth quarter of 2015 and the
last three were delivered during the first quarter of 2016. In
addition, TORM purchased three modern second-hand MR
vessels during the year. Towards the end of the year, TORM
placed an order for four LR2 newbuildings at Guangzhou
Shipyard International with expected delivery in the period
between the fourth quarter of 2017 and the second quarter
of 2018 and with options for up to six additional vessels. At
the end of 2015, TORM operated a fleet of 78 vessels of
which 74 are fully owned and four are chartered in.
TORM'S RESULTS IN THE TANKER SEGMENT
USDm
PRO FORMA INCOME STATEMENT
Revenue
Port expenses, bunkers and commissions
Time charter equivalent earnings
Charter hire
Operating expenses
Gross profit (Net earnings from shipping activities)
2014
Total
766.8
-383.3
383.5
-17.3
-195.6
170.6
2015
Q1
Q2
Q3
Q4
2015
Total
215.1
-72.8
142.3
-5.7
-46.3
90.3
207.8
-68.3
139.5
-5.9
-46.4
87.2
235.5
-71.3
164.2
-6.4
-43.9
113.9
185.6
844.0
-57.3
-269.7
128.3
574.3
-5.3
-23.3
-49.9
-186.5
73.1
364.5
TORM 2015 16
Segments
TANKER SEGMENT
– SUPPLY AND DEMAND
• Supply and demand balance is forecasted to remain stable
• Current order book indicates a high number of deliveries in 2016-2017
• Ton-mile demand continues to be driven by increased oil consumption and relocation of
refineries
SUPPLY
In 2015, the global product tanker fleet grew by 6.5% in
terms of capacity and 5.9% in terms of number of vessels.
This was the highest growth since 2009, but the figure
covers considerable differences between the individual
segments. The growth was ranging from -0.3% for the LR1
segment to 10.5% for LR2 vessels. Over the next two years,
the LR1 segment will see increasing fleet growth following
substantial ordering in 2014-2015.
SCRAPPING
In 2015, around 0.8m dwt of product tanker capacity was
scrapped, corresponding to approximately 0.6% of the fleet
capacity at the beginning of the year. Compared to 2014,
scrapping activity slowed down and corresponds to the
lowest level of scrapping since 2008. It is expected that
approximately 3% of the existing capacity in the global
fleet will be phased out or scrapped during 2016-2018.
LR2
LR1
MR
Handysize
Total
Fleet
start 2015
Delivered
in 2015
Scrapped
in 2015
Fleet
end 2015
258
327
1,393
652
2,630
27
1
107
42
177
0
2
4
16
22
285
326
1,496
678
2,785
Order
book for
2016-2018
2016-2018
order book
as % of end
2015 fleet
98
66
211
85
460
34%
20%
14%
13%
17%
CURRENT NEWBUILDING ORDER BOOK
The number of newbuilding orders placed in 2015 increased
by 94 vessels, corresponding to 75% higher activity than in
2014 and 33% higher activity than the 10-year average.
Ordering activity increased in the MR, LR1 and LR2
segments, while the Handysize segment saw less interest.
At the end of 2015, the existing order book for deliveries in
2016-2018 totaled 460 vessels, including 98 LR2 vessels, 66
LR1 vessels, 211 MR vessels and 85 Handysize vessels.
CANCELLATIONS AND POSTPONEMENTS
In 2015, only 77% of the deliveries scheduled for the year
actually materialized, and TORM expects to see some
slippage taking place also in 2016.
YEARLY NET FLEET GROWTH (BASED ON NO. OF VESSELS)
Source: SSY
% of existing fleet
15
10
5
0
-5
2011
LR2
2012
2013
2014
2015
LR1
MR
Handysize
TORM 2015 Segments
17
According to TORM estimates, the net global refinery
capacity is expected to grow by more than 3.0 mb/d
during 2016-2018. The majority of the refinery additions
continue to come from Asia and the Middle East. In the
latter region, new refineries that experienced some start-up
problems in 2014-2015 have reached their full capacity.
Together with the additional supply, these refineries are
likely to lead to more oil products being transported
long-haul.
Over medium term, the additional refining capacity will put
renewed pressure on European refiners. TORM expects this
to lead to cuts in refinery activity in Europe and conse-
quently growing diesel imports from Russia, the US Gulf
and – to an increasing degree – from the new refineries in
the Middle East. Currently, high gasoil/diesel stockpiles in
Europe, however, could somewhat soften the need for
imports in 2016.
Despite weak oil demand in 2015 in several South American
countries, the region remains an important product
importer in the medium and long term. Continued demand
for naphtha in the Far East will increasingly be met by
supplies from the Atlantic Basin, adding to average trade
distances. The lifting of the US crude oil export ban
combined with limited pipeline capacity between the US
Gulf and the US East Coast and the presence of the Jones
Act entail sustained gasoline imports from Europe to the
US East Coast.
Consequently, the product tanker ton-mile demand is
estimated to grow by a compound annual rate of slightly
above 6% during 2016-2018.
SWING FACTORS
The main factors likely to change this outlook in either a
negative or a positive direction include the impact of
sustained low oil prices on demand and trade patterns, a
potential trend towards substantial floating storage
underpinned by deepening price contango or logistical
constraints, higher-than-expected newbuilding contract
activity and order conversions. Other factors that could
affect the outlook are slower refining industry rationaliza-
tion in Europe, the export strategy of the new Middle
Eastern refineries as well as a slower-than-forecasted shift
in the Russian refining sector’s exports from fuel oil to
cleaner products and uncertainty around China’s ambitions
for product exports. Similarly, product price volatility and
the resulting arbitrage flows are potential swing factors.
Another swing factor that affects the supply of vessels
available for transportation of clean products is substitu-
tion of tonnage between dirty and clean product transpor-
tation. With demand for crude tankers expected to stay
resilient at least throughout 2016, supported by OPEC’s
apparent determination to maintain its crude market share,
an increasing number of product tankers could switch to
the dirty segment.
CONTRACTING OF NEWBUILDINGS
TORM anticipates limited ordering of new product tankers
with delivery before the end of 2017. The Company expects
ordering activity in 2016 to slow compared to the 2015
level, as the more stringent Tier III regulations take effect
from 1 January 2016. During 2016-2018, the product tanker
fleet capacity is estimated to grow by a compound annual
rate of approximately 6%. Positive developments in the
crude market could potentially lower the growth in
available tonnage supply.
OIL DEMAND AND TON-MILE DEMAND
While global economic growth remained relatively
lackluster in 2015, global oil demand surprised to the
upside, increasing by 1.7 mb/d (1.8%) (source: IEA January
2016). This marked the highest growth in five years and
was driven by main economies such as China, the USA,
India and Europe. Gasoline dominated demand growth,
positively affected by crude oil prices dropping by 46%
from the 2014 average level. However, sluggish global
economic growth put pressure on demand for gasoil/
diesel, with stronger demand from India and Europe only
somewhat mitigating this effect. In 2016, global oil demand
is forecasted to grow by 1.2 mb/d (1.3%) (source: IEA
January 2016), closer to its long-term trend pace. Based
on the preliminary data, demand for product tankers is
estimated to have grown by 11% in 2015.
REFINERY CAPACITY AND TRANSPORTATION
Low crude oil prices and strong demand for gasoline in
particular resulted in record high refinery margins in several
regions. This coupled with new refining capacity coming
online led to a 1.6 mb/d increase in global refinery runs in
2015. Surprisingly, much of this increase came from Europe,
where refinery runs were up 6% year-on-year, at the same
time as Latin America and the Former Soviet Union
witnessed cutbacks (source: Wood Mackenzie). As
refineries operated at full capacity to meet rising demand
for gasoline, gasoil/diesel inventories climbed to new highs,
with subdued global industrial activity failing to absorb the
growing supply.
GLOBAL OIL DEMAND GROWTH AND
NET REFINING CAPACITY ADDITIONS
Source: TORM
Mb/d
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
2014
2015E
2016F
2017F
2018F
Atlantic Basin
Latin America
Middle East
OECD Pacific
Asia
Other
Total Crude Destillation
Unit net additions
Global oil demand growth
TORM 2015 18
Segments
BULK SEGMENT
• TORM completed the wind-down of its bulk activities
• Freight and charter rates continued at historically low levels
In line with the Company’s strategy from 2013 to exit the
dry bulk market, TORM has sold its two owned bulk carriers
and redelivered its last time charter vessels during the
second half of 2015. With this, TORM has completed the
wind-down of its bulk activities.
Parallel to the weak spot and period market, the second-
hand asset prices developed negatively, and the price for a
five-year-old second-hand Panamax bulk carrier declined
by almost 30% during the year (source: Clarksons).
The dry bulk market remained at historically low levels
during 2015. The average Panamax spot market was USD/
day 5,561 (7,718), which is 76% under the 10-year average
(source: BPI). The depressed spot market led to an erosion
of the period market where the rate for a one-year period
was about USD/day 6,000 by the end of 2015 (source:
Clarksons).
The pro forma gross profit/(loss) for the Company’s bulk
activities was USD -4m (USD 1m) for the year, which was
negatively affected by costs incurred in connection with
the vessel sales, bunker inventories and prior period
adjustments.
BULK TIME CHARTER FREIGHT RATES 2015
Source: Clarksons
ASSET PRICES ON FIVE-YEAR-OLD SECOND-HAND
DRY BULK CARRIERS IN 2015
Source: Clarksons
TCE in USD/day
USDm
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
40
35
30
25
20
15
10
5
0
Jan
Feb Mar
Apr May
Jun
Jul Aug Sep
Oct Nov Dec
Jan
Feb Mar
Apr May
Jun
Jul Aug Sep
Oct Nov Dec
Panamax
Handymax
Panamax
Handymax
TORM'S RESULTS IN THE BULK SEGMENT
USDm
PRO FORMA INCOME STATEMENT
Revenue
Port expenses, bunkers and commissions
Time charter equivalent earnings
Charter hire
Operating expenses
Gross profit (Net earnings from shipping activities)
2014
Total
27.0
3.8
30.8
-25.5
-3.9
1.4
2015
Q1
Q2
Q3
Q4
5.2
-1.6
3.6
-4.5
-1.0
-1.9
3.2
-0.5
2.7
-3.0
-0.9
-1.2
1.5
-0.6
0.9
-0.5
-0.7
-0.3
0.4
0.1
0.5
-0.1
-0.5
-0.1
2015
Total
10.3
-2.6
7.7
-8.1
-3.1
-3.5
TORM 2015 Divisions
19
Our EXPERIENCED PEOPLE at sea
and ashore constitute an important part
of TORM. The positive commitment and
engagement continued throughout 2015
with strong retention levels,
says CEO Jacob Meldgaard.
TORM 2015 20
20
About TORM
<
RESTRUCTURING
3. Asset contribution by Oaktree
Finally, Oaktree contributed entities controlling 25
on-the-water product tankers and six MR newbuildings,
appraised at USD 742m in total as of 30 June 2015. In
exchange, Oaktree received a controlling equity stake of
62% in TORM. As of 13 July 2015, the contributed vessels
had associated debt of USD 134m under a loan facility
with Danish Ship Finance.
The result of the financial restructuring was an LTV of 51%
giving TORM a strong capital structure.
OTHER MAIN RESTRUCTURING TERMS
As part of the Restructuring, other terms were agreed:
New Working Capital Facility: Certain of the lenders
provided TORM with a USD 75m New Working Capital
Facility.
New corporate governance provisions: New provisions
have been adopted to enable efficient corporate govern-
ance of the Company and to incorporate minority
shareholder protection.
Official listing of new A shares: As part of the Restructur-
ing, new A shares were issued and subsequently admitted
to trading and official listing on Nasdaq Copenhagen by the
end of July 2015.
On 13 July 2015, TORM, its lenders and Oaktree successfully
completed a comprehensive restructuring of TORM’s
balance sheet and a transformative merger between TORM
and Oaktree. The Restructuring was highly complex
involving multiple jurisdictions and constituents.
The result of the Restructuring was the creation of one of
the largest owner-operators of product tankers with a
diversified portfolio of product tankers including LR2, LR1,
MR and Handysize. Thereby, TORM has regained its
financial and strategic flexibility to further develop the
Company and invest in growth opportunities. The most
important elements of the Restructuring are summarized
here.
RESTRUCTURING OF THE BALANCE SHEET
Prior to the Restructuring, the total outstanding debt
amounted to USD 1.4bn and thereby exceeded the asset
values, giving TORM a loan-to-value (“LTV”) ratio of 164%.
The financial restructuring occurred in three interlinked
steps:
1. Mandatory exchange of debt
Lenders wrote down USD 536m of debt in exchange for
warrants giving the right to subscribe for 7.5% of the
post-restructuring equity at a strike price of DKK/share
96.3. This gave TORM an LTV of approximately 100%
including vessel and non-vessel values.
2. Optional exchange of further debt into equity
Following the mandatory debt write-down, the lenders
had the option to exchange further debt for new equity
in TORM. In aggregate, the lenders chose to convert debt
that after adjustments gave TORM a net asset value
(NAV) of USD 312m. The remaining debt after the
optional exchange amounted to USD 561m reinstated in a
New Term Facility that matures in 2021.
TORM 2015
TORM 2015
RESTRUCTURING
About TORM
21
21
PRE-
RESTRUCTURING
POST-
RESTRUCTURING
(31 DECEMBER 2015)
PRODUCT TANKER OWNER WITH A
FLEET OF 43 VESSELS
TOP THREE PRODUCT TANKER OWNER-
OPERATOR WITH 74 ON-THE-WATER
VESSELS AND SEVEN NEWBUILDINGS
5
7
LR2
LR1
MR
20
11
Handysize
On-the-water vessels
Newbuildings
12
7
LR2
LR1
MR
51
11
Handysize
RESTRUCTURING OF THE BALANCE SHEET - JULY 2015
LTV
164%
1,409
536
LTV
51%
1,603
861
TORM
vessel values
1,409
312
122
134
861
561
817
742
Oaktree
vessel values
Vessel value
Total debt
Debt
write-down
Debt
to equity
TORM
reinstated
debt
Oaktree
debt
Remaining
newbuilding
CAPEX
Total debt
and CAPEX
commitments
Total
vessel values
PRE-RESTRUCTURING
CAPITAL STRUCTURE
DEVELOPMENT IN DEBT
AND CAPEX COMMITMENTS
POST-RESTRUCTURING
CAPITAL STRUCTURE
Note: Vessel values are based on 30 June 2015 broker values. Debt write-down and debt-to-equity conversions have been simplified and include other
minor elements.
TORM 2015
TORM 2015
22
About TORM
PEOPLE
• Corporate safety campaign launched
• Continued focus on the cooperation between TORM’s vessels and the shore organization
• Employee satisfaction survey demonstrates highly motivated and dedicated employees
SAFETY
The safety of the Company’s employees – whether on land
or at sea – is a top priority, and TORM considers it important
to maintain this focus and remind employees to look out
for each other. In 2015, a campaign to re-emphasize
TORM’s safety culture was launched ashore and at sea
under the headline “STOP Unsafe Operations”.
COMPLIANCE
In 2015, TORM further developed and improved the
Company’s compliance programs. As part of this effort,
TORM introduced a Fraud Awareness and Prevention
Program for all seafares and employees on shore.
SEAFARERS
The seafarers’ positive commitment and engagement
continued throughout 2015 with a strong retention rate of
99% for Senior Officers and 100% compliance with
customer requirements (the so-called officer matrix
compliance).
In 2015, TORM focused on improving the planning phase to
ensure that seafarers can rejoin the same vessels as often
as possible. This has resulted in greater commitment and
higher job satisfaction among the Company’s seafarers, to
the benefit of both the seafarers and TORM.
Furthermore, TORM continued to focus on the cooperation
between the Company’s vessels and the support from the
shore organization. By introducing a project called “Just
Culture”, TORM has highlighted and started to harvest the
benefits of an open, honest and transparent communica-
tion and execution culture. During the year, this has
improved the cooperation between seafarers and land-
based organization regarding the operation of TORM’s
vessels.
In the second half of 2015, TORM’s pool of seafarers
increased, as the Company took over six MR newbuildings
as part of the Restructuring. This created a positive
challenge for the part of the organization which is
responsible for recruiting, training and developing TORM’s
seafarers. This period has especially opened opportunities
for creating a motivating environment with regard to
promotion of TORM’s experienced seafarers.
In 2015, TORM continued to carry out seminars for the
Company’s Senior Officers with a focus on safety and the
One TORM platform. During the year, TORM has also
worked on ways to optimize the structure of the Officers’
seminars, for example by introducing local mini seminars
for up to 20 officers in either Manila, Mumbai or Copen-
hagen.
SHORE ORGANIZATION
Throughout 2015, TORM’s shore organization maintained
full attention on delivering to the One TORM operational
platform. By acting according to TORM’s Leadership
Philosophy, each leader has ensured continued high
motivation and performance among the shore staff.
Retention levels have been kept at a satisfactory level,
which has been central for TORM’s ability to serve its
customers professionally and with full attention to quality.
GEOGRAPHICAL DISTRIBUTION OF SEAFARERS IN %
GEOGRAPHICAL DISTRIBUTION OF LAND-BASED EMPLOYEES IN %
100% = 3,004 seafarers at the end of 2015 incl. contracted crew
100% = 271 employees at the end of 2015
1% Poland
6% Croatia
6% Denmark
4% Singapore
2% USA
12% The Philippines
48% The Philippines
51% Denmark
39% India
31% India
TORM 2015 People
23
All employee initiatives in 2015 have been directed towards
ensuring a transparent and safe working environment with
a strong focus on “business as usual”. Leaders have
focused on individual performance management as well as
people and team development.
As a result of these efforts, a high degree of motivation and
engagement was demonstrated with 96.9% of all shore-
based employees participating in the voluntary annual
employee satisfaction survey. Results of the survey gave
clear indications of continued highly motivated employees
at TORM’s five offices.
The TORM Leadership Philosophy has three dimensions:
Performance, Relations and Personal Leadership.
Each dimension has associated behaviors, which guide TORM’s
In 2015, TORM launched the ”STOP Unsafe Operations” campaign
employees in terms of how to think and act.
across land and sea to re-emphasize the Company’s safety culture.
TORM 2015 24
About TORM
CORPORATE SOCIAL
RESPONSIBILITY
• Implemented new vessel reporting system to drive energy-efficient behavior
• Propeller boss cap fins and Mewis ducts retrofitted to reduce oil consumption and CO2
emissions
• Ongoing monitoring of risk situation to pre-empt hijacking
REPORTING AND TRANSPARENCY
TORM’s approach to Corporate Social Responsibility (CSR)
is rooted in the Company’s values and based on TORM’s
commitment to the UN Global Compact, an internationally
recognized set of principles regarding health, safety, labor
rights, environmental protection and anti-corruption. The
importance of CSR is also emphasized in the One TORM
strategic direction and TORM’s Business Principles.
TORM signed the UN Global Compact in 2009 as the first
Danish shipping company. Since then, the Company has
reported on its social and environmental performance
every year to ensure progress and accountability to
stakeholders. The Company believes that accountability in
all aspects is necessary in order to be the preferred carrier
in the industry.
Responsible behavior is central to the way TORM does
business. TORM’s CSR policy has the following overall
objectives:
• Comply with statutory rules and regulations in order to
ensure that all employees are able to execute their work
under safe, healthy and proper working conditions
• Strive to eliminate all known risks that may result in
accidents, injuries, illness, damage to property or to the
environment
• Integrate sustainability into TORM’s business operations
• Avoid any form of corruption or bribery
• Make TORM’s CSR performance transparent to all
stakeholders
RESPONSIBILITY
TORM’s CSR commitment is not limited to the Company’s
own business practices, as real impact often requires
industry collaboration. TORM cooperates with peers and
stakeholders in a number of areas to increase responsibility
in the shipping industry and the supply chain. As a member
of the Danish Shipowners’ Association’s CSR work group
and co-founder and member of the Maritime Anti-Corrup-
tion Network, TORM strives to increase corporate transpar-
ency and accountability and minimize corruption.
INSPECTIONS AND AUDITS
In order to exceed the standards set by stakeholders, the
Company has enhanced the vetting preparations and
increased the number of internal vettings on the vessels
carried out by SQE officers. On average, each product
tanker is subject to ten inspections a year. Inspections are
CO2 EMISSION PER VESSEL PER G/TON-KM
Source: TORM
CO2 EMISSION PER OFFICE EMPLOYEE IN TON
Source: TORM
10.0
8.0
Target
for 2020:
6.4 g/
ton-km
6.0
4.0
2.0
0
7.1
7.0
5.5
3.0
Target
for
2020:
2.2 ton/
employee
2.5
2.0
1.5
1.0
0.5
0
2.6
2.3
2.3
2013
2014
2015
2013
2014
2015
TORM 2015 About TORM
25
carried out by customers, terminals, internal auditors, ports
and classification societies. TORM is committed to meeting
and outperforming the ever increasing standards set both
internally and by customers.
ENVIRONMENT AND CLIMATE
Marine pollution constitutes the largest environmental risk,
and TORM takes care to avoid pollution of the seas and the
atmosphere. This includes measuring CO2 emissions per
ton-km and per office employee as well as striving to avoid
accidental releases of pollutants to the environment.
CLIMATE PERFORMANCE
TORM has reduced the year-on-year CO2 emissions from
7.0 to 5.5 g/ton-km, or by approximately 32% since 2008.
This is primarily driven by increased fuel efficiency. In 2016,
TORM will continue to invest in fuel efficiency projects. CO2
emissions from TORM’s offices were steady at 2.3 ton per
employee year-on-year. Since 2008, TORM has improved
performance on this measure by approximately 20%. Given
that TORM has reached its CO2 emission per vessel target
for 2020, the Company will review whether to introduce a
new target in this area.
FUEL EFFICIENCY
TORM takes a proactive approach to fuel efficiency, as this
has a significant environmental and economic impact.
During 2015, TORM installed retrofit equipment on a
number of vessels, such as propeller boss cap fins and
Mewis ducts, to reduce oil consumption and CO2 emissions.
Furthermore, TORM continued initiatives to strengthen
energy-efficient navigation, including upgrades of auto-
pilots and voyage decision support software.
To drive energy-efficient behavior, TORM has implemented
a new vessel reporting system. Furthermore, a department
dedicated to monitor fuel consumption and follow up on
energy usage constantly works to ensure optimal fuel
consumption on board TORM’s vessels.
TORM will continue these efforts in 2016 with a number of
additional initiatives, including close follow-up on perform-
ance indicators for the vessels.
OIL SPILLS
In 2015, TORM experienced zero oil spills larger than one
barrel, but two smaller oil spills over board of less than one
barrel. All incidents were investigated and procedures
revised where required.
HEALTH, SAFETY AND SECURITY
Approximately 90% of TORM’s employees work at sea, and
providing healthy, safe and secure working conditions for
them is an essential part of the business. Respecting
employees’ human rights is pivotal to the Company, and
policies are outlined in TORM’s Business Principles*) and
the commitment to the UN Global Compact. The Com-
pany’s safety policy is rooted in the rules and regulations
issued by the Danish Maritime Occupational Health Service.
*) TORM’s Business Principles consist of five principles which ensure that TORM remains a trustworthy and attractive business
partner: 1) Maintaining a good workplace, 2) Reducing environmental impact, 3) Respecting people, 4) Doing business
responsibly and 5) Ensuring transparency.
TORM 2015 26
About TORM
In June 2015, one of TORM’s product tankers, TORM Arawa,
performed a Search and Rescue Operation in the Mediter-
ranean Sea and rescued the lives of more than 200 boat
refugees. This is part of a trend that has continued since
2014.
SAFETY CULTURE
A strong safety culture is central to TORM, and the
Company has not experienced any work-related fatalities in
2015. Lost Time Accident Frequency (LTAF) is an indicator
of serious work-related personal injuries that result in more
than one day off work. During 2015, TORM had an LTAF of
0.96 (1.49). The decrease from 2014 to 2015 is caused by
four accidents less. The definition of LTAF follows standard
practice among shipping companies.
attacks in the High Risk Area off the African Horn. Piracy
activity in the West African region, centered around the
Gulf of Guinea, has been monitored thoroughly throughout
the year. The number of piracy attacks in this region
remains stable, although a reduction was observed in the
beginning of the year. Piracy activity in south-east Asia has
been monitored thoroughly throughout the year, as a slight
increase in reported robbery attempts has been observed.
The Company will continue to monitor the risk situation
and pre-empt hijacking by following Company security
procedures. TORM made 264 voyages with armed guards
in 2015 against 175 in 2014. The increase is primarily due to
changed trading patterns. A decrease from 2015 to 2016 is
expected due to the changes in the boundaries of the High
Risk Area.
Near-miss reports provide TORM with an opportunity to
analyze conditions that might lead to accidents and
ultimately prevent accidents. A high number of near-miss
reports indicate that the organization is aware of the risks
and responds to them. In 2015, TORM exceeded the target
of 6.0 near-miss reports per month per vessel on average
by reaching 6.6 due to continued focus on this area.
PIRACY
TORM’s response to piracy is founded in the Best Manage-
ment Practice (BMP) developed by the International
Chamber of Shipping, the International Shipping Federation
and national navy forces. In 2015, TORM experienced four
robberies and one suspicious approach. The BMP was
updated at the end of the year, where the High Risk Area
was reduced in size. Furthermore, the Company again
observed a significant reduction in the number of piracy
LOCAL COMMUNITIES
The Company has been a long-standing supporter of
maritime education in India and the Philippines. This
commitment also has a strategic purpose and reflects the
Company’s ties to local communities. TORM is not yet
measuring the results of this commitment, but expects to
be able to give an account of the results in the next annual
report.
This section constitutes TORM’s reporting according to the
requirements of The Danish Financial Statements Act on
CSR.
TORM reports to the UN Global Compact. To see the
reports, please visit www.unglobalcompact.org
LOST TIME ACCIDENT FREQUENCY (LTAF)
Source: TORM
LTAF = work-related personal injuries that result in more than one
day off work per million hours of work
2.0
1.5
Target
for 2015:
<1
1.0
0.5
0
1.26
1.49
0.96
2013
2014
2015
TORM 2015 About TORM
27
RISK MANAGEMENT
• TORM’s risk profile is positively impacted by the Restructuring – primarily due to lower
risk around the capital structure
• Market risks remain high, but TORM is well-positioned for a relatively strong product
tanker market
TORM believes that a strong risk management framework
is vital to protect the Company and to ensure that the
Company is well-positioned in key markets. The objective
remains a balance of risk and reward generating the most
value for shareholders. TORM has constituted a new Risk
Committee at Board level, which is a sign of the Company’s
commitment to monitoring and maneging risks.
Risks are defined as all events or developments that could
significantly reduce TORM’s ability to sustain the long-term
value of the Company.
The risk management approach emphasizes management
accountability and broad organizational anchoring of risk
management and mitigation activities. The approach is
based on a combination of overall risk management tools
such as scenario and sensitivity analyses, active monitoring
of the risk profile and specific policies governing the risk
management in all key areas. Finally, there is a verification
process for the adequacy of TORM’s risk management
infrastructure.
The key risks associated with TORM’s activities can broadly
be divided into the four main categories described in the
figure below.
Adequate management of operational and compliance
risks within TORM’s risk tolerance limits is a prerequisite for
TORM to succeed as a tanker owner and operator.
The Executive Management and the Board of Directors
discuss and decide on the Company’s tolerance of the
most significant risks, while the Executive Management is
responsible for the ongoing monitoring of risks and imple-
mentation of mitigating actions. TORM’s overall risk
MAIN RISKS ASSOCIATED WITH TORM’S ACTIVITIES
toler ance for and inherited exposure to risks in each of the
four main categories are detailed below.
LONG-TERM STRATEGIC RISKS (“RISK-SEEKING”)
Risks and opportunities beyond the immediate strategy
window are monitored by the Executive Management and
incorporated in updates of the corporate strategy.
Industry-changing risks, such as the substitution of oil for
other energy sources, technological changes and radical
changes in transportation patterns, are considered to have
a relatively high potential impact, but are considered as
long-term risks.
INDUSTRY AND MARKET-RELATED RISKS (“RISK-
SEEKING”)
TORM’s business is sensitive to changes in market-related
risks such as changes in the global economic situation,
changes in freight rates in the product tanker market and
changes in bunker prices. It remains a cornerstone of the
Company’s strategy to actively pursue this type of risk by
taking positions to benefit from fluctuations in freight rates.
OPERATIONAL AND COMPLIANCE RISKS (“RISK-
AVERSE”)
TORM aims at maintaining its position as a quality operator
with high focus on operating vessels in a safe and reliable
manner. Consequently, commercial operations are an
important part of TORM’s business model. This area
involves potentially severe risks with respect to environ-
ment, health, safety and compliance. TORM constantly
focuses on reducing these risks through rigorous
proce d ures and standardized controls carried out by
well-trained employees. Quality-enhancing measures were
implemented during 2015 and will continue in 2016.
LONG-TERM
STRATEGIC RISKS
INDUSTRY AND
MARKET-RELATED RISKS
OPERATIONAL AND
COMPLIANCE RISKS
FINANCIAL RISKS
• Political risks
• Macroeconomic development
• Compliance with relevant maritime regimes
• Funding and liquidity risk
• Substitution of oil
• Freight rate fluctuations
• Vessel utilization
• Technological changes
• Bunker price fluctuations
• Safe operation of vessels
• Sales and purchase price
• Terrorism and piracy
fluctuations
• Availability of experienced seafarers and
• Interest rate risk
• Currency risk
• Counterparty risk
staff
• Compliance with environmental regulations
• Stability of IT systems
• Fraud
• Insurance coverage
TORM 2015 28
About TORM
FINANCIAL RISKS (“MODERATELY RISK-AVERSE”)
Management believes that a prudent approach to financial
risks benefits the Company the most.
TORM’S CURRENT RISK PROFILE
The key aspects of TORM’s current risk profile are summar-
ized below:
During 2015, TORM has completed the financial restructur-
ing and thus created a long-term, sustainable capital
structure.
• Through 2015, TORM’s product tanker fleet has realized
better average spot TCE earnings than in 2014. With a
low coverage ratio going into 2016, TORM remains
well-positioned for a relatively strong market. As a
consequence, market risk remains high
• TORM faces market risk on vessel sale and purchase
activities related to the fleet renewal program
• Risks within the Company’s immediate sphere of control,
including compliance with quality and environmental
requirements, have remained stable at a low level due to
the implemented mitigating controls
TORM’s 2015 top risks and changes compared to 2014 are
described below. For a more in-depth description of the
various risks and TORM’s risk management as well as
sensitivity analyses, please see note 22 on page 78. TORM
assesses the Company’s risks on a continuous basis.
TORM TOP RISK MAP (RISK EVALUATION INCLUDES EFFECT OF CURRENTLY DEPLOYED MITIGATION)
H
H
C
C
A
A
F
E D
G
G
F
B
2015
2014
Unchanged
A Tanker freight rates
B Bunker price
C Timing of sale and purchase of vessels
D Oil major approval
E Severe vessel accidents
F Technical costs
G Code of conduct
H Capital structure
s
e
c
n
e
u
q
e
s
n
o
C
5
4
3
2
1
1
2
3
4
5
Likelihood
TORM 2015 About TORM
29
# RISK
DESCRIPTION
SEVERITY
COMMENTS TO DEVELOPMENT 2014 – 2015 / STATUS 2015
A Tanker freight
rates
B Bunker price
C Timing of sale
and purchase of
vessels
D Oil major
approval
The risk of sustained
low tanker freight
rates or of TORM not
being able to predict
and act on the deve-
lopment of these.
The risk of unex-
pected bunker price
increases not covered
by corresponding
freight rate increases.
The risk of TORM not
purchasing and selling
vessels timely relative
to market devel-
opments and business
requirements.
The risk of a partial
ban of the TORM
tanker fleet by oil
majors.
High
Medium
High
The product tanker market remained volatile during 2015.
TORM has maintained a low coverage and accordingly, the
Company has maintained a high exposure towards the product
tanker market.
Adequate bunker purchase procedures continue to be in place,
but as bunker prices are volatile and not necessarily reflected
in the freight rates, TORM continues to be exposed to bunker
price changes.
Until the Restructuring, TORM was restricted from actively
managing its fleet composition through sale and purchase
activities. Going into 2016, TORM has regained its flexibility
and is in a position to manage the composition of its fleet;
however, market risk remains high.
Medium
The overall tradability of the fleet with oil majors is unchanged,
and TORM is considered a top performer in the market.
E Severe vessel
accidents
The risk of a severe
vessel accident.
Medium
TORM’s comprehensive quality and safety procedures have
been maintained, thereby leaving the risk unchanged.
F Technical costs
The risk of technical
costs related primar-
ily to OPEX.
Medium
TORM takes a serious and prudent approach to technical costs.
In 2015, TORM has reversed an increasing OPEX trend and
thereby reduced the risk related to technical costs. However,
the Company recognizes that external factors can impact the
technical costs.
G Code of conduct
Fraud and miscon-
duct risk.
Medium
TORM recognizes the risk of fraud and misconduct as a top
risk, as the potential impact of misconduct can be severe.
H Capital structure
The risk of going
concern.
High
Following the successful Restructuring, this risk has decreased.
TORM has a healthy capital structure, and it is a top priority to
maintain a long-term sustainable capital structure.
TORM 2015 30
About TORM
CORPORATE
GOVERNANCE
• Revised Articles of Association including new corporate governance provisions in order
to ensure appropriate minority shareholder protection
• As of 31 December 2015, TORM complied with 44 out of 47 of the Danish Corporate
Governance Recommendations
For TORM, good Corporate Governance represents the
framework and guidelines for business management and
aims to ensure that the Company is managed in a proper
and orderly manner, consistent with applicable laws and
regulations.
REVISED ARTICLES OF ASSOCIATION AND
GOVERNANCE PROVISIONS
As part of the Restructuring, TORM has adopted revised
Articles of Association including new corporate governance
provisions in order to ensure appropriate minority share-
holder protection. The key provisions include:
• The appointment of a Minority Trustee who shall hold a B
share giving the minority trustee the right to appoint a
Minority Director, the Deputy Chairman of the Board. The
Minority Director has approval rights over Reserved
Matters such as related party transactions, larger
business acquisitions and the issuance of certain share,
warrant or convertible debt instruments
• Appointment of a Board Observer and alternates for the
Minority Director
The B share has no other rights than the right to elect one
member of the Board of Directors and one Board Observer
in TORM. The Minority Trustee will exercise this voting right
on behalf of all A shareholders other than Oaktree and its
affiliates.
Further, a single redeemable and non-transferable C share
has been issued to Oaktree in order to give Oaktree suf-
ficient voting rights to allow to elect all Board members
other than the Minority Director (and employee representa-
tives) and to vote for amendments to TORM’s Articles of
Association with the exception of certain minority protec-
tion rights. The C share has no voting rights on any other
matters.
Both the B share and the C share will be redeemed by
TORM upon a reduction in Oaktree’s shareholding below
1/3 of the issued and outstanding shares in TORM A/S.
THE BOARD OF DIRECTORS
In accordance with Danish company legislation, TORM has
a two-tier management structure. The Board of Directors
lays out policies and directives, which in turn the Executive
Management implements in the day-to-day operations. The
Board of Directors acts as a partner as well as a super-
visory body to the Executive Management. No member of
the Executive Management is a member of the Board of
Directors, but the Executive Management and the CFO
ordinarily attend Board meetings.
The primary responsibilities of the Board of Directors are to
safeguard the interests of the shareholders, to ensure that
the Company is properly managed in accordance with the
Articles of Association and applicable laws and regulations
and to pursue the commercial goals as well as the strategic
development of the Company.
At the end of 2015, the Board of Directors consisted of six
members, of whom four were elected at the Annual
General Meeting. The remaining two members have been
elected by the employees. Board members elected by the
employees have the same rights, duties and responsibilities
as shareholder-elected members.
The Board of Directors has issued management guidelines
and Business Principles.
The Board of Directors meets at least four times a year in
accordance with the Rules of Procedure. In 2015, 19 Board
meetings were held.
The Board of Directors regularly evaluates the work, the
results and the composition of the Board of Directors and
the Executive Management.
In connection with the Restructuring, a new Board of
Directors was elected at the Extraordinary General Meeting
on 25 August 2015 with Mr. Christopher H. Boehringer as
Chairman, David N. Weinstein as Deputy Chairman and
Minority Director, Torben Janholt as Board member and Pär
Göran Trapp as Board member. The employee-elected
Board members, Kari Millum Gardarnar and Rasmus J.
Skaun Hoffmann, are unchanged.
THE AUDIT COMMITTEE
The Audit Committee meets at least four times a year, and
both the Executive Management, the CFO, the head of the
Accounting Department as well as the independent auditor
will normally attend these meetings. In 2015, eight meet-
ings were held. As of 31 December 2015, the Audit
Committee had three members elected by the Board of
Directors from its members.
TORM 2015 About TORM
31
The Audit Committee performs its duties under a charter
approved by the Board of Directors on an annual basis and
assists the Board of Directors in supervising and enhancing
financial reporting, internal controls and auditing processes.
THE REMUNERATION COMMITTEE
The Remuneration Committee meets at least twice a year,
and two meetings were held in 2015. As of 31 December
2015, the Remuneration Committee had three members
elected by the Board of Directors. The Remuneration
Committee assists the Board of Directors in reviewing
Management’s performance and remuneration as well as
the Company’s general remuneration policies.
The amounts and components of the remuneration to the
individual members of the Board of Directors and Execu-
tive Management are disclosed in note 4 to the financial
statements.
THE NOMINATION COMMITTEE
The Nomination Committee meets at least twice a year,
and two meetings were held in 2015. As of 31 December
2015, the Nomination Committee had three members
elected by the Board of Directors. The Nomination
Committee is responsible for maintaining and developing a
number of governance procedures and evaluation processes
in relation to the Board of Directors and the Executive
Management.
THE RISK COMMITTEE
The Risk Committee, which was incorporated in the third
quarter of 2015, meets at least four times a year, and two
meetings were held in 2015. As of 31 December 2015, the
Risk Committee had three members elected by the Board
of Directors. The Risk Committee is responsible for
supervisory oversight and monitoring responsibilities with
respect to internal controls and risk management.
THE EXECUTIVE MANAGEMENT
As of 31 December 2015, the Executive Management
consists solely of Mr. Jacob Meldgaard, CEO. Mr. Mads
Peter Zacho holds the position as CFO.
INTERNAL CONTROL AND RISK MANAGEMENT
The Board of Directors is responsible for the Company’s
overall internal controls and risk assessment. The Executive
Management is responsible for the identification of key
risks, the operation of an effective internal control environ-
ment and the implementation of adequate risk manage-
ment processes.
Management is also responsible for periodical risk report-
ing to the Audit Committee and the Board of Directors. The
Board of Directors reviews the key risks with the Executive
Management as appropriate, but at least once a year.
TORM’s financial controls are defined and monitored in a
compliance framework consistent with the recognized
framework established by the Committee of Sponsoring
Organizations (COSO 1992) and provides a clear audit trail
of changes in risk assessments and design of controls.
TORM’s processes for financial reporting and financial
controls consist of the following elements, performed
throughout the financial year:
• Overall scoping: It is assessed whether changes should
be made to the scoping.
• Risk assessment: TORM performs a risk assessment to
identify financial reporting risks. TORM uses a top-down
risk-based approach. The process starts with the
identification and assessment of the risks related to
financial reporting, including relevant changes. Further-
more, the entity-wide controls and general IT controls
are considered. The likelihood of risks occurring as well
as the financial impact of such are assessed.
• Mapping: The material risks identified in the risk
assessment are mapped in relation to the financial
statements and the existing internal controls.
• Monitoring: Based on information from TORM’s subsid-
iaries and the Parent Company’s financial data, an
internal financial report is prepared for Management
every month. At the end of each quarter, external
financial statements are prepared, and additional
controls and analyses are performed. At the end of the
year, further controls and analyses are performed to
ensure a correct and complete presentation in the annual
report.
• Conclusion: At the end of each financial year, TORM
concludes whether any material weaknesses have been
found in the internal controls for the financial reporting.
Management has concluded that there were no material
weaknesses or areas of concern during 2015. In view of
TORM’s compliance program and comprehensive system
for internal control and risk management in connection
with the financial reporting as well as the size of the
Company, the Board of Directors has not found it
relevant to establish an internal audit function. The Board
of Directors continues to evaluate the need for an
internal audit function annually.
In addition to ensuring compliance with the relevant legisla-
tion, TORM believes that the increased focus on internal
controls and risk management contributes positively to
improving the effectiveness of the Company’s business.
CORPORATE GOVERNANCE RECOMMENDATIONS
In line with the “comply or explain” principle, the Board of
Directors has considered the 2013 Corporate Governance
Recommendations, which form part of the disclosure
obligations for companies listed on Nasdaq Copenhagen.
The Company has chosen not to comply with three
recommendations.
• One year election periods for all shareholder-elected
Board members: In the interest of continuity, the TORM
shareholder-elected Board members are all elected for
two years.
• Fixed retirement age for Board members: TORM does
not have a fixed retirement age for members of the
Board of Directors, as TORM believes that competences,
not age, should be the main selection criterion.
• Selection and nomination of candidates for the Board:
The B share election rights for the Minority Director
developed to ensure appropriate minority shareholder
protection rights and the C share 525,000,000,000
votes with respect to election of Board members were
agreed in connection with the Restructuring and are
assessed not to be in compliance with the guideline.
TORM 2015 32
About TORM
TORM complies with recommendations regarding diversity
at management level. Along with other major Danish
shipowners, TORM has signed the Charter on More Women
on Boards. As of December 2015, females represented 44%
of the land-based employees globally (defined as non-
managerial individual performers), 33% of middle manage-
ment and 5% of top management (Vice Presidents and
above). In 2013, TORM set a target to reach minimum 20%
of top management and 40% of middle management being
female by 2016, for example by adjusting the Company’s
recruitment procedures. TORM has redefined its diversity
policy to include a goal of having at least 25% female
Board members elected by the shareholders in 2019. The
original goal of 25% female Board members in 2016 was
not fulfilled as the current Board, that was elected at the
Extraordinary General Meeting on 25 August 2015 in
connection with the Restructuring, has a two-year election
period.
This Corporate Governance section and an overview of
TORM’s position on the individual recommendations are
available on TORM’s website. They constitute TORM’s
mandatory Corporate Governance Report in accordance
with Section 107b of the Danish Financial Statements’ Act.
WHISTLEBLOWER FACILITY
Since 2006, the Board of Directors has, as part of the
internal control system, a whistleblower facility with an
independent lawyer to detect any violations of laws, regula-
tions or business ethics by TORM representatives.
In 2015, the whistleblower facility received one notification,
which was investigated and closed without any critique or
requirements for new measures.
The whistleblower facility is registered and approved by the
Danish Data Protection Agency. For further information on
the whistleblower facility, please visit TORM’s website
www.torm.com/about-torm.
For TORM’s overall guidelines for incentive schemes for
members of the Board of Directors and the Management,
please visit www.torm.com/about-torm.
For further information on TORM’s position on the
individual corporate governance recommendations, please
visit TORM’s website www.torm.com/about-torm.
MEETINGS ATTENDED/HELD
Members
Flemming Ipsen
(Member from 1 January until
25 August 2015)
Olivier Dubois
(Member from 1 January until
25 August 2015)
Alexander Green
(Member from 1 January until
25 August 2015)
Jon Syvertsen
(Member from 1 January until
25 August 2015)
Christopher H. Boehringer
(Member after 25 August 2015)
David N. Weinstein
(Member after 25 August 2015)
Pär Göran Trapp
(Member after 25 August 2015)
Torben Janholt
(Member after 25 August 2015)
Kari Millum Gardarnar
(Member throughout 2015)
Rasmus J. Skaun Hoffmann
(Member throughout 2015)
Board of
Directors
12/12
10/12
11/12
11/12
7/7
7/7
6/7
7/7
18/19
16*)/19
4/4
4/4
3/4
4/4
4/4
*) Rasmus J. Skaun Hoffmann has been at sea and unable to participate at three meetings.
Audit
Committee
Remuneration
Commitee
Nomination
Committee
0/0
Risk
Committee
0/0
0/0
0/0
0/0
0/0
2/2
2/2
2/2
2/2
2/2
2/2
TORM 2015 About TORM
33
BOARD OF DIRECTORS
CHRISTOPHER HELMUT BOEHRINGER / Chairman of TORM’s Board of Directors
Born: 01-01-1971
Nationality: Canadian
Employment: Managing Director, Oaktree Capital
Management, L. P.
Education: BA degree in Economics
from Harvard University and an MBA from
INSEAD in France, where he graduated with
Distinction and was the recipient of the INSEAD
Canadian Foundation Scholarship.
Mr. Boehringer is Chairman of TORM’s Nomina-
tion Committee and the Remuneration Commit-
tee and a member of the Audit Committee and
the Risk Committee.
Prior to joining Oaktree in March 2006,
Mr. Boehringer worked at Goldman Sachs,
FITravel Corporation, Warburg Dillon Read/SG
Warburg and LTU GmbH & Co.
Other Board directorships: Magellan Enterprises
Limited, OCM Luxembourg OPPS Herkules
Holdings, OCM Luxembourg OPPS VI Sarl, OCM
Luxembourg OPPS VII Homer Holdings Sarl, OCM
Luxembourg VOF Blocker Sarl, OCM Luxembourg
Mars Holdings Sarl, OCM Luxembourg OPPS
VIII Blocker Sarl, OCM Luxembourg Huntington
Blocker Sarl, OCM Luxembourg OPPS VIII (Paral-
lel 2) Blocker Sarl, OCM Luxembourg OPPS VIIIB
Sarl, OCM Luxembourg OPPS VIIIB Blocker Sarl,
OCM Luxembourg OPPS FFF Sarl, Boston Sarl,
OCM Njord Holdings Sarl, OCM Luxembourg
Raphael Sarl, OCM Luxembourg Seraphina Sarl,
OCM Phoenix Holdings I Sarl, OCM Phoenix
Holdings II Sarl, OCM Lux. Sand Holdings Sarl,
OCM Luxembourg Avenue Sarl, OCM Luxem-
bourg Springboard Sarl, LCCG UK Limited, LCCG
Holdings (No. 3) Limited, LCCG Holdings (No.
2) Limited, LCCG Holdings (No. 1) Limited, Life
Company Consolidation Group Limited, Mars
Acquisition Limited, Amber GP (London) Limited,
TORM plc.
DAVID NEIL WEINSTEIN / Member and Deputy Chairman of TORM’s Board of Directors
Born: 22-08-1959
Nationality: US citizen
Employment: Senior Investment Banking,
Governance and Reorganization Specialist
Education: Brandeis University,
BA Economics and Columbia University School
of Law.
Mr. Weinstein has had a number of Board
leadership positions in inter alia Horizon Lines,
Inc., Interstate Bakeries Corporation, Pioneer
Companies, Inc. and York Research Corporation
and has served as Managing Director of Calyon
Securities Inc., BNP Paribas, Bank of Boston and
Chase Securities Inc.
Mr. Weinstein is member of TORM’s Nomination
Committee and Remuneration Committee.
Other Board directorships: Chairman of Every-
ware Global Inc., Board member of DeepOcean
Group Holdings AS, Axiall Corporation and TORM
plc.
KARI MILLUM GARDARNAR / Member of TORM’s Board of Directors
Born: 05-05-1951
Nationality: Danish
Employment: Mr. Gardarnar is employed by
TORM as Captain and has been with the Com-
pany since 1975.
Education: Master License, Navigational Center,
Faroe Islands (1975), Tanker Certificates, Marstal
Navigational Center (1980, follow-up every five
years), Security and Safety Certificate, Simac
(1990, follow-up every five years), Medical Care
Certificate, Maritime & Health care Center, Fanø
(2000, follow up every 5 years).
A member of the Board since April 2011,
representing the employees of TORM on the
Board. Mr. Gardarnar has sailed since 1975
and has experience from general, refrigerated,
container and project cargos as well as dry bulk
and tanker cargo.
PÄR GÖRAN TRAPP / Member of TORM’s Board of Directors
Born: 31-01-1962
Nationality: Swedish
Employment: Board member
Education: Stockholm School of Economics,
MSc Economics and Business Administration
(Majoring in Finance, 1983-1987).
Mr. Trapp was with Morgan Stanley from 1992 to
2013 where he started as crude oil trader, then
became Head of Oil Products Trading Europe &
Asia, Head of Global Trading and Head of Com-
modities EMEA. Prior to joining Morgan Stanley,
Mr. Trapp was crude oil trader at Statoil.
Mr. Trapp is Chairman of TORM’s
Audit Committee and the Risk Committee.
Other Board directorships: Chairman of Ma-
drague Capital Partners AB, Board member of
Amara Living Ltd and TORM plc.
TORM 2015 34
About TORM
RASMUS J. SKAUN HOFFMANN / Member of TORM’s Board of Directors
Born: 10-04-1977
Nationality: Danish
Employment: Mr. Hoffmann is employed by
TORM as Chief Engineer and has been with the
Company since 2003.
Education: Frederikshavn School of Marine and
Technical Engineering/MARTEC BSc, Marine and
Technical Engineering (1994-1999), Seamanship,
navigation and engineering operations Naval
Engineer since 1994.
A member of the Board since April 2011, repre-
senting the employees of TORM on the Board.
Mr. Hoffmann has 20 years of sailing experience
on various vessel types, including eight years
of experience as Chief Engineer and experience
from project management in fleet reliability initia-
tives, energy efficiency and operational optimiza-
tion of technical systems.
TORBEN JANHOLT / Member of TORM’s Board of Directors
Born: 11-10-1946
Nationality: Danish
Employment: Just Water ApS
Education: IESE, Barcelona (2012/2008), Harvard,
Copenhagen (Board of Directors Program) (2011),
IMD, Lausanne (2010/2007/2003/2000/1999),
CEDEP/INSEAD Management School, Fon-
tainebleau (1990), Niels Brock Business College,
Copenhagen (Certificate in business administra-
tion, 1974).
Mr. Janholt is a member of TORM’s Audit Com-
mittee, Risk Committee and Remuneration
Committee.
Mr. Janholt has been the CEO and President for
J. Lauritzen A/S from 1998 to 2013 and Chairman
of the Danish Shipowners’ Association from 2005
to 2009 and holds a number of management
duties/directorships.
Other Board directorships: Chairman of Otto
Suenson & Co. A/S, Board member of Pioneer
Marine Pty Ltd. Singapore, PostNord A/B,
A/S United Shipping & Trading Company,
Bunker Holding A/S, Uni-Chartering A/S,
Uni-Tankers A/S and TORM plc.
EXECUTIVE MANAGEMENT AND
CHIEF FINANCIAL OFFICER
JACOB MELDGAARD / Chief Executive Officer (Executive Management)
Born: 24-06-1968
Nationality: Danish
Education: Copenhagen Business School, Den-
mark (Bachelor’s degree in International Trade)
and Wharton Business School and Harvard
Business School, USA (Advanced Management
Program).
Jacob Meldgaard has been Chief Executive
Officer since 1 April 2010. Before this, Mr. Meld-
gaard served as Executive Vice President of
Dampskibsselskabet NORDEN A/S.
MADS PETER ZACHO / Chief Financial Officer
Born: 24-05-1969
Nationality: Danish
Education: University of Copenhagen (Master
of Science, Economics) and IMD, Switzerland
(Executive MBA).
Chief Financial Officer since September 2013.
From 2010 to 2013, Mads Peter Zacho served as
CFO of Svitzer. He was Deputy Head of Group
Finance in A. P. Moller–Maersk, which he joined
in 2004. Prior to this, Mads Peter Zacho held
positions with Nordea and The World Bank.
TORM 2015
About TORM
35
INVESTOR INFORMATION
• Oaktree new majority shareholder
• Capital increase and issuance of warrants
• Reverse stock split and capital reduction by cancellation of treasury shares
COMMUNICATION TO THE INVESTORS
To ensure consistent communication to all investors,
quarterly and annual financial statements and other stock
exchange announcements are the main vehicles of
communication. TORM maintains regular capital market
contact through analyst and industry presentations,
investor meetings and conference calls. Roadshows are
primarily held in Copenhagen and in the major European
and US financial centers.
In 2015, TORM issued 42 announcements to the stock
exchange, which are accessible in both Danish and English
versions on www.torm.com/investors. Interested stakeholders
can sign up for TORM’s investor relations mailing list there.
For a three-week period prior to the publication of
quarterly and annual financial statements, communication
is limited to issues of a general nature and no individual
investor meetings are held.
In 2015, TORM also convened three Extraordinary General
Meetings, all in connection with the Restructuring, to approve:
• Adoption of revised Articles of Association in connection
with the Restructuring, held on 7 July 2015
• Election of new Board of Directors, new remuneration
policy and mandate to execute the reverse stock split
with a consolidation ratio of 1,500:1, held on 25 August
2015
• Reduction of TORM’s share capital by nominally DKK
147,160.54 by cancellation of treasury shares, held on 15
December 2015 (share capital reduction effectuated on
13 January 2016)
INCREASE IN SHARE CAPITAL IN CONNECTION WITH
THE RESTRUCTURING
In connection with the Restructuring, the Board of Directors
decided to use authorizations received at TORM’s Annual
General Meeting held on 26 March 2015 and at TORM’s
Extraordinary General Meeting held on 7 July 2015 to:
• Issue 35,672,000,000 new A shares of DKK 0.01 each to
the Company’s pre-restructuring lenders against
conversion of debt
• Issue 59,354,374,554 new A shares of DKK 0.01 each to
Oaktree against a contribution in kind of the entire share
capital of OCM (Gibraltar) Njord Midco Ltd. (the legal
entity owning 25 on-the-water vessels and six newbuild-
ings)
• Issue 7,181,578,089 warrants to the Company’s pre-re-
structuring lenders, each entitling their holders to
subscribe for one new A share of DKK 0.01, in consider-
ation of a total debt write-down of approximately USD
536m
• Issue one C share of DKK 0.01 in nominal value to
Oaktree against payment in cash of DKK 10
• Issue one B Share of DKK 0.01 in nominal value to SFM
Trustees Limited as Minority Trustee against payment in
cash of DKK 10
The new capital increase comprised approximately 99.2%
of TORM’s total post-restructuring share capital.
Following the increase in share capital, TORM published a
listing prospectus to admit the new shares for trading on
Nasdaq Copenhagen, which took effect on 29 July 2015.
REVERSE STOCK SPLIT AND CAPITAL REDUCTION
After the increase of the share capital on 13 July 2015,
TORM had 95,754,374,554 A shares, one B share and one C
share, all with a nominal value of DKK 0.01. At TORM’s
Extraordinary General Meeting held on 25 August 2015, the
Board of Directors was mandated to execute a reverse split
of the A shares and TORM’s warrants with a consolidation
ratio of 1,500:1. The consolidation was effectuated on 24
September 2015 after which the Company’s share capital
comprised 63,836,249 A shares of DKK 15.00 each, 1,054 A
shares of DKK 0.01 each, one B share and one C share, both
of DKK 0.01.
In the redemption process in connection with the share
consolidation, TORM acquired 9,810 A shares of DKK 15
each and the 1,054 A shares of DKK 0.01 each as treasury
shares. At the Extraordinary General Meeting held on 15
December 2015, it was decided to cancel the treasury
shares, and the capital reduction was carried out on 13
January 2016 following the statutory four-week creditor
notice period.
TRADING
Adjusting for the share consolidation, TORM had approxi-
mately 485t shares outstanding trading at approximately
DKK 465 each at the beginning of 2015. On 29 July 2015,
following the Restructuring, TORM listed 63m shares
trading at a closing price of approximately DKK 105 each,
also adjusted for the share consolidation. The share price
ended at approximately DKK 98 on 30 December 2015.
Following the listing on 29 July 2015, the average daily
trading volume on Nasdaq Copenhagen has been approxi-
mately 138t shares.
From 17 December 2015, TORM has been part of the
MidCap segment on Nasdaq Copenhagen.
SHAREHOLDERS
TORM’s A shares are listed on Nasdaq Copenhagen under
the ticker TORM A. As of 31 December 2015, TORM had a
share capital of DKK 958m divided into 63,836,249 A
TORM 2015 36
About TORM
shares with a nominal value of DKK 15.00, 1,054 A shares
with a nominal value of DKK 0.01, one B share and one C
share, both with a nominal value of DKK 0.01.
The warrant transfer notice can be found on
http://www.torm.com/uploads/media_items/torm-
warrant-transfer-notice.original.pdf.
As of 31 December 2015, TORM had approximately 12,500
registered shareholders representing 88% of the share
capital. In compliance with section 29 of the Danish
Securities Trading Act, the following shareholders have
reported to TORM that they owned more than 5% and 50%
of the share capital, respectively:
• OCM Njord Holdings S.à r.l. (Oaktree) (>50%)
• DW Partners, LP (>5%)
As of 31 December 2015, TORM’s treasury shares comprised
approximately 0% of the total share capital.
The C share is held by Oaktree and the B share is held by
the Minority Trustee, SFM Trustees Limited, on behalf of
TORM’s non-Oaktree shareholders. The B and the C share
have certain voting rights.
At the end of 2015, the members of the Board of Directors
held a total of 2 shares, equivalent to a total market capital-
ization of DKK 195 or USD 29. The Executive Management
held a total of 66 shares, equivalent to a market capitaliza-
tion of DKK 6,435 or USD 942. The Board of Directors and
all employees are limited to trading shares during a
four-week period after the publication of financial reports.
TORM’s company’s registrar is VP Securities, Weidekamps-
gade 14, P.O. Box 4040, DK-2300 Copenhagen S, Denmark.
WARRANTS AND RESTRICTED SHARE UNITS
In connection with the Restructuring, TORM’s pre-restruc-
turing Lenders received warrants comprising 7.5% of the
total share capital. As of 31 December 2015, 4,787,692
warrants are outstanding with each warrant being
convertible into one A share with a nominal value of DKK 15
against payment of a subscription price in cash to TORM of
DKK 96.3. The warrants can be exercised in the period
between 13 July 2016 and 13 July 2020.
In accordance with TORM’s remuneration policy, the Board
of Directors has on 18 January 2016 and as part of a new
long-term incentive program decided to grant certain
employees Restricted Share Units (“RSU”) in the form of
restricted stock options. The RSUs aim at incentivizing the
employees to seek to improve the performance of TORM
and thereby the TORM share price for the mutual benefit of
themselves and the shareholders of TORM. A total of
850,667 RSUs were granted and, subject to vesting, each
RSU entitles the holder to acquire one TORM A share. The
RSUs will vest over a three-year period with an exercise
price for each TORM A share of DKK 96.3.
During 2016, the Chief Executive Officer may be granted up
to 1,276,725 RSUs. RSUs granted to the Chief Executive
Officer will vest over a five-year period with an exercise
price for each TORM A share of DKK 96.3.
The theoretical market value of the RSU allocation was
around the time of the issuance calculated at USD 5.0m
based on the Black-Scholes model.
NET ASSET VALUE (NAV)
TORM’s net asset value (NAV) as of 31 December 2015 is
estimated at USD 1,169m based on i) broker values of USD
1,951m, ii) outstanding debt of USD 781m, iii) outstanding
newbuilding installments of USD 224m, iv) a cash position
of USD 168m, v) other current assets of USD 120m and vi)
current liabilities of USD 66m.
Based on 63,836,249 outstanding A shares as of 31
December 2015, this corresponds to a NAV/share of USD
18.3 or DKK 125.1.
DIVIDEND
The Board of Directors proposes that no dividend be
distributed for 2015.
The warrants are not publicly listed, but can be transferred
by submitting a warrant transfer notice to the Company.
For further information about investor relations, please visit
www.torm.com/investors
INVESTOR RELATIONS CONTACT
FINANCIAL CALENDAR 2016
Christian Søgaard-Christensen,
Vice President,
Corporate Support
Phone: +45 3917 9285
E-mail: csc@torm.com
Morten Agdrup,
Head of Corporate Finance
and IR
Phone: +45 3917 9249
E-mail: mag@torm.com
12 April 2016
12 May 2016
Annual General Meeting
First quarter 2016 results
16 August 2016
First half 2016 results
15 November 2016
Nine months 2016 results
ANALYST COVERAGE
As of 7 March 2016, the following analysts from Nordic investment banks cover TORM:
Carnegie Investment Bank
Marcus Bellander
Phone: +45 3288 0298
E-mail:
marcus.bellander@carnegie.dk
Fearnley Securities
Jonathan Staubo
Phone: +47 2293 6485
E-mail:
j.staubo@fearnleys.no
Nordea Markets
Stig Frederiksen
Phone: +45 3333 5723
E-mail:
stig.frederiksen@nordea.com
SEB
Lars Heindorff
Phone: +45 3328 3307
E-mail: lars.heindorff@seb.dk
Danske Bank
Finn Bjarke Petersen
Phone: +45 4512 8036
E-mail: finpe@danskebank.dk
Espen L. Fjermestad
Phone: +47 2293 6484
E-mail:
e.fjermestad@fearnleys.no
Jyske Bank
Frans Høyer
Phone: +45 8989 7033
E-mail: frans.hoyer@jyskebank.dk
Ole G. Stenhagen
Phone: +47 2100 8527
E-mail: ole.g.stenhagen@seb.no
The list of analysts is updated on a regular basis and is available on www.torm.com/investors
TORM 2015
About TORM
37
TORM maintains ATTENTION TO
DETAIL across the integrated operating
platform, which enables superior
performance in areas such as customer
service, fleet quality, safety and financial
return,
says CFO Mads Peter Zacho.
TORM 2015 38
Investor information
TORM 2015 FINANCIAL STATEMENTS
financial statements
39
Financial review 2015
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated cash flow statement
Notes
Statement by Management
Independent auditor’s reports
Parent Company 2015
Fleet overview
Glossary
40
48
49
50
52
53
54
86
87
89
102
104
TORM 2015 40
FINANCIAL REVIEW 2015
REPORTED FINANCIALS*)
TORM achieved a net profit of USD 126m in 2015 (2014:
USD 13m), resulting in earnings per share, or EPS, of USD
2.5 in 2015 (2014: USD 0.4). The higher result in 2015 was
mainly due to the increased number of available earning
days, which stems from the acquisition of the fleet from
Former TORM A/S as well as higher freight rates.
EBITDA for 2015 was USD 210m, which is in line with the
latest guidance of an EBITDA of USD 200-220m dated 11
November 2015.
The profit before tax for 2015 was USD 127m, which is also
in line with the latest guidance of a profit before tax of USD
115-135m.
In 2015, total revenue was USD 540m (2014: USD 180m)
and TCE earnings amounted to USD 371m (2014: USD
99m). The increase in TCE earnings was primarily attribut-
able to an increase of 154% in the number of available
earning days, corresponding to an increase in earnings of
USD 151m, and higher freight rates in the Company’s
Tanker Segment, corresponding to an increase in earnings
of USD 121m.
The operating profit increased by USD 127m to a profit of
USD 143m in 2015 (2014: USD 16m). This increase was
primarily due to an increase in gross profit (net earnings
from shipping activities) of USD 187m. This was partly
offset by increases in administrative expenses of USD 19m
and depreciations on tangible assets of USD 43m.
TORM’s total assets increased by USD 1,241m in 2015 to
USD 1,867m (2014: USD 626m), of which the carrying
amount of vessels, capitalized dry-docking and prepay-
ments on vessels amounted to USD 1,565m (2014: USD
537m). The increase was primarily attributable to the
acquisition of the fleet from Former TORM A/S.
LIQUIDITY AND CASH FLOW
In 2015, the invested capital increased by USD 1,015m to
USD 1,588m as of 31 December 2015 (2014: USD 573m).
The increase can primarily be explained by the acquisition
of the fleet from Former TORM A/S.
Total cash and cash equivalents amounted to USD 168m at
the end of 2015 (2014: USD 38m), resulting in a net
increase in cash and cash equivalents for the year of USD
130m, compared to a net increase of USD 36m in 2014. The
undrawn credit facilities as of 31 December 2015 amounted
to USD 75m (2014: USD 0m).
The Company’s operations generated a cash inflow of USD
214m in 2015 (2014: USD 17m). In addition, the Company
invested USD 254m (2014: USD 378m) in tangible fixed
assets during 2015, primarily related to the acquisition of
three second-hand MR vessels, three MR newbuildings and
the capitalized dry-docking. The Company generated USD
78m (2014: USD 0m) in cash from business combinations
and USD 18m from the sale of two bulk vessels.
The total cash inflow from financing activities amounted to
USD 75m, compared to a cash inflow of USD 397m in 2014.
Repayment on mortgage debt and bank loans amounted
to USD 29m primarily in connection with vessel sales.
Additional borrowings generated an inflow of USD 93m
relating to the financing of the acquisition of two second-
hand MR vessels and three MR newbuildings. TORM did not
pay any dividends to its shareholders during 2015.
PROFORMA FINANCIAL INFORMATION ADJUSTED
FOR NON-RECURRING ITEMS*)
For the purpose of presenting historical financial perform-
ance and financial position of the business that will be
the continuing business, TORM has presented pro forma
financial information and financial review of the combined
businesses of Former TORM A/S and Njord adjusted for
non-recurring items.
In 2015, current assets excluding cash increased by USD 69m.
This was primarily due to an increase in freight receivables of
USD 48m and an increase in bunkers of USD 12m. The
increase in freight receivables and bunkers was driven by the
increase in the fleet of owned and chartered vessels from the
acquisition of the fleet from Former TORM A/S.
TORM has prepared pro forma financial information by
performing consolidation and elimination of all significant
transactions between Former TORM and Njord (OCM
(Gibraltar) Njord Midco Ltd.) for the period 1 January to
31 December 2015 and 1 January to 31 December 2014.
In 2015, total equity increased year-on-year by USD 506m
to USD 976m from USD 470m in 2014. The increase was
mainly relating to the accounting effects of the reverse
acquisition of TORM A/S of USD 368m and the impact of
the profit for the year of USD 126m.
In 2015, TORM’s total liabilities increased by USD 735m to
USD 891m from USD 156m in 2014. This was primarily
attributable to the takeover of liabilities resulting from the
acquisition of Former TORM A/S.
*) Please refer to page 2 for definitions.
Pro forma adjustments give effect to the completion of the
Restructuring, which also reflects the write-down of part
of TORM’s debt to current asset values against issuance of
Consideration Warrants, the exchange of part of Former
TORM’s debt for equity and, subject to certain adjust-
ments, reinstatement of Former TORM’s remaining debt
under the New Term Facility Agreement.
The pro forma income statements for 2015 and 2014 have
been prepared as though the Restructuring occurred as
of 1 January 2015 and 1 January 2014, respectively. The
pro forma adjustments and adjustments for non-recurring
items are based on available information and assumptions
TORM 2015Financial review 2015 41
that TORM believes are reasonable. Such adjustments are
based on estimates and may be subject to change.
For the purpose of the pro forma financial information,
the initial purchase price allocation is based upon the es-
timated fair value of assets and liabilities of Former TORM
as of 1 January 2015 and 1 January 2014, respectively,
and the pro forma adjustments consist of the differences
between those fair values and the carrying amount of
the same assets and liabilities as of 1 January 2015 and 1
January 2014 except for write-down of debt.
For the purpose of the pro forma financial information,
the write-down of part of Former TORM’s debt to cur-
rent asset values against issuance of warrants and the ex-
change of part of Former TORM’s debt for equity are the
actual numbers despite the carrying amount of the debt as
of 1 January 2015 and 1 January 2014 being different from
the amount of the Restructuring Completion Date.
The impact of the write-down of debt and the cost in-
curred to effect the business combination have not been
incorporated in the pro forma income statements, as the
pro forma financial information has been prepared as
though the Restructuring took place as of 1 January 2015
and 1 January 2014, respectively.
In March 2014, a realized impairment loss was recognized
in connection with the sale of vessels from Former TORM
A/S to Njord. Had the Restructuring been undertaken as of
1 January 2014, these vessels would have been recognized
at a value low enough to eliminate the impairment loss.
Consequently, the impairment loss recognized by Former
TORM A/S in 2014 has been reversed in the pro forma in-
come statement.
Furthermore, in addition to the pro forma adjustments, the
pro forma income statement has been adjusted for costs
incurred in relation to the Restructuring and an impair-
ment loss of the remaining vessels in Former TORM A/S’
fleet recognized in 2014, as such items are deemed non-
recurring items.
The following pro forma adjustments have been made to
the unadjusted financial information of Former TORM and
Njord:
1) Elimination of revenue generated and costs incurred in
connection with the chartering of three vessels from
Njord to Former TORM A/S.
2) In 2011, Former TORM sold two LR2 tankers at prices
above market and leased them back on seven-year
bareboat contracts. The excess profit arising from the
sales was recognized as deferred income and amortized
over the term of the leases. In connection with the pur-
chase price allocation, no new value has been allocated
to these contracts, as it has been determined that the
charter rate according to the agreements approximates
the current market rate. Accordingly, the amortized in-
come recognized in 2015 has been reversed to reflect
the situation as if the purchase price allocation occur-
red on 1 January 2015 and 1 January 2014, respect-
ively. Furthermore, there have been added amortiza-
tions of the value allocated to time charter contracts as
part of the purchase price allocation on 1 January 2015
and 1 January 2014, respectively, calculated as the dif-
ference between the contract value and the fair value of
the monthly time charter as of the date of the Restruc-
turing.
3) Depreciations during 2014 and 2015 on vessels are
reduced to reflect that the depreciable amount would
have been reduced, had the vessels been adjusted to
fair values as of 1 January 2015 and 1 January 2014,
respectively, in connection with the purchase price allo-
cation on these dates. No adjustments have been made
to depreciations on other tangible assets.
4) Former TORM A/S disposed of its investment in Danish
Ship Finance in connection with the Restructuring. For
the presentation of the pro forma income statement,
dividend received in 2014 and 2015 has been reversed.
5) In 2014 and 2015, Former TORM recognized financial
expenses related to amortized borrowing costs and an
amortization of the cash flow hedging reserve gener-
ated by interest rate swaps that were cancelled in con-
nection with the 2012-Restructuring. For pro forma
presentation purposes, amortized borrowing costs and
amortized hedging reserve costs are reversed to reflect
that had the Restructuring occurred as of 1 January
2015 and 1 January 2014, any unamortized borrowing
costs and hedge reserves would have been eliminated,
as such borrowing costs and hedge reserves would not
have been part of the purchase price allocation.
6) As part of the Restructuring, Former TORM’s debt was
significantly reduced. Consequentely, for pro forma
presentation purposes, interest expenses are reduced
to reflect that had the Restructuring occurred as of
1 January 2015 and 1 January 2014, respectively, the
interest-bearing debt had been lower.
7) Reversal of realized impairment loss recognized in 2014
in connection with the sale of vessels from Former
TORM A/S to Njord because, had the Restructuring
been undertaken as of 1 January 2014, these vessels
would have been recognized at a value low enough to
eliminate the impairment loss.
The following adjustments have been made for non-recur-
ring items:
8) In 2014, Former TORM A/S has recorded an impairment
loss on the vessels not transferred to Njord. For the
purpose of presenting the performance of the continu-
ing combined business, this impairment loss has been
reversed, as it is considered of non-recurring nature.
9) At the Restructuring Completion Date, Former TORM
A/S had incurred advisor fees directly related to the
Restructuring, which are reversed as they are considered
of non-recurring nature.
FINANCIAL PERFORMANCE OVERVIEW
(PRO FORMA FINANCIALS)
TORM achieved a net profit of USD 187m in 2015 (2014:
USD 0m). The higher result in 2015 was mainly due to
higher freight rates in the Tanker Segment.
EBITDA for 2015 was USD 319m (2014: USD 119m), which
is in line with the latest guidance of an EBITDA of USD
310-330m dated 11 November 2015.
TORM 2015Financial review 2015 42
PRO FORMA CONSOLIDATED INCOME STATEMENT
ADJUSTED FOR NON-RECURRING ITEMS
2015
Pro
forma
adjust-
ments,
etc.
Pro
forma
Com-
bined
Group
Note
TORM
A/S
(Njord)
Former
TORM
A/S*)
2014
Pro
forma
adjust-
ments,
etc.
Pro
forma
Com-
bined
Group
Note
TORM
A/S
(Njord)
Former
TORM
A/S
540.4
315.4
-1.5
1, 2
854.3
179.9
624.2
-10.3
1, 2
793.8
USDm
Revenue
Port expenses, bunkers and
commissions
-169.7 -102.6
Freight and bunker derivatives
0.0
0.0
-272.3
0.0
-81.2 -298.1
0.0
-0.2
-379.3
-0.2
Time charter equivalent
earnings
370.7
212.8
-1.5
582.0
98.7
325.9
-10.3
414.3
Charter hire
Operating expenses
-12.0
-122.9
-21.3
-66.7
1.9
1, 2
-31.4
0.0
-53.6
10.8
1, 2
-42.8
-189.6
-50.3 -149.2
-199.5
Gross profit (Net earnings
from shipping activities)
235.8
124.8
0.4
Administrative expenses
-19.5
-22.4
Other operating income/
(expenses)
Share of profit/(loss) from joint
ventures
-6.3
6.3
0.2
-0.1
361.0
-41.9
0.0
0.1
48.4
123.1
0.5
-0.9
-51.0
-6.6
4.6
0.0
0.4
172.0
-51.9
-2.0
0.4
EBITDA
210.2
108.6
0.4
319.2
40.9
77.1
0.5
118.5
Impairment losses on tangible
and intangible assets
Amortizations and
depreciation
0.0
0.0
0.0
0.0 -191.7
191.7
7, 8
0.0
-67.3
-50.4
17.0
3
-100.7
-24.8
-96.3
26.2
3
-94.9
Operating profit/(EBIT)
142.9
58.2
17.4
218.5
16.1 -210.9
218.4
23.6
Financial income
Financial expenses
0.6
3.1
-2.3
4
1.4
0.0
3.8
-0.9
4
2.9
-16.6
-57.8
42.3 5, 6, 9
-32.1
-3.5
-76.2
54.0 5, 6, 9
-25.7
Profit/(loss) before tax
126.9
3.5
57.4
187.8
12.6 -283.3
271.5
Tax
-1.0
-0.1
-1.1
0.0
-0.8
Net profit/(loss) for the year
125.9
3.4
57.4
186.7
12.6 -284.1
271.5
0.8
-0.8
0.0
*) Former TORM A/S refers to the period 1 January to 13 July 2015.
5) Reversal of amortization of deferred borrowing costs and interest rate
Pro forma adjustments:
1) Elimination of charter-in income and charter hire of vessels between
Former TORM and Njord and amortization of the fair value of Former
TORM’s time charter book.
2) Reversal of amortization of deferred income on sale and leaseback trans-
actions involving two Former TORM LR2 product tankers and amort-
ization of fair value of Former TORM’s time charter book as follows from
the purchase price allocation.
3) Adjustment to depreciation to reflect depreciation on the fair value of
the vessels at the assumed dates for the business combination.
4) Reversal of dividends from disposed investment in Danish Ship Finance.
swaps relating to the 2012-Restructuring.
6) Adjustments to interest expenses based on the reinstated debt.
7) Represent the reversal of impairments of USD 44m recognized on
vessels sold from Former TORM to Njord.
Non-recurring items:
8) Represent the reversal of impairments of USD 148m recognized on
Former TORM's remaining vessels. For pro forma presentation
purposes, the impairments are reversed to reflect the normalized
business for the period.
9) Reversal of Former TORM advisor fees related to the financing and
restructuring plan of USD 26.6m in 2015 and USD 15.4m in 2014.
TORM 2015Financial review 2015 CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF 31 DECEMBER 2014
43
USDm
Intangible assets
Tangible assets
Financial assets
Non-current assets
Bunkers and freight receivables
Other receivables
Cash and cash equivalents
Total assets
Equity
Mortage debt and bank loans
Other liabilities
Deferred income
Total liabilities
TORM
A/S
(Njord)
Former
TORM
A/S
Pro
forma
Adjust-
ments
Pro forma
Com-
bined
Group
Note
0.0
1.4
10.0
536.9
1,217.8
-335.4
0.0
11.8
-10.9
536.9
1,231.0
-336.3
48.5
2.5
38.1
95.7
12.9
44.6
-4.4
17.0
-13.2
626.0
1,384.2
-336.9
469.5
-164.0
536.4
141.6
1,427.1
-866.4
13.3
1.6
115.9
5.2
-1.8
-5.1
156.5
1,548.2
-873.3
1
2
3
4
3
5
6
4
4
11.4
1,419.3
0.9
1,431.6
139.8
32.4
69.5
1,673.3
841.9
702.3
127.4
1.7
831.4
Total equity and liabilities
626.0
1,384.2
-336.9
1,673.3
Pro forma adjustments:
1) Reflects an adjustment to record identifiable intangible assets of
Former TORM at fair value and record goodwill from the reverse
acquisition.
2) Reflects an adjustment to record vessels at fair value as of 1 Janu-
ary 2014 and to record the value of Former TORM's vessels after
one year of depreciation.
3) Represents the sale of other investments in Danish Ship Finance.
4) Eliminates deferred income, other freight receivables and other liabilities of
balances between Former TORM and Njord and reversal of deferred income
on a sale and leaseback transaction and fair value of Former TORM's time
charter book.
5) Reflects the effect of lower paid interest on the reinstated debt and the effect
from advisor fees related to the financing and restructuring plan of Former
TORM A/S, deemed incurred before 1 January 2014.
6) Reflects the adjustments to record Former TORM's reinstated debt.
TORM 2015Financial review 2015
44
SEGMENT GROSS PROFIT/(LOSS) (PRO FORMA)
USDm
Revenue
Port expenses, bunkers and commissions
Freight and bunker derivatives
Time charter equivalent earnings
Charter hire
Operating expenses
Gross profit/(loss) (Net earnings from shipping activities)
Tanker
Segment
Bulk
Segment
Total
2014
Tanker
Segment
Bulk
Segment
Total
2015
766.8
-383.3
0.0
383.5
-17.3
-195.6
170.6
27.0
4.0
-0.2
30.8
-25.5
-3.9
1.4
793.8
844.0
-379.3
-269.7
-0.2
414.3
-42.8
0.0
574.3
-23.3
-199.5
-186.5
172.0
364.5
10.3
-2.6
0.0
7.7
-8.1
-3.1
-3.5
854.3
-272.3
0.0
582.0
-31.4
-189.6
361.0
CHANGE IN TIME CHARTER EQUIVALENT EARNINGS (PRO FORMA)
USDm
Time charter equivalent earnings
2014
Change in number of earning days
Change in freight rates
Other
Time charter equivalent earnings
2015
Handy-
size
MR
LR1
LR2
Tanker
Seg-
ment
Total
Un-
allo-
cated
Handy-
max
Pana-
max
Un-
allo-
cated
Bulk
Seg-
ment
Total
Total
56.7
227.1
42.9
1.7
0.5
57.3
-1.6
115.2
20.8
41.3
-1.8
17.3
-0.5
383.5
-
-1.2
- 194.6
1.6
-1.7
-0.2
30.4
-15.4
-7.5
-1.2
30.8 414.3
-
-
-17.1
-18.3
-7.7 186.9
-
-
-
-
-2.6
-2.6
-
-
1.7
1.7
-0.9
72.2 344.0
64.2
97.0
-3.1 574.3
-0.3
7.5
0.5
7.7 582.0
Unallocated earnings comprise fair value adjustment of freight and bunker derivatives, which are not designated as hedges, and gains and losses on
freight and bunker derivatives, which are not entered into for hedging purposes.
The profit before tax for 2015 was USD 188m, which is also
in line with the latest guidance of a profit before tax of USD
185-205m.
In 2015, total revenue was USD 854m (2014: USD 794m)
and TCE earnings amounted to USD 582m (2014: USD
414m). The increase in TCE earnings was primarily
attributable to a increase of 51% in freight rates in the
Company’s Tanker Segment, corresponding to an increase
in earnings of USD 195m. This was offset by a decrease in
the number of available earning days and freight rates in
the Bulk Segment, corresponding to a reduction in earnings
of USD 23m.
The operating profit increased by USD 195m to a profit of
USD 219m in 2015 (2014: USD 24m). This increase was
primarily due to an increase in gross profit (net earnings
from shipping activities) of USD 189m and a decrease of
USD 10m in administrative expenses. This was partly offset
by increases in amortizations and depreciations on tangible
assets of USD 6m.
SEGMENT RESULTS
TORM’s revenue derives from two segments: The Tanker
Segment and the Bulk Segment. The table Segment Gross
Profit/(Loss) above presents the results of shipping
activities by operating segment for 2015 and 2014. The
gross profit for 2015 in the Tanker Segment increased by
USD 194m, and the gross profit in the Bulk Segment
decreased by USD 5m compared to 2014.
The change in TCE earnings in the Tanker Segment and the
Bulk Segment is summarized in the table above.
Furthermore, the table on page 45 summarizes earnings
data per quarter.
Tanker Segment
Revenue in the Tanker Segment increased by 10% to USD
844m in 2015 from USD 767m in 2014, and TCE earnings
increased by USD 191m or 50% to USD 574m in 2015 from
USD 384m in 2014. The increase in TCE earnings was
primarily due to an increase in the weighted average TCE
earnings per available earning day of 51% compared to
2014.
In the LR2 fleet, the average freight rates increased by 74%
from 2014 to 2015, resulting in an increase in earnings of
USD 41m. The number of available earning days in the LR2
fleet decreased by 3% due to off-hire and dry-docking,
resulting in a reduction of earnings of USD 2m. Hence,
earnings in total increased by USD 39m.
TORM 2015Financial review 2015 EARNINGS DATA (PRO FORMA)
45
USDm
TANKER SEGMENT
LR2/Aframax vessels
Available earning days
Owned
T/C
Spot rates 1)
TCE per earning day 2)
LR1/Panamax vessels
Available earning days
Owned
T/C
Spot rates 1)
TCE per earning day 2)
MR vessels
Available earning days
Owned
T/C
Spot rates 1)
TCE per earning day 2)
Handysize vessels
Available earning days
Owned
T/C
Spot rates 1)
TCE per earning day 2)
Tanker Division
Available earning days
Owned
T/C
Spot rates
TCE per earning days 2)
BULK SEGMENT
Bulk
Available earning days
Owned
T/C
2014
Full year
Q1
Q2
Q3
Q4 Full year
2015
%
Change
full year
3,589
2,881
708
16,048
15,975
2,445
2,445
0
17,770
17,556
15,558
14,817
741
14,973
14,583
3,710
3,710
0
15,583
15,287
25,302
23,853
1,449
15,565
15,171
885
720
165
846
670
176
872
688
184
883
736
147
25,224
25,486
28,089
26,707
33,623
34,024
25,946
25,127
612
612
0
636
636
0
628
628
0
600
600
0
28,937
28,276
24,881
25,369
29,141
28,939
20,929
21,031
3,903
3,741
162
22,971
22,032
3,848
3,666
182
22,219
21,912
3,878
3,700
178
24,599
24,692
4,047
3,880
167
18,695
18,578
819
819
0
888
888
0
913
913
0
975
975
0
20,057
20,035
19,752
18,762
24,180
22,897
18,888
19,005
6,219
5,892
327
23,492
22,876
6,218
5,860
358
22,913
22,469
6,291
5,929
362
26,089
26,148
6,505
6,191
314
19,739
19,757
3,486
2,814
672
27,884
27,826
2,476
2,476
0
26,047
25,938
15,676
14,987
689
21,998
21,935
3,595
3,595
0
20,942
20,090
25,233
23,872
1,361
22,986
22,879
-3%
74%
74%
1%
47%
48%
1%
47%
50%
-3%
34%
31%
0%
48%
51%
2,981
699
2,282
580
180
400
386
182
204
259
184
75
62
48
14
1,287
-57%
594
693
TCE per earning day 2)
10,831
6,132
6,736
2,516
11,108
5,805
-46%
1) Spot rate = Time Charter Equivalent Earnings for all charters with less than six months’ duration = Gross freight income less bunker, commissions and
port expenses.
2) TCE = Time Charter Equivalent Earnings = Gross freight income less bunker, commissions and port expenses.
The average freight rates in the LR1 fleet were 48% higher
than in 2014. Furthermore, the available earning days
increased by 1%. In total, earnings increased by USD 21m.
more, freight rates increased by 50%, resulting in higher
earnings of USD 115m. Hence, total earnings increased by
USD 117m.
In the MR fleet, three second-hand vessels were acquired
and three newbuildings were delivered to TORM in the
second half of 2015. This was only partly off-set by an
increase in dry-dockings, and therefore the number of
available earning days increased by 118 days or 1%,
resulting in an increase in earnings of USD 2m. Further-
In the Handysize fleet, the average freight rates were 31%
higher in 2015 compared to 2014, resulting in a net
increase in earnings of USD 17m. There was a decrease in
available earning days due to dry-docking activities in
2015.
TORM 2015Financial review 2015 46
CHANGE IN OPERATING EXPENSES (PRO FORMA)
USDm
Tanker Segment
Bulk Segment
Operating expenses 2014
Change in operating days
Change in operating expenses per day
Operating expenses 2015
Handysize
33
-
-5
28
MR
115
3
-8
110
LR1
19
-
0
19
Panamax/
Handymax
4
-1
0
3
LR2
29
-
1
30
Total
200
2
-12
190
OPERATING DATA (PRO FORMA)
USD/day
Tanker Segment
Bulk Segment
Op erating expenses per
operating day in 2014
Op erating expenses per
operating day in 2015
Ch ange in the operating
expenses per operating
day in %
Handysize
MR
LR1
LR2
Tankers
Panamax/
Handymax
Bulk
Total
7,862
7,530
7,357
8,166
7,655
5,320
5,320
7,590
6,768
7,031
7,252
8,319
7,193
5,414
5,414
7,154
-14%
-7%
-1%
2%
-6%
2%
2%
-6%
Operating days in 2015*)
4,015
15,682
2,555
3,650
25,902
594
594
26,496
- Off-hire
- Dry-docking
+/- Bareboat charters out/in
+ Vessels chartered-in
25
395
-
-
82
587
-
663
43
36
-
-
6
156
100
1,118
-730
-730
-
-
-
-
-
-
156
1,118
-730
672
1,335
693
693
2,028
Available earning days
3,595
15,676
2,476
3,486
25,233
1,287
1,287
26,520
*) Including bareboat charters.
Bulk Segment
TORM has discontinued the bulk activities in 2015, and the
remaining vessels were sold and delivered to the new
owners in 2015.
Revenue decreased by 63% to USD 10m (2014: USD 27m),
whereas TCE earnings decreased by 76% or USD 23m to
USD 8m in 2015 (2014: USD 31m). Earnings were nega-
tively affected by an overall decrease of 57% in the number
of available earning days. Further, the weighted average
TCE earnings per available earning day decreased by 46%
as compared to 2014.
OPERATION OF VESSELS
As compared to 2014, the charter hire cost in the Tanker
Segment increased by USD 6m or 34% to USD 23m in 2015,
whereas the charter hire cost in the Bulk Segment de-
creased by USD 17m or 67% to USD 8m. The increase in the
Tanker Segment was caused by higher charter rates. The
decrease in the Bulk Segment was due to reduced activity.
The development in operating expenses is summarized in
the table above. The table also summarizes the operating
data for the Company’s fleet of owned and bareboat-
chartered vessels.
Operating expenses for the owned vessels decreased by
USD 10m to USD 190m in 2015 due to lower operating
expenses per day. This was partly offset by an increase in
operating days following the acquisition of three second-
hand MR vessels and the delivery of three MR newbuildings.
The total fleet of owned vessels had 1,274 off-hire and
dry-docking days, corresponding to 5% of the number of
operating days in 2015 compared to 966 off-hire days in
2014, equivalent to 4% of the number of operating days.
This was mainly attributable to an increase in dry-docking
activities.
Administrative expenses and other operating income
Total administrative expenses amounted to USD 42m in
2015, which was a decrease of USD 10m or 19% (2014:
USD 52m). This was mainly driven by a reduction in
staff-related expenses, savings within facility expenses and
the appreciation of the USD.
Other operating income and expenses primarily consisting
of chartering commissions and service fees amounted to
USD 0m in 2015 (2014: USD -2m). The increase is due to
the fact that commercial management was insourced in
2015 from external managers.
Financial income and expenses
Net financial expenses in 2015 were USD 31m (2014: USD
23m), corresponding to an increase of USD 8m. This was
mainly due to the acquisition of vessels and delivery of
newbuildings, the associated vessel financing and ex-
change rate adjustments.
Tax
Tax for the year amounted to an expense of USD 1m
compared to an expense of USD 1m in 2014. The tax for
2015 comprises the current tax expense for the year of
USD 2m, which was unchanged from the previous year, and
TORM 2015Financial review 2015 47
an income of USD 1m related to an adjustment of the
estimated tax liabilities for the previous years. In 2014,
there was an income of USD 1m in the deferred tax liability,
mainly related to the transition account under the Danish
tonnage tax scheme following sale of vessels.
Assessment of impairment of assets
Management has followed the usual practice of performing
an impairment review every quarter and presenting the
outcome to the Audit Committee. The Audit Committee
evaluates the impairment review and prepares a recom-
mendation to the Board of Directors. The recoverable
amount of the assets is reviewed by assessing the fair value
less costs to sell and the value in use for the significant
assets within the two cash generating units of the Com-
pany: The Tanker Segment and the Bulk Segment.
In the assessment of the fair value less costs to sell,
Management included a review of market values calculated
as the average of two internationally recognized shipbrokers’
valuations. The shipbrokers’ primary input is deadweight
tonnage, yard and age of the vessel. The assessment of the
value in use was based on the net present value (NPV) of
the expected future cash flows. The key assumptions are
considered to be related to future developments in freight
rates and operating expenses and to the weighted average
cost of capital (WACC) applied as discounting factor in the
calculations.
TORM did not impair any assets in 2015.
The Company will continue to monitor developments on a
quarterly basis for indications of impairment.
PRIMARY FACTORS AFFECTING RESULTS OF
OPERATIONS
TORM generates revenue by charging customers for the
transportation of refined oil products, crude oil and, to a
lesser extent, dry bulk cargos, using the Company’s tankers
and dry bulk vessels. The Company’s focus is on maintain-
ing a high quality fleet, and TORM actively manages the
deployment of the fleet between spot market voyage
charters, which generally lasts from several days to several
weeks, and time charters.
TORM believes that the important measures for analyzing
trends in the results of its operations for both tankers and
dry bulk vessels consist of the following:
• Time charter equivalent (TCE) earnings per avail-
able earning day. TCE earnings per available earning
day are defined as revenue less voyage expenses
divided by the number of available earning days. Voy-
age expenses primarily consist of port and bunker
expenses that are unique to a particular voyage,
which would otherwise be paid by a charterer under
a time charter, as well as commissions, freight and
bunker derivatives. TORM believes that present-
ing revenue net of voyage expenses neutralizes the
variability created by unique costs associated with
particular voyages or the deployment of vessels on
the spot market and facilitates comparisons between
periods on a consistent basis. Under time charter
contracts, the charterer pays the voyage expenses,
while under voyage charter contracts the shipowner
pays these expenses. A charterer has the choice of
entering into a time charter (which may be a one-trip
time charter) or a voyage charter. TORM is neutral as
to the charterer’s choice, because the Company will
primarily base its financial decisions on expected TCE
rates rather than on expected revenue. The analysis
of revenue is therefore primarily based on develop-
ments in TCE earnings.
• Spot charter rates. A spot market voyage charter is
generally a contract to carry a specific cargo from a
load port to a discharge port for an agreed freight
rate per ton of cargo or a specified total amount.
Under spot market voyage charters, TORM pays voy-
age expenses such as port, canal and bunker costs.
Spot charter rates are volatile and fluctuate on a
seasonal and year-on-year basis. Fluctuations derive
from imbalances in the availability of cargos for
shipment and the number of vessels available at any
given time to transport these cargos. Vessels operat-
ing in the spot market generate revenue that is less
predictable, but may enable the Company to capture
increased profit margins during periods of improve-
ments in tanker rates.
• Time charter rates. A time charter is generally a con-
tract to charter a vessel for a fixed period of time at
a set daily or monthly rate. Under time charters, the
charterer pays voyage expenses such as port, canal
and bunker costs. Vessels operating on time charters
provide more predictable cash flows, but can yield
lower profit margins than vessels operating in the
spot market during periods characterized by favour-
able market conditions.
• Available earning days. Available earning days are
the total number of days in a period when a vessel
is ready and available to perform a voyage, mean-
ing the vessel is not off-hire or in dry-dock. For the
owned vessels, this is calculated by taking operating
days and subtracting off-hire days and days in dry-
dock. For the chartered-in vessels, no such calcula-
tion is required, because charter hire is only paid
on earning days and not for off-hire days or days in
dry-dock.
• Operating days. Operating days are the total num-
ber of available days in a period with respect to the
owned vessels, before deducting unavailable days
due to off-hire days and days in dry-dock. Operating
days is a measurement that is only applicable to the
owned vessels, not to the time chartered-in vessels.
• Operating expenses per operating day. Operating
expenses per operating day are defined as crew
wages and related costs, the costs of spares and
consumable stores, expenses relating to repairs and
maintenance (excluding capitalized dry-docking), the
cost of insurance and other expenses on a per op-
erating day basis. Operating expenses are only paid
for owned vessels. The Company does not pay such
costs for the time chartered-in vessels, as they are
paid by the vessel owner and instead factored into
the charter hire cost for such chartered-in vessels.
TORM 2015Financial review 2015
48
Consolidated financial statements 2015
CONSOLIDATED INCOME STATEMENT
1 JANUARY – 31 DECEMBER
USD '000
Revenue
Port expenses, bunkers and commissions
Time charter equivalent earnings
Charter hire
Operating expenses
Gross profit (Net earnings from shipping activities)
Administrative expenses
Other operating expenses
Share of profit from joint ventures
EBITDA
Depreciation
Operating profit (EBIT)
Financial income
Financial expenses
Profit before tax
Tax
Net profit for the year
EARNINGS PER SHARE
Earnings per share (USD)
Earnings per share (DKK)*)
Diluted earnings per share (USD)
Diluted earnings per share (DKK)*)
*) Calculated from USD to DKK at the average USD/DKK exchange rate for the relevant period.
The accompanying notes are an integrated part of these financial statements.
Note
2015
2014
540,404
179,873
-169,646
-81,208
370,758
98,665
-12,023
-
-122,867
-50,254
235,868
48,411
5
4
5, 6
-19,486
-933
-6,299
-6,549
202
-
210,285
40,929
7, 8
-67,327
-24,751
142,958
16,178
10
10
992
-
-16,926
-3,546
127,024
12,632
13
-1,041
-
125,983
12,632
28
28
2015
2.5
16.6
2.5
16.6
2014
0.4
2.2
0.4
2.2
TORM 2015 Consolidated financial statements 2015
49
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
1 JANUARY – 31 DECEMBER
USD '000
Net profit for the year
Other comprehensive income:
Items that may be reclassified to profit or loss:
Exchange rate adjustment arising from translation of entities using
a functional currency different from USD
Fair value adjustment on hedging instruments
Value adjustment on hedging instruments transferred to income statement
Other comprehensive income after tax*)
2015
2014
125,983
12,632
160
1,067
333
1,560
0
0
0
0
Total comprehensive income for the year
127,543
12,632
*) No income tax was incurred relating to other comprehensive income items.
The accompanying notes are an integrated part of these financial statements.
TORM 2015 50
Consolidated financial statements 2015
CONSOLIDATED BALANCE SHEET
AS OF 31 DECEMBER
USD '000
ASSETS
NON-CURRENT ASSETS
Intangible assets
Goodwill
Total intangible assets
Tangible fixed assets
Vessels and capitalized dry-docking
Prepayments on vessels
Other plant and operating equipment
Total tangible fixed assets
Financial assets
Investments in joint ventures
Other investments
Total financial assets
Total non-current assets
CURRENT ASSETS
Bunkers
Freight receivables
Other receivables
Prepayments
Cash and cash equivalents
Total current assets
TOTAL ASSETS
The accompanying notes are an integrated part of these financial statements.
Note
2015
2014
11,400
11,400
7
0
0
9, 17 1,492,046
502,205
72,540
34,664
2,499
0
8 1,567,085
536,869
334
5
339
-
-
0
1,578,824
536,869
11
12
25,557
83,088
5,791
5,923
13,330
35,174
789
1,696
168,258
38,056
288,617
89,045
1,867,441
625,914
TORM 2015
CONSOLIDATED BALANCE SHEET
AS OF 31 DECEMBER
Consolidated financial statements 2015
51
USD '000
EQUITY AND LIABILITIES
EQUITY
Common shares
Special reserves
Treasury shares
Hedging reserves
Translation reserves
Retained profit
Total equity
LIABILITIES
NON-CURRENT LIABILITIES
Deferred tax liability
Mortgage debt and bank loans
Finance lease liabilities
Total non-current liabilities
CURRENT LIABILITIES
Mortgage debt and bank loans
Finance lease liabilities
Trade payables
Current tax liabilities
Other liabilities
Deferred income
Total current liabilities
Total liabilities
Note
2015
2014
14
141,946
87,986
14
60,974
-176
1,400
160
0
0
0
0
771,672
381,528
975,976
469,514
13
45,105
0
3, 16, 17, 19
717,530
125,325
19, 20
12,937
0
775,572
125,325
3, 16, 17, 19
48,727
16,226
19, 20
19
15, 19
624
22,284
1,763
42,055
440
0
11,912
0
1,341
1,596
115,893
31,075
891,465
156,400
TOTAL EQUITY AND LIABILITIES
1,867,441
625,914
The accompanying notes are an integrated part of these financial statements.
Accounting policies, critical accounting estimates and judgements
Business combinations
Liquidity, capital resources and subsequent events
Guarantee commitments and contingent liabilities
Derivative financial instruments
Risks associated with TORM's activities
Financial instruments
Related party transactions
Non-current assets sold during the year
1
2
3
18
21
22
23
24
25
TORM 2015 52
Consolidated financial statements 2015
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
USD ‘000
EQUITY
Common
shares*)
Special
reserves
**)
Treasury
shares
***)
Hedging
reserves
Trans-
lation
reserves
Retained
profit
Total
Balance as of 1 January 2014, as shown in the
financial statements of Njord
Effect as of 1 January 2014 of the reverse
acquisition
Equity as of 1 January 2014
16
87,970
87,986
Comprehensive income for the year:
Net profit for the year
Other comprehensive income for the year ****)
Total comprehensive income for the year
Shareholders’ contribution
Dividend paid
Total changes in equity 2014
-
-
0
-
-
0
Equity as of 31 December 2014
87,986
Comprehensive income for the year:
Net profit for the year
Other comprehensive income for the year ****)
Total comprehensive income for the year
Shareholders’ contribution
-
-
0
-
0
-
0
-
-
0
-
-
0
0
-
-
0
-
Reverse acquisition of TORM A/S
53,960
60,974
Transaction costs share issue
Acquisition treasury shares, cost
-
-
-
-
Total changes in equity 2015
53,960
60,974
0
-
0
-
-
0
-
-
0
0
-
-
0
-
-
-
-176
-176
0
-
0
-
0
0
-
-
0
0
-
0
-
0
-
0
0
-
-
0
201,306
201,322
-87,970
0
113,336
201,322
12,632
12,632
-
0
12,632
12,632
256,656
256,656
-1,096
-1,096
268,192
268,192
0
381,528 469,514
-
125,983
125,983
1,400
1,400
160
-
1,560
160
125,983
127,543
-
-
-
-
-
-
-
-
14,040
14,040
252,844
367,778
-2,723
-2,723
-
-176
1,400
160 390,144 506,462
Equity as of 31 December 2015
141,946
60,974
-176
1,400
160
771,672 975,976
*)
**)
Common shares have been adjusted to reflect the nominal capital of TORM A/S as a result of the reverse acquisition. Please refer to note 2 and note
14.
The special reserves were established in conjunction with a capital decrease in 2012. In accordance with the Danish Companies Act, the special
reserves can be used by the Board of Directors to distribute dividends or for other purposes that the Board of Directors may deem appropriate.
***)
Please refer to note 14 for further information on treasury shares.
****) Please refer to “Consolidated Statement of Comprehensive Income”.
The accompanying notes are an integrated part of these financial statements.
TORM 2015 CONSOLIDATED CASH FLOW STATEMENT
1 JANUARY - 31 DECEMBER
Consolidated financial statements 2015
53
USD '000
CASH FLOW FROM OPERATING ACTIVITIES
Operating profit
Adjustments:
Reversal of depreciation
Reversal of share of profit from joint ventures
Reversal of other non-cash movements
Dividends received from joint ventures
Interest received and exchange gains
Interest paid and exchange loss
Income taxes paid/repaid
Change in bunkers, receivables and payables
Note
2015
2014
142,958
16,178
67,327
24,751
26
-202
-874
200
624
0
0
0
0
-12,364
-3,313
-584
0
26
16,870
-20,360
Net cash flow from operating activities
213,955
17,256
CASH FLOW FROM INVESTING ACTIVITIES
Investment in tangible fixed assets
Cash from business combination
Sale of non-current assets (vessels)
-253,964
-377,914
2
25
77,544
17,640
0
0
Net cash flow from investing activities
-158,780
-377,914
CASH FLOW FROM FINANCING ACTIVITIES
Borrowing, mortgage debt
Repayment/redemption, mortgage debt
Dividend paid
Shareholders’ contribution
Transaction costs share issue
Purchase of treasury shares
Cash flow from financing activities
93,100
150,000
-29,214
0
-8,449
-1,096
14,040
256,657
-2,723
-176
0
0
75,027
397,112
Net cash flow from operating, investing and financing activities
130,202
36,454
Cash and cash equivalents as of 1 January
Cash and cash equivalents as of 31 December
Of which restricted cash and cash equivalents
Non restricted cash and cash equivalents as of 31 December
The accompanying notes are an integrated part of these financial statements.
38,056
1,602
168,258
38,056
13,768
0
154,490
38,056
TORM 2015 54
NOTE 1
ACCOUNTING POLICIES, CRITICAL ACCOUNTING
ESTIMATES AND JUDGEMENTS
• Annual improvements to IFRS 2010-2012 cycle
References to the “Company”, "Group", “TORM”, “TORM
Group” and “Njord” refer to TORM A/S and its subsidiaries
as a continuation of Njord (OCM (Gibraltar) Njord Midco
Ltd.). References to “Former TORM A/S” refer to the ac-
tivities of TORM A/S prior to the business combination
described in note 2.
The consolidated financial results reflect the activities for
Njord only for 2014 and the period from 1 January – 13
July 2015, whereas the remaining period of 2015 reflects
the combined activity of Former TORM A/S and Njord.
The annual report has been prepared in accordance with
the International Financial Reporting Standards as adopted
by the EU and the additional Danish disclosure require-
ments for annual reports for listed companies.
The financial statements are prepared in accordance with
the historical cost convention except where fair value ac-
counting is specifically required by IFRS.
The functional currency in all major entities is USD, and
the Company applies USD as presentation currency in the
preparation of the annual report.
ADOPTION OF NEW OR AMENDED IFRS
TORM has implemented the following standard amend-
ments issued by IASB and adopted by the EU and the
interpretations in the annual report for 2015:
• Annual improvements to IFRS 2011-2013 cycle
The implementation of the standard amendments and im-
provements did not affect TORM’s accounting policies ex-
cept for the changes to IAS 24 “Related Party Transactions”,
where management entities providing key management
personnel services are now considered as related party.
ACCOUNTING STANDARDS AND INTERPRETATIONS NOT
YET ADOPTED
IASB has issued a number of new or amended and revised
accounting standards and interpretations that potentially
could come into effect:
• IFRS 9 “Financial Instruments”. The standard and sub-
sequent amendments will substantially change the clas-
sification and measurement of financial instruments and
hedging requirements. The new standard and amend-
ments have not yet been endorsed by the EU. IASB has
tentatively decided that the mandatory effective date of
the standard will be no earlier than annual periods be-
ginning on or after 1 January 2018
• IFRS 15 “Revenue from Contracts with Customers”
• IFRS 16 "Leases"
• Amendments to IFRS 11 “Accounting for Acquisitions of
Interests in Joint Operations”
• Amendments to IAS 16 and IAS 38 “Clarification of Ac-
ceptable Methods of Depreciation and Amortisation”
• Amendments to IAS 27 “Equity Method in Separate Fi-
nancial Statements”
• Amendments to IFRS 10 and IAS 28 “Sale or Contribu-
tion of Assets between an Investor and its Associate or
Joint Venture”
• Amendments to IFRS 10, IFRS 12 and IAS 28 “Invest-
ment Entities: Applying the Consolidation Exception”
• Annual Improvements to IFRS 2012-2014 cycle
• Amendments to IAS 1 “Disclosure initiative”
• Amendments to IAS 19 “Defined Benefit plans:
Employee Contributions”
The impact on the consolidated financial statements has
not yet been determined on a sufficiently reliable basis.
KEY ACCOUNTING POLICIES
Management considers the following to be the most im-
portant accounting policies for the TORM Group.
Participation in pool and revenue share scheme
TORM generates its revenue from shipping activities, which
to some extent are conducted through a pool and rev-
enue share scheme. Total pool and revenue share scheme
revenue is generated from each vessel participating in the
pool and the revenue share scheme in which the Group
participates and is based on either voyage or time charter
parties. The pool and the revenue share scheme measure
net revenues based on the contractual rates and the dura-
tion of each voyage, and net revenue is recognized upon
delivery of services in accordance with the terms and con-
ditions of the charter parties.
The pool and the revenue share scheme are considered to
be joint operations, which is a joint arrangement whereby
the parties that have joint control of the arrangement have
rights to the assets and liabilities relating to the arrange-
ment. Joint control is considered to be the contractually
agreed sharing of control of the arrangement, where the
decisions for the relevant activities require unanimous con-
sent from the partners in the arrangement.
TORM recognizes the Company’s share of the income
statement and balance sheet in the respective pool and
revenue share scheme by recognizing a proportional share,
based on participation in the pool and the revenue share
scheme, combining items of a uniform nature.
The Company’s share of the income in the pool and the
revenue share scheme is primarily dependent on the num-
ber of days the Company’s vessels have been available
for the pool and the revenue share scheme in relation to
the total available pool and revenue share scheme earning
days during the period.
Cross-over voyages
Revenue is recognized upon delivery of services in accord-
ance with the terms and conditions of the charter parties.
For cross-over voyages (voyages in progress at the end
of a reporting period), the uncertainty and the depend-
ence on estimates are greater than for finalized voyages.
The Company recognizes a percentage of the estimated
revenue for the voyage equal to the percentage of the
estimated duration of the voyage completed at the bal-
ance sheet date. The estimate of revenue is based on the
expected duration and destination of the voyage. Voyage
expenses are recognized as incurred.
When recognizing revenue, there is a risk that the actual
number of days it takes to complete the voyage will differ
from the estimate, and for time charter parties a lower day
rate may have been agreed for additional days. The contract
for a single voyage may state several alternative destination
ports. The destination port may change during the voyage,
and the rate may vary depending on the destination port.
Changes to the estimated duration of the voyage as well
as changing destinations and weather conditions will affect
the voyage expenses.
TORM 2015Notes 55
NOTE 1 – CONTINUED
Demurrage revenue
Freight contracts contain conditions regarding the amount
of time available for loading and discharging of the vessel.
If these conditions are breached, TORM is compensated
for the additional time incurred in the form of demurrage
revenue. Demurrage revenue is recognized upon delivery
of services in accordance with the terms and conditions
of the charter parties. Upon completion of the voyage, the
Company assesses the time spent in port, and a demur-
rage claim based on the relevant contractual conditions is
submitted to the charterers. The claim will often be met
by counterclaims due to differences in the interpretation
of the agreement compared to the actual circumstances
of the additional time used. Based on previous experience,
95% of the demurrage claim submitted is recognized as
demurrage revenue. The Company receives the demurrage
payment upon reaching final agreement on the amount,
which on average is approximately 100 days after the
original demurrage claim was submitted. If the Group ac-
cepts a reduction of more than 5% of the original claim, or
if the charterer is not able to pay, demurrage revenue will
be affected.
Vessels
Vessels are measured at cost less accumulated deprecia-
tion and accumulated impairment losses. Cost comprises
acquisition cost and costs directly related to the acquisi-
tion up until the time when the asset is ready for use,
including interest expenses incurred during the period of
construction based on the loans obtained for the vessels.
All major components of vessels except for dry-docking
costs are depreciated on a straight-line basis to the es-
timated residual value over their estimated useful lives,
which TORM estimates to be 25 years. The Company
considers that a 25-year depreciable life is consistent with
what is used by other shipowners with comparable ton-
nage. Depreciation is based on cost less the estimated re-
sidual value. Residual value is estimated as the lightweight
tonnage of each vessel multiplied by scrap value per ton.
The useful life and the residual value of the vessels are re-
viewed at least at each financial year-end based on market
conditions, regulatory requirements and the Company’s
business plans.
The Company also evaluates the carrying amounts to de-
termine if events have occurred that indicate impairment
and would require a modification of the carrying amounts.
Prepayment on vessels is measured at costs incurred.
Dry-docking
Approximately every 30 and 60 months, depending on the
nature of work and external requirements, the vessels are
required to undergo planned dry-dockings for replacement
of certain components, major repairs and maintenance of
other components, which cannot be carried out while the
vessels are operating. These dry-docking costs are capital-
ized and depreciated on a straight-line basis over the esti-
mated period until the next dry-docking. The residual value
of such components is estimated at nil. The useful life of
the dry-docking costs is reviewed at least at each financial
year-end based on market conditions, regulatory require-
ments and TORM’s business plans.
A portion of the cost of acquiring a new vessel is allocated
to the components expected to be replaced or refurbished
at the next dry-docking. Depreciation hereof is carried
over the period until the next dry-docking. For newbuild-
ings, the initial dry-docking asset is estimated based on
the expected costs related to the first-coming dry-docking,
which again is based on experience and past history of
similar vessels. For second-hand vessels, a dry-docking
asset is also segregated and capitalized separately, taking
into account the normal docking intervals of the Company.
At subsequent dry-dockings, the costs comprise the actual
costs incurred at the dry-docking yard. Dry-docking costs
may include the cost of hiring crews to carry out replace-
ments and repairs, the cost of parts and materials used,
cost of travel, lodging and supervision of Company per-
sonnel as well as the cost of hiring third-party personnel to
oversee a dry-docking. Dry-docking activities include, but
are not limited to, the inspection, service on turbocharger,
replacement of shaft seals, service on boiler, replacement
of hull anodes, applying of antifouling and hull paint, steel
repairs and refurbishment and replacement of other parts
of the vessel.
Deferred tax
All significant Danish entities within the Former TORM
entered into the Danish tonnage tax scheme for a binding
10-year period with effect from 1 January 2001. However,
as a consequence of the reverse acquisition of TORM A/S
in July 2015, a new 10-year binding period commenced
with effect from 1 January 2016. Under the Danish ton-
nage tax scheme, taxable income is not calculated on the
basis of income and expenses as under the normal cor-
porate taxation. Instead, taxable income is calculated with
reference to the tonnage used during the year. The tax-
able income of a company for a given period is calculated
as the sum of the taxable income under the tonnage tax
scheme and the taxable income from the activities that are
not covered by the tonnage tax scheme computed in ac-
cordance with the ordinary Danish corporate tax rules.
If the entities’ participation in the Danish tonnage tax
scheme is abandoned, or if the entities’ level of investment
and activity is significantly reduced, a deferred tax liability
will become payable. A deferred tax liability is recognized
in the balance sheet at each period end calculated by
using the balance sheet liability method. The deferred tax
liability relating to the vessels is measured on the basis of
the difference between the tax base of the vessels at the
date of entry into the tonnage tax scheme and the lower
of cost and the realized or realizable sales value of the
vessels.
OTHER ACCOUNTING POLICIES
Consolidation principles
The consolidated financial statements comprise the finan-
cial statements of the Parent Company, TORM A/S and
entities controlled by the Company. Control is achieved,
when the Company:
• Has the power over the investee
• Is exposed or has the right to variable returns from
involvement with the investee
• Has the ability to use its power to affect its returns
The Company reassesses whether it controls an investee if
facts and circumstances indicate that there are changes to
one or more of the three elements of control listed above.
When the Company has less than a majority of the voting
rights of an investee, it has power over the investee when
the voting rights are sufficient to give it the practical abil-
ity to direct the relevant activities unilaterally. The Com-
pany considers all facts and circumstances in assessing
whether or not the Company’s voting rights in an investee
are sufficient to give it power, including:
TORM 2015Notes 56
NOTE 1 – CONTINUED
• The size of the Company’s holding of voting rights rela-
tive to the size and dispersion of holdings of the other
vote holders
• Potential voting rights held by the Company, other vote
holders or other parties
• Rights arising from other contractual arrangements
• Any additional facts and circumstances that indicate
that the Company has, or does not have, the current
ability to direct the relevant activities at the time that
decisions need to be made, including voting pattern at
previous shareholders’ meetings
Entities in which the Group exercises significant but not
controlling influence are regarded as associated companies
and are recognized by using the equity method.
Companies which are by agreement managed jointly with
one or more companies and therefore are subject to joint
control (joint ventures) are accounted for by using the
equity method.
Consolidation of a subsidiary begins when the Company
obtains control over the subsidiary and ends when the
Company loses control over the subsidiary. Specifically,
income and expenses of a subsidiary acquired or disposed
of during the year are included in the consolidated income
statement and other comprehensive income from the date
that the Company obtains control until the date when the
Company loses control over the subsidiary.
Sold or unwound entities are recognized in the consoli-
dated financial statements until the date of the sale or
the unwinding. The date of sale or unwinding is the date
when control is effectively transferred to third parties. The
comparative figures are not restated for entities acquired,
disposed of or wound up.
The consolidated financial statements are prepared on the
basis of the financial statements of the Parent Company,
its subsidiaries and the Company’s share of the income
statement and balance sheet of joint operations by com-
bining items of a uniform nature and eliminating intercom-
pany transactions, balances and shareholdings as well as
realized and unrealized gains and losses on transactions
between the consolidated entities. The financial statements
used for consolidation purposes are prepared in accord-
ance with the Company’s accounting policies.
The consolidated financial statements following a reverse
acquisition are issued under the name of the legal parent
(accounting acquiree), but as continuation of the financial
statements of the legal subsidiary (accounting acquirer).
The accounting acquirer’s legal capital is adjusted retro-
spectively to reflect the legal capital of the accounting ac-
quirer. Comparative information is adjusted accordingly.
Business combinations
Newly acquired or formed entities are recognized in the
consolidated financial statements from the date of acquisi-
tion or formation. The date of acquisition is the date on
which control over the entity is effectively transferred.
Business combinations are accounted for by applying the
acquisition method, whereby the acquired entities’ identifi-
able assets, liabilities and contingent liabilities are meas-
ured at fair value at the acquisition date. The tax effect
of the revaluation activities is also taken into account.
When a business combination agreement provides for an
adjustment to the cost of the combination contingent on
future events, the estimated amount of that adjustment
is included in the cost of the combination if the event is
probable and the adjustment can be measured reliably.
Subsequent changes in such estimate are recognized in
the income statement. Subsequent changes cannot ex-
ceed one year from the acquisition date. Costs of issuing
debt or equity instruments in connection with a business
combin ation are accounted for together with the debt or
equity issuance. All other costs associated with the acqui-
sition are expensed in the income statement.
In reverse acquisitions, the consideration is calculated as
the fair value of the interest in the accounting acquirer that
the existing shareholders of the accounting acquiree would
have received, had the business combination not been a
reverse acquisition.
The excess of the consideration of the business combin-
ation over the fair value of the acquired assets, liabilities
and contingent liabilities is recognized as goodwill under
intangible assets and is tested for impairment at least once
every year. Upon acquisition, goodwill is allocated to the
cash generating units, which subsequently form the basis
for the impairment test. If the fair value of the acquired
assets, liabilities and contingent liabilities exceeds the con-
sideration for the business combination, the identification
of assets and liabilities and the processes of measuring
the fair value of the assets and liabilities and the consid-
eration of the business combination are reassessed. If the
fair value of the assets, liabilities and contingent liabilities
continues to exceed the consideration, the resulting gain is
recognized in the income statement.
Foreign currencies
The functional currency of all significant entities, including
subsidiaries and associated companies, is USD, because
the Company’s vessels operate in international shipping
markets, in which income and expenses are settled in USD,
and the Company’s most significant assets and liabilities in
the form of vessels and related liabilities are denominated
in USD. Transactions in currencies other than the functional
currency are translated into the functional currency at the
transaction date. Cash, receivables and payables and other
monetary items denominated in currencies other than
the functional currency are translated into the functional
currency at the exchange rate at the balance sheet date.
Gains or losses due to differences between the exchange
rate at the transaction date and the exchange rate at the
settlement date or the balance sheet date are recognized
in the income statement under “Financial income and ex-
penses”.
An exchange rate gain or loss relating to a non-monetary
item carried at fair value is recognized in the same line as
the fair value adjustment.
The reporting currency of the Company is USD. Upon rec-
ognition of entities with functional currencies other than
USD, the financial statements are translated into USD.
Income statement items are translated into USD at the
average exchange rates for the period, whereas balance
sheet items are translated at the exchange rates as of the
balance sheet date. Exchange differences arising from the
translation of financial statements into USD are recognized
as a separate component of equity via other comprehen-
sive income. On the disposal of an entity, the cumulative
amount of the exchange differences recognized in the
separate component of equity relating to that entity is
transferred to the income statement as part of the gain or
loss on disposal.
TORM 2015Notes 57
NOTE 1 – CONTINUED
Derivative financial instruments
Derivative financial instruments, primarily forward currency
exchange contracts, forward freight agreements and for-
ward contracts regarding bunker purchases, are used to
hedge future committed or anticipated transactions. TORM
applies hedge accounting under the specific rules on cash
flow hedges when appropriate.
Derivative financial instruments are initially recognized
in the balance sheet at fair value at the date when the
derivative contract is entered into and are subsequently
measured at their fair value as other receivables or other
liabilities, respectively.
Changes in the fair value of derivative financial instru-
ments, which are designated as cash flow hedges and
deemed to be effective, are recognized directly in “Other
comprehensive income”. When the hedged transaction is
recognized in the income statement, the cumulative value
adjustment recognized in “Other comprehensive income”
is transferred to the income statement and included in the
same line as the hedged transaction. However, when the
hedged transaction results in the recognition of a fixed
asset, the gains and losses previously accumulated in
“Other comprehensive income” are transferred from “Other
comprehensive income” and included in the initial meas-
urement of the cost of the fixed asset. Changes in the fair
value of a portion of a hedge deemed to be ineffective are
recognized in the income statement.
Changes in the fair value of derivative financial instru-
ments that are not designated as hedges are recognized
in the income statement. While effectively reducing cash
flow risk in accordance with the risk management policy
of the Company, interest rate swaps with cap features and
certain forward freight agreements and forward contracts
regarding bunker purchases do not qualify for hedge ac-
counting. Changes in fair value of these derivate financial
instruments are therefore recognized in the income state-
ment under “Financial income” or “Financial expenses” for
interest rate swaps with cap features and under “Freight
and bunkers derivatives” for forward freight agreements
and forward bunker contracts.
Segment information
TORM consists of two business segments: The Tanker
Segment and the Bulk Segment. This segmentation is
based on the Group’s internal management and reporting
structure. In the Tanker Segment, the services provided
primarily comprise transportation of refined oil products
such as gasoline, jet fuel and naphtha. In the Bulk Seg-
ment, the services provided comprise transportation of dry
cargo – typically commodities such as coal, grain, iron ore,
etc. Transactions between segments are based on market-
related prices and are eliminated at Group level. The Group
only has one geographical segment, because the Company
considers the global market as a whole, and as the indi-
vidual vessels are not limited to specific parts of the world.
Furthermore, the internal management reporting does not
provide such information. Consequently, it is not possible
to provide geographical segment information on revenue
from external customers or non-current segment assets.
Not allocated items primarily comprise assets and liabilities
as well as revenues and expenses relating to the Com-
pany’s administrative functions and investment activities,
including cash and bank balances, interest-bearing debt,
income tax, deferred tax, etc.
Employee benefits
Wages, salaries, social security contributions, paid holiday
and sick leave, bonuses and other monetary and non-
monetary benefits are recognized in the year in which the
employees render the associated services.
Pension plans
The Group has entered into defined contribution plans
only. Pension costs related to defined contribution plans
are recorded in the income statement in the year to which
they relate.
Leases
Agreements to charter-in vessels and to lease other plant
and operating equipment, where TORM has substantially
all the risks and rewards of ownership, are recognized
in the balance sheet as finance leases. Lease assets are
meas ured at the lower of fair value and the present value
of minimum lease payments determined in the leases.
For the purpose of calculating the present value, the inter-
est rate implicit in the lease or an incremental borrowing
rate is used as discount factor. The lease assets are depre-
ciated and written down under the same accounting policy
as the vessels owned by the Company or over the lease
period depending on the lease terms.
The corresponding lease obligation is recognized as a
liability in the balance sheet, and the interest element of
the lease payment is charged to the income statement as
incurred.
Other charter agreements concerning vessels and other
leases are classified as operating leases, and lease pay-
ments are charged to the income statement on a straight-
line basis over the lease term. The obligation for the re-
maining lease term is disclosed in the notes to the financial
statements.
Agreements to charter out vessels, where substantially
all the risks and rewards of ownership are transferred to
the lessee, are classified as finance leases, and an amount
equal to the net investment in the lease is recognized
and presented in the balance sheet as a receivable. The
car r y ing amount of the vessel is derecognized, and any
gain or loss on disposal is recognized in the income state-
ment. Other agreements to charter out vessels are classi-
fied as operating leases, and lease income is recognized
in the income statement on a straight-line basis over the
lease term.
INCOME STATEMENT
Revenue
Income, including revenue, is recognized in the income
statement when:
• The income generating activities have been carried out
The accounting policies applied for the segments regard-
ing recognition and measurement are consistent with the
policies for TORM as described in this note.
on the basis of a binding agreement
• The income can be measured reliably
• It is probable that the economic benefits associated with
The segment income statement comprises income and
expenses which are directly attributable to the segment.
the transaction will flow to the Company
• Costs relating to the transaction can be measured
reliably
TORM 2015Notes 58
NOTE 1 – CONTINUED
Revenue comprises freight, charter hire and demurrage
revenues from the vessels and gains and losses on forward
freight agreements designated as hedges. Revenue is
recognized when it meets the general criteria mentioned
above, and when the stage of completion can be meas-
ured reliably. Accordingly, freight, charter hire and demur-
rage revenue is recognized at selling price upon delivery of
the service according to the charter parties concluded.
Port expenses, bunkers and commissions
Port expenses, bunker fuel consumption and commissions
are recognized as incurred. Gains and losses on forward
bunker contracts designated as hedges and write-down
and provisions for losses on freight receivables are in-
cluded in this line.
Freight and bunker derivatives
Freight and bunker derivatives comprise fair value adjust-
ments and gains and losses on forward freight agreements,
forward bunker contracts and other derivative financial
instruments directly related to shipping activities which are
not designated as hedges.
Charter hire
Charter hire comprises expenses related to the chartering-
in of vessels incurred in order to achieve the net revenue
for the period.
Operating expenses
Operating expenses, which comprise crew expenses, repair
and maintenance expenses and tonnage duty, are ex-
pensed as incurred.
Net profit/(loss) from sale of vessels
Net profit/(loss) from sale of vessels is recognized when
the significant risks and rewards of ownership have been
transferred to the buyer, and it is measured as the dif-
ference between the sales price less sales costs and the
carrying amount of the asset.
Administrative expenses
Administrative expenses, which comprise administrative
staff costs, management costs, office expenses and other
expenses related to administration, are expensed as
incurred.
Other operating expenses
Other operating expenses primarily comprise chartering
commissions and management fees paid to commercial
and technical managers for managing the fleet and to a
lesser extent profits and losses deriving from the disposal
of other plant and operating equipment.
Depreciation and impairment losses
Depreciation and impairment losses comprise deprecia-
tion of tangible fixed assets for the period as well as the
write-down of the value of assets by the amount by which
the carrying amount of the asset exceeds its recover-
able amount. In the event of indication of impairment, the
carry ing amount is assessed, and the value of the asset is
written down to its recoverable amount equal to the higher
of value in use based on net present value of future earn-
ings from the assets and its fair value less costs to sell.
Financial income
Financial income comprises interest income, realized and
unrealized exchange rate gains related to transactions
in currencies other than the functional currency, realized
gains from other equity investments and securities, unreal-
ized gains from securities, dividends received and other
financial income including value adjustments of certain fi-
nancial instruments not accounted for as hedges of future
transactions.
Interest is recognized in accordance with the accrual basis
of accounting taking into account the effective interest
rate. Dividends from other investments are recognized
when the right to receive payment has been decided,
which is typically when the dividend has been declared
and can be received without conditions.
Financial expenses
Financial expenses comprise interest expenses, financing
costs of finance leases, realized and unrealized exchange
rate losses relating to transactions in currencies other than
the functional currency, realized losses from other equity
investments and securities, unrealized losses from securi-
ties and other financial expenses including value adjust-
ments of certain financial instruments not accounted for as
hedges of future transactions.
Interest is recognized in accordance with the accrual basis
of accounting taking into account the effective interest
rate.
Tax
In Denmark, TORM A/S is jointly taxed with its Danish sub-
sidiaries. The Parent Company provides for and pays the
aggregate Danish tax on the taxable income of these com-
panies, but recovers the relevant portion of the taxes paid
from the subsidiaries based on each entity’s portion of
the aggregate taxable income. Tax expenses comprise the
expected tax including tonnage tax on the taxable income
for the year for the Group, adjustments relating to previous
years and the change in deferred tax for the year. However,
tax relating to equity items is posted directly in equity.
BALANCE SHEET
Goodwill
Goodwill is measured as the excess of the cost of the
business combination over the fair value of the acquired
assets, liabilities and contingent liabilities and is recognized
as an asset under intangible assets. Goodwill is not
amortized, but the recoverable amount of goodwill is
assessed every quarter. For impairment testing purposes,
goodwill is on initial recognition allocated to the cash gen-
erating units to which it relates. Goodwill is considered to
have an indefinite useful life.
Other plant and operating equipment
Operating equipment is measured at cost less accumu-
lated depreciation.
Computer equipment is depreciated on a straight-line
basis over three years, and other operating equipment is
depreciated on a straight-line basis over five years.
Leasehold improvements are measured at cost less ac-
cumulated amortization and impairment losses, and lease-
hold improvements are amortized on a straight-line basis
over the shorter of the term of the lease and the estimated
useful life. Cost comprises acquisition cost and costs dir-
ectly related to the acquisition up until the time when the
asset is ready for use.
TORM 2015Notes 59
NOTE 1 – CONTINUED
Investments in joint ventures
Investments in joint ventures comprise investments in
companies which by agreement are managed jointly with
one or more companies and therefore subject to joint con-
trol and in which the parties have rights to the net assets
of the joint venture. Joint ventures are accounted for by
using the equity method. Under the equity method, the in-
vestment in joint ventures is initially recognized at cost and
thereafter adjusted to recognize TORM’s share of the profit
or loss in the joint venture. When TORM’s share of losses in
a joint venture exceeds the investment in the joint venture,
TORM discontinues recognizing its share of further losses.
Additional losses are recognized only to the extent that
TORM has incurred legal or constructive obligations or
made payments on behalf of the joint venture.
Financial assets
Financial assets are initially recognized at the settlement
date at fair value plus transaction costs, except for finan-
cial assets at fair value through profit or loss, which are
recognized at fair value. Financial assets are derecognized
when the rights to receive cash flows from the assets have
expired or have been transferred.
as a completed sale within one year from the date of clas-
sification.
Assets held-for-sale are measured at the lower of their pre-
vious carrying amount and fair value less costs to sell.
Gains and losses are recognized on delivery to the new
owners in the income statement in the item “Net profit/
loss from sale of vessels”.
Impairment of assets
Non-current assets are reviewed quarterly to determine
any indication of impairment due to a significant decline in
either the assets’ market value or in the cash flows gener-
ated by the assets. In case of such indication, the recov-
erable amount of the asset is estimated as the higher of
the asset’s fair value less costs to sell and its value in use.
The value in use is the present value of the future cash
flows expected to derive from an asset. If the recoverable
amount is less than the carrying amount of the asset, the
carrying amount is reduced to the recoverable amount.
The impairment loss is recognized immediately in the in-
come statement.
Financial assets are classified as:
• Financial assets at fair value through profit or loss
• Loans and receivables
• Available-for-sale financial assets
For the purpose of assessing impairment, assets includ-
ing goodwill and time charter and bareboat contracts are
grouped at the lowest levels at which goodwill is moni-
tored for internal management purposes.
Other investments
Other investments comprise shares in other companies
and are classified as available-for-sale. Listed shares are
measured at the market value at the balance sheet date,
and unlisted shares are measured at estimated fair value.
Unrealized gains and losses resulting from changes in fair
value of shares are recognized in “Other comprehensive
income”. Realized gains and losses resulting from sales
of shares are recognized as financial items in the income
statement. The cumulative value adjustment recognized
in “Other comprehensive income” is transferred to the in-
come statement when the shares are sold. Dividends on
shares in other companies are recognized as financial in-
come in the period in which they are declared.
The two cash generating units of the Company are the
Tanker Segment and the Bulk Segment.
Bunkers
Bunkers and luboil are stated at the lower of cost and net
realizable value. Cost is determined by using the FIFO
method and includes expenditures incurred in acquiring
the bunkers and luboil and delivery cost less discounts.
Treasury shares
Treasury shares are recognized as a separate component
of equity at cost. Upon subsequent disposal of treasury
shares, any consideration is also recognized directly in
equity.
Other investments are presented as non-current, unless
Management intends to dispose of the investments within
12 months of the balance sheet date.
Receivables
Outstanding freight receivables and other receivables that
are expected to be realized within 12 months from the bal-
ance sheet date are classified as loans and receivables and
presented as current assets.
Receivables are measured at the lower of amortized cost
and net realizable values, which corresponds to nominal
value less provision for bad debts. Derivative financial in-
struments included in other receivables are measured at
fair value.
Assets held-for-sale
Assets are classified as held-for-sale if the carrying amount
will be recovered principally through a sales transaction
rather than through continuing use. This condition is re-
garded as met only when the asset is available for immedi-
ate sale in its present condition subject to terms that are
usual and customary for sales of such assets and the sale
is highly probable. Management must be committed to the
sale, which should be expected to qualify for recognition
Dividend
Dividend is recognized as a liability at the time of declara-
tion at the Annual General Meeting. Dividend proposed for
the year is moved from “Retained profit” and presented as
a separate component of equity.
Provisions
Provisions are recognized when the Company has a legal
or constructive obligation as a result of past events and it
is probable that it will lead to an outflow of resources that
can be reliably estimated. Provisions are measured at the
estimated liability that is expected to arise, taking into ac-
count the time value of money.
Mortgage debt and bank loans
At the time of borrowing, mortgage debt and bank loans
are measured at fair value less transaction costs. Mort-
gage debt and bank loans are subsequently measured at
amortized cost. This means that the difference between
the proceeds at the time of borrowing and the nominal
amount of the loan is recognized in the income statement
as a financial expense over the term of the loan by apply-
ing the effective interest method.
When terms of existing financial liabilities are renegotiated,
or other changes regarding the effective interest rate
TORM 2015Notes 60
NOTE 1 – CONTINUED
occur, TORM performs a test to evaluate whether the new
terms are substantially different from the original terms. If
the new terms are substantially different from the original
terms, TORM accounts for the change as an extinguish-
ment of the original financial liability and the recognition
of a new financial liability. TORM considers the new terms
to be substantially different from the original terms if the
present value of the cash flows under the new terms,
including any fees paid net of any fees received and dis-
counted using the original effective interest rate, is at least
10% different from the discounted present value of the re-
maining cash flows of the original financial liability.
Other liabilities
Liabilities are generally measured at amortized cost. De-
rivative financial instruments included in other liabilities are
measured at fair value.
CASH FLOW STATEMENT
The cash flow statement shows the Company’s cash flows
and cash and cash equivalents at the beginning and the
end of the period. Cash flow from operating activities is
presented by using the indirect method and is based on
net operating profit for the year adjusted for tax, financial
income and expenses, net profit from sale of vessels, non-
cash operating items, changes in working capital, income
tax paid, dividends received and interest paid/received.
Cash flow from investing activities comprises the purchase
and sale of tangible fixed assets and financial assets.
Cash flow from financing activities comprises changes in
long-term debt, bank loans, finance lease liabilities, pur-
chases or sales of treasury shares and dividend paid to
shareholders.
Cash and cash equivalents comprise cash at bank and in
hand including restricted cash and cash equivalents. Other
investments are classified as investment activities.
EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the
consolidated net operation profit for the year available to
common shareholders by the weighted average number of
common shares outstanding during the period. Treasury
shares are not included in the calculation. Purchases and
sales of treasury shares during the period are weighted
based on the remaining period.
Diluted earnings per share is calculated by adjusting the
consolidated profit or loss available to common sharehold-
ers and the weighted average number of common shares
outstanding for the effects of all potentially dilutive shares.
Such potentially dilutive common shares are excluded
when the effect of including them would be to increase
earnings per share or reduce a loss per share.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of financial statements in accordance with
IFRS requires Management to make estimates and as-
sumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting
period. These estimates and assumptions are affected by
the way TORM applies its accounting policies. An account-
ing estimate is considered critical if the estimate requires
Management to make assumptions about matters subject
to significant uncertainty, if different estimates could rea-
sonably have been used, or if changes in the estimate that
would have a material impact on the Company’s financial
position or results of operations are reasonably likely to
occur from period to period. Management believes that
the accounting estimates applied are appropriate and the
resulting balances are reasonable. However, actual results
could differ from the original estimates requiring adjust-
ments to these balances in future periods.
Management believes that the following are the significant
accounting estimates and judgments used in the prepara-
tion of the consolidated financial statements:
Reverse acquisition
TORM’s Restructuring was completed on 13 July 2015 and
included inter alia a contribution by OCM Njord Holdings
S.à r.l. (“Njord Luxco”) of Njord to TORM in exchange for a
controlling interest in TORM. The transaction is described
in detail in note 2. Management has concluded that the
contribution should be accounted for as a reverse acquisi-
tion according to IFRS 3 (Revised 2008) – Business Com-
binations (“IFRS 3”), i.e. Njord is the acquirer and Former
TORM is the acquiree. Management's most significant
judgements applying to the accounting policies relate to:
• Identification of the acquirer
• Calculation of consideration
Identification of the acquirer
IFRS 3 requires that the determination of the acquirer
shall be determined based on the guidance in IFRS 10 –
“Consolidated Financial Statements”, which means that
the acquirer will be the entity that obtains control over
the acquiree. The acquirer in a business combination will
therefore most often be the entity (Former TORM A/S)
legally acquiring the other (Njord) in exchange for cash,
other assets or in exchange for issuing its equity interests.
However, IFRS 3 states that in some cases the accounting
acquirer can be the entity that is legally being acquired,
i.e. Former TORM A/S. The latter is typically the case when
the former shareholder (Njord Luxco) of the entity whose
shares are being acquired (Njord) owns the majority of
shares and controls the majority of votes in the combined
entity (TORM) after the transaction.
Following the transaction, Njord Luxco will have control
with the majority of the share capital and associated votes
of Former TORM A/S, which led Management to conclude
that the transaction is to be accounted for as a reverse ac-
quisition, i.e. as if Former TORM A/S has been acquired by
Njord rather than Former TORM A/S acquiring Njord.
Calculation of consideration
Based on the provision of IFRS 3, Njord’s purchase price
for a controlling interest in Former TORM A/S is calculated
as the fair value of the interest in Njord that the existing
shareholders and warrant holders in Former TORM A/S
would have received, had the business combination of For-
mer TORM A/S and Njord not been a reverse acquisition.
As the issued shares of Former TORM A/S are publicly
traded, Management has considered whether the fair value
of Former TORM A/S would be a more reliable measure
of the consideration. Management believes that the fair
value of the interest in Njord that would have been issued
represents the fair value of the consideration more reliably
than the share price of Former TORM A/S. The share price
of Former TORM A/S was very volatile during the period
before the Restructuring due to the significant uncertainty
about Former TORM A/S' future as an independent group.
TORM 2015Notes 61
NOTE 1 – CONTINUED
Carrying amounts of vessels (including newbuildings)
The Company evaluates the carrying amounts of the ves-
sels to determine if events have occurred that would
require a modification of their carrying amounts. The valu-
ation of vessels is reviewed based on events and changes
in circumstances that would indicate that the carrying
amount of the assets might not be recovered. In assess-
ing the recoverability of the vessels, the Company reviews
certain indicators of potential impairment such as reported
sale and purchase prices, market demand and general mar-
ket conditions. Furthermore, market valuations from lead-
ing, independent and internationally recognized shipbrokers
are obtained on a quarterly basis as part of the review for
potential impairment indicators. If an indication of impair-
ment is identified, the need for recognizing an impairment
loss is assessed by comparing the carrying amount of the
vessels to the higher of the fair value less cost to sell and
the value in use.
The review for potential impairment indicators and projec-
tion of future undiscounted and discounted cash flows re-
lated to the vessels is complex and requires the Company
to make various estimates including future freight rates,
earnings from the vessels and discount rates. Historically,
all these factors have been volatile. The carrying amounts
of TORM’s vessels may not represent their fair market value
at any point in time, as market prices of second-hand ves-
sels to a certain degree tend to fluctuate with changes in
charter rates and the cost of newbuildings. However, if the
estimated future cash flow or related assumptions in the
future experience change, an impairment write-down of
vessels may be required.
TORM 2015Notes 62
NOTE 2
BUSINESS COMBINATIONS
TORM A/S’ Restructuring was completed on 13 July
2015 and included inter alia a contribution by OCM Njord
Holdings S.à.r.l. (“Njord Luxco”) of its 100% owned sub-
sidiary Njord to TORM A/S in exchange for a controlling
interest in TORM A/S.
Following the implementation of the Restructuring, Njord
Luxco, holding 61.99% of the voting rights (excluding the
voting rights attached to the C Share) in TORM A/S, and
its subsidiaries, including Njord and Njord’s subsidiaries
(the “Combined Group”), controls the Combined Group
in accordance with IFRS 10 “Consolidated financial state-
ments”, as it controls the majority of the voting rights in
the Combined Group. Accordingly, the contribution of
Njord by Njord Luxco in exchange for a controlling inter-
est in the Combined Group has been accounted for as a
reverse acquisition in accordance with IFRS 3, “Business
Combinations”, which means that for financial reporting
purposes, Njord is considered the accounting acquirer and
the continuing reporting entity. Consequently, the con-
solidated financial statements of TORM following the Re-
structuring are a continuation of the financial statements
of Njord as the reporting continuing entity, despite TORM
A/S being the legal acquirer and the continuing publicly
listed company.
Njord’s purchase price for a controlling interest in TORM
A/S is calculated as the fair value of the interest in Njord
that the existing shareholders and warrant holders of
TORM A/S would have received, had the business com-
bination of TORM A/S and Njord not been a reverse ac-
quisition. The value is based on the value agreed between
TORM A/S, Njord Luxco and certain of TORM A/S’ pre-
Restructuring shareholders and lenders for the purposes of
determining the ownership interest in TORM A/S obtained
by Njord Luxco in exchange for the contribution of Njord.
Goodwill that arose in the combination relates to the bene-
fit of expected synergies from combining operations of the
acquiree and the acquirer. These benefits are not recog-
nized separately from goodwill, because they do not meet
the recognition criteria for identifiable intangible assets.
Since the acquisition date, revenue of USD 390.8m and
profit for the period of USD 88.2m are included in the
consolidated income statement.
Had the business combination been effected as of 1 Janu-
ary 2015, the revenue of the combined Group would have
been USD 854.3m and the profit for the year would have
been USD 186.7m.
The preparation of the pro forma figures for revenue
and profit for the year is based on actual earnings for
the period and the fair values used in the pre-acquisition
balance sheet and the effect thereof on earnings, including
depreciation on tangible fixed assets.
Assets acquired and liabilities assumed in the business
combination at fair value
USDm
Tangible fixed assets
Investment in joint ventures
Bunkers
Freight receivables
Other receivables
Prepayments
Cash and cash equivalents
Deferred tax liability
Mortgage debt and bank loans
Finance lease liabilities
Trade payables
Current tax liabilities
Other liabilities
Time charter contracts
Deferred income
Net assets acquired
Goodwill
Consideration (purchase price)
859.9
0.3
27.8
53.4
6.6
10.6
77.5
-45.1
-560.7
-13.5
-27.3
-1.4
-29.7
-1.6
-0.4
356.4
11.4
367.8
349.8
18.0
367.8
The freight and other receivables acquired with a total fair
value of USD 60.0m had a gross contractual amount of
USD 61.9m. The best estimate at the acquisition date of
the contractual cash flows not to be collected is USD 1.9m.
Of which:
Shares
Consideration warrants (see note 14)
No acquisition-related costs have been incurred.
TORM 2015Notes 63
NOTE 3
LIQUIDITY, CAPITAL RESOURCES AND SUBSEQUENT
EVENTS
SUBSEQUENT EVENTS
LIQUIDITY AND CAPITAL RESOURCES
As of 31 December 2015, TORM’s cash position totaled
USD 168m (2014: USD 38m) and undrawn credit facilities
amounted to USD 75m (2014: USD 0m). TORM had seven
(2014: six) newbuildings on order for delivery in 2016-2018
of which three have been delivered in the first quarter of
2016. The total outstanding CAPEX related to these new-
buildings was USD 224m (2014: USD 171m).
TORM has a Term Facility Agreement of USD 561m and an
undrawn Working Capital Facility of USD 75m both with
maturity in 2021. In addition, a finance lease liability with
a purchase obligation of USD 12.8m (JPY 1.5bn) expiring
in 2017 is acquired as part of the reverse acquisition. The
Term Facility Agreement includes a Cash Sweep Period
of two years from the Restructuring date during which
the size of loan repayments will depend on the actual
cash position. In addition to the Term Facility Agreement
and the Working Capital Facility, TORM had bilateral loan
agreements with Danske Bank and Danish Ship Finance of
USD 218m in total at the end of 2015. As of 31 December
2015, the scheduled minimum amortizations on mortgage
debt and bank loans in 2016 were USD 49m.
Financial covenants related to TORM’s bank debt facilities
include:
• Minimum liquidity: Cash plus available part of the USD
On 13 January 2016, TORM completed a reduction of the
Company’s share capital by cancellation of treasury shares
acquired through the redemption process in connection
with the implementation of the reverse stock split on 24
September 2015. TORM’s share capital is hereafter DKK
957,396,585.02 and comprises 63,826,439 A shares of DKK
15 each, one B share of DKK 0.01 and one C share of DKK
0.01 (cf. company announcement no. 1 dated 13 January
2016).
On 18 January 2016, the Board of Directors granted cer-
tain employees (the “Participants”) Restricted Share Units
(“RSU”) in the form of restricted stock options. The Board
of Directors of TORM has granted the Participants a total
of 850,667 RSUs and, subject to vesting, each RSU entitles
the holder to acquire one TORM A share. The RSUs will
vest over a three-year period, with one third of the grant
amount vesting at each anniversary during the three-year
period. The exercise price for each TORM A share is DKK
96.3. During 2016, the Chief Executive Officer may be
granted up to 1,276,725 RSUs and, subject to vesting, each
RSU will entitle the Chief Executive Officer to acquire one
TORM A/S A share. RSUs granted to the Chief Executive
Officer will vest over a five-year period, with one fifth of
the grant amount vesting at each anniversary during the
five-year period. The exercise price for each TORM A share
is DKK 96.3.
75m Working Capital Facility must exceed the greater of
USD 50m and 5% of the Group’s debt provided that at
least USD 20m shall consist of cash
The theoretical market value of the RSU allocation is calcu-
lated at USD 5.0m based on the Black-Scholes model (cf.
company announcement no. 2 dated 18 January 2016).
• Equity ratio: The equity ratio adjusted for the fair market
values of vessels must be above 25%
• In addition to the financial covenants other covenants in-
clude Loan-To-Value and Minimum Value clauses limiting
the ratio of debt to vessel values
As of 31 December 2015, TORM is in compliance with all
covenants.
TORM 2015Notes 64
NOTE 4
USDm
Segment Segment allocated
Total Segment Segment allocated
Total
2015
2014
Tanker
Bulk
Not
Tanker
Bulk
Not
CONSOLIDATED SEGMENT INFORMATION
INCOME STATEMENT
Revenue
Port expenses, bunkers and commissions
Time charter equivalent earnings
Charter hire
Operating expenses
538.7
-169.2
369.5
-11.1
-121.7
1.7
-0.4
1.3
-0.9
-1.2
-
-
0.0
-
-
540.4
-169.6
370.8
-12.0
179.9
-81.2
98.7
-
-122.9
-50.3
-
-
-
-
0.0
0.0
-
-
Gross profit/loss (Net earnings/loss from
shipping activities) (Segment result)
236.7
-0.8
Administrative expenses
Other operating expenses
Share of profit from joint ventures
EBITDA
Depreciation
Operating profit (EBIT)
Financial income
Financial expenses
Profit before tax
Tax
Net profit for the year
48.4
0.0
0.0
-19.5
-6.3
0.2
-25.6
-67.3
-92.9
1.0
-16.9
-108.8
-1.0
235.9
-19.5
-6.3
0.2
210.3
-67.3
143.0
1.0
-16.9
127.0
-1.0
-109.9
126.0
179.9
-81.2
98.7
0.0
-50.3
48.4
-0.9
-6.6
0.0
40.9
-24.8
16.1
0.0
-3.5
12.6
0.0
12.6
-
-
0.0
-0.9
-6.6
-
-7.5
-24.8
-32.3
-
-3.5
-35.8
-
-35.8
TORM consists of two business segments: The Tanker Segment and the Bulk Segment. This segmentation is based on the
Group’s internal management and reporting structure. During Q4 2015, the Company divested its bulk activities.
During the year, there have been no transactions between the Tanker and the Bulk Segments, and therefore all revenue
derives from external customers.
All revenue is derived from transportation services. In all material aspects, the Company’s customers are domiciled out-
side Denmark. A significant part of the Company’s revenue, approximately 31.2% (2014: 26%), is derived from customers
registered in Singapore. Singapore is one of the largest shipping hubs with the presence of a large part of the world’s oil
trading industry.
The carrying amount of non-current assets owned by Group entities domiciled outside Denmark amounts to 53.4% of
which entities domiciled in Singapore amount to 40.4%. Non-current assets domiciled in Denmark amount to 46.6%.
Because the Company considers the global market as a whole, and as the individual vessels are not limited to specific
parts of the world, the Group has only one geographical segment.
In the Tanker Segment, a major part of the Company’s freight revenue is concentrated on a small group of customers.
In 2015, two customers (2014: one) in the Tanker Segment accounted for more than 10% of the total freight revenue of
the Company each. These two customers account for USD 68.2m and USD 56.1m (2014: the customer accounted for USD
22.9m) of the total freight revenue respectively.
Please also refer to the section "Segment information" in note 1.
TORM 2015Notes NOTE 5
USDm
STAFF COSTS
Total staff costs
Staff costs included in operating expenses
Staff costs included in administrative expenses
Total
Staff costs comprise the following:
Wages and salaries
Pension costs
Other social security costs
Total
65
2015
2014
9.7
14.2
23.9
22.4
1.4
0.1
23.9
-
-
0.0
-
-
-
0.0
Of which remuneration to the Board of Directors and
salaries to the Executive Management:
USD ‘000
2015
2014
Board
remuner-
ation
Committee
remuner-
ation
Additional
meetings
and travel
allowance
Total
short-term
benefits
Board
remuner-
ation
Committee
remuner-
ation
Additional
meetings
and travel
allowance
Total
short-term
benefits
Board of Directors
Cheam Directors Limited 1)
Katherine Margaret Ralph 2)
Szymon Stanislaw Dec 3)
Christopher H. Boehringer 4)
Kari Millum Gardarnar
Rasmus J. Skaun Hoffmann
Flemming Ipsen 5)
Olivier Dubois 5)
Alexander Green 5)
Jon Syvertsen 5)
David Neil Weinstein 6)
Torben Janholt 6)
Pär Göran Trapp 6)
Jeffery Stein 7)
Total
3
-
-
58
29
29
27
9
9
9
38
20
20
7
-
-
-
30
-
-
11
8
10
10
10
28
38
-
258
145
-
-
-
-
2
-
-
-
-
-
-
-
-
-
2
3
0
0
88
31
29
38
17
19
19
48
48
58
7
405
3
-
-
-
-
-
-
-
-
-
-
-
-
-
3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0
3
0
0
0
0
0
0
0
0
0
0
0
0
0
3
1) Former member of the Board of Directors of Njord. Left the Board of Directors due to the reverse aquisition on 13 July 2015.
2) Former member of the Board of Directors of Njord and resigned on 20 August 2014.
3) Former member of the Board of Directors of Njord and resigned on 30 January 2015.
4) Former member of the Board of Directors of Njord but continued after the Restructuring.
5) Former member of the Board of Directors of Former TORM A/S, resigned on 25 August 2015.
6) Appointed on 25 August 2015.
7) Appointed as Board Observer on 16 November 2015.
Executive Management 2015
Jacob Meldgaard
Total
The Company did not have an Executive Management in 2014.
Employee information
Short-term benefits
Salaries
Bonus
Pension
381
381
624
624
-
0
Total
1.005
1.005
The average number of permanently employed staff in the Group in 2015 was 133 land-based employees (2014: 0) and 65 sea-
farers (2014: 0).
The majority of the staff on vessels are not employed by TORM.
The average number of employees is calculated as a full-time equivalent (FTE).
The member of Executive Management is, in the event of termination by the Company, entitled to a severance payment of up to
12 months’ salary.
TORM 2015Notes 66
NOTE 5 – CONTINUED
INCENTIVE SCHEME FOR MANAGEMENT AND CERTAIN
EMPLOYEES FOR 2010-2012
INCENTIVE SCHEME
In connection with the reverse acquisition of Former TORM
A/S, the Company has assumed fully vested share options
granted to management and certain key employees of
Former TORM A/S. Each share option gives right to ac-
quire one share with a nominal value of DKK 15. The share
options that are granted in 2010 and 2011 may be exer-
cised until the publication of the annual report for 2016
and 2017 at an exercise price of DKK 50,385 and DKK
40,805, respectively. The nominal value and the exercise
price have been adjusted to reflect the reverse stock split
with a consolidation ratio of 1,500 : 1 in September 2015.
Number of share options
Not exercised as of 1 January
Reverse acquisition of TORM A/S
Not exercised as of 31 December
Total number of share options that could be exercised as of 31 December
Total
options
2015
Total
options
2014
0
1,687
1,687
1,687
0
-
0
0
TORM 2015Notes
NOTE 6
USDm
REMUNERATION TO AUDITORS APPOINTED AT
THE PARENT COMPANY'S ANNUAL GENERAL MEETING
Deloitte
Audit fees
Audit-related fees
Tax fees
Fees other services
Total
NOTE 7
USDm
INTANGIBLE ASSETS
Cost:
Balance as of 1 January 2014
Additions
Balance as of 31 December 2014
Impairment losses:
Balance as of 1 January 2014
Impairment losses for the year
Balance as of 31 December 2014
Carrying amount as of 31 December 2014
Cost:
Balance as of 1 January 2015
Additions
Balance as of 31 December 2015
Impairment losses:
Balance as of 1 January 2015
Impairment losses for the year
Balance as of 31 December 2015
Carrying amount as of 31 December 2015
67
2015
2014
0.5
0.7
0.0
0.4
1.6
0.1
0.0
0.1
0.0
0.2
Goodwill
0.0
-
0.0
0.0
-
0.0
0.0
0.0
11.4
11.4
0.0
-
0.0
11.4
The goodwill acquired during the year of USD 11.4m relates to the reverse acquisition of TORM A/S and has been allo-
cated to the Tanker Segment. Please refere to note 2 for further information.
Please refer to note 9 for impairment testing of goodwill.
TORM 2015Notes 68
NOTE 8
USDm
TANGIBLE FIXED ASSETS
Cost:
Balance as of 1 January 2014
Additions
Disposals
Balance as of 31 December 2014
Depreciation:
Balance as of 1 January 2014
Disposals
Depreciation for the year
Balance as of 31 December 2014
Vessels and
capitalized
dry-
docking
Prepay-
ments on
vessels
Other
plant and
operating
equipment
Total
186.8
378.0
0.0
0.0
-
-
0.0
564.8
0.0
-
-
0.0
3.1
0.0
24.8
27.9
186.8
343.3
0.0
530.1
3.1
-
24.8
27.9
0.0
34.7
0.0
34.7
0.0
-
-
0.0
Carrying amount as of 31 December 2014
502.2
34.7
0.0
536.9
Of which finance leases
-
-
-
0.0
Cost:
Balance as of 1 January 2015
Exchange rate adjustment
Additions
Additions from business combination
Disposals
Transferred to/from other items
Transferred to assets held-for-sale during the year
Balance as of 31 December 2015
Depreciation:
Balance as of 1 January 2015
Exchange rate adjustment
Disposals
Depreciation for the year
Transferred to assets held-for-sale during the year
Balance as of 31 December 2015
530.1
-
112.0
857.4
-18.6
104.6
-18.0
1,567.5
27.9
-
-18.6
66.5
-0.3
75.5
34.7
-
142.5
-
-
-104.6
-
72.6
0.0
-
-
-
-
0.0
0.0
0.0
0.9
2.5
-0.2
-
-
564.8
0.0
255.4
859.9
-18.8
0.0
-18.0
3.2
1,643.3
0.0
0.0
-0.2
0.9
-
0.7
27.9
0.0
-18.8
67.4
-0.3
76.2
Carrying amount as of 31 December 2015
1,492.0
72.6
2.5
1,567.1
Of which finance leases
13.1
-
-
13.1
Included in the carrying amount for “Vessels and capitalized dry-docking” are capitalized dry-docking costs in the amount
of USD 81.7m (2014: USD 17.3m).
For information on assets used as collateral security, please refer to note 17.
In all material aspects, the depreciation under “Other plant and operating equipment” of USD 0.9m relates to office and IT
equipment (2014: USD 0.0m).
Please refer to note 9 for information on impairment testing.
For assets held-for-sale, please refer to note 25.
TORM 2015Notes 69
NOTE 9
IMPAIRMENT TESTING
As of 31 December 2015, Management performed an
impairment test of goodwill by reviewing the recover-
able amount of the cash generating unit, the Tanker
Segment, to which the goodwill from the reverse ac-
quisition of TORM A/S has been allocated. Goodwill
amounts to USD 11.4m as of 31 December 2015 (31
December 2014: USD 0.0m).
As of 31 December 2015, the assessment of the recover-
able amount of the Tanker Segment is based on the fair
value less costs to sell the individual assets and liabilities
making up the segment.
In the assessment of the fair value less costs to sell
the vessels making up the majority of the assets, Man-
agement included a review of vessel market values
calculated as the average of valuations from two inter-
nationally acknowledged shipbrokers with appropriate
qualifications and recent experience in the valuation of
vessels. The fair value is based on the assumption that
the vessels are in good and seaworthy condition and
with prompt, charter-free delivery.
The fair value of the related mortgage debt, bank loans
and other liabilities is based on the carrying value of
these debts and liabilities, which approximates the fair
value.
The fair value less costs to sell the vessels is determined
to be within level 3 of the fair value hierarchy. The fair
value less costs to sell mortgage debt, bank loans and
other liabilities is determined to be within level 2 of the
fair value hierarchy. Please refer to note 23 for further
information on fair value hierarchies.
As of 31 December 2015, the fair value less cost to sell
the individual assets and liabilities of the Tanker Seg-
ment exceeds the carrying value including goodwill of
the segment. As such, goodwill and other assets includ-
ing vessels are not impaired as of 31 December 2015.
TORM 2015Notes 70
NOTE 10
USDm
FINANCIAL ITEMS
Financial income
Interest income*)
Exchange rate adjustments, including net gain from forward exchange rate contracts
Total
Financial expenses
Interest expenses on mortgage and bank debt*)
Exchange rate adjustments, including net gain/loss from forward exchange rate contracts
Other financial expenses
Total
Total financial items
*) Interest for financial assets and liabilities not at fair value through profit and loss.
NOTE 11
USDm
FREIGHT RECEIVABLES
Analysis as of 31 December of freight receivables:
Neither past due nor impaired
Past due not impaired:
Due < 30 days
Due between 30 and 180 days
Past due and impaired:
Due > 180 days
Total gross
Provision for impairment of freight receivables
Total net
2015
2014
0.3
0.7
1.0
-15.0
-0.6
-1.3
-16.9
0.0
0.0
0.0
-3.5
0.0
0.0
-3.5
-15.9
-3.5
2015
2014
40.3
16.1
22.8
16.4
5.3
84.8
1.7
83.1
3.9
15.2
0.0
35.2
0.0
35.2
As of 31 December 2015, freight receivables included receivables at a value of USD 1.9m (2014: USD 0.0m) that are
individually determined to be impaired to a value of USD 0.2m (2014: USD 0.0m).
Movements in provisions for impairment of freight receivables during the year are as follows:
USDm
PROVISIONS FOR IMPAIRMENT OF FREIGHT RECEIVABLES
Balance as of 1 January
Addition from business combination
Provisions for the year
Provisions reversed during the year
Provisions utilized during the year
Balance as of 31 December
2015
2014
0.0
1.9
0.5
-0.7
0.0
1.7
0.0
0.0
0.0
0.0
0.0
0.0
Provisions for impairment of freight receivables have been recognized in the income statement under "Port expenses,
bunkers and commissions".
The provisions are based on an individual assessment of each receivable.
NOTE 12
USDm
OTHER RECEIVABLES
Partners and commercial managements
Derivative financial instruments
Tax receivables
Miscellaneous, including items related to shipping activities
Total
No significant other receivables are past due nor impaired.
2015
2014
0.3
1.6
1.7
2.2
5.8
0.0
0.0
0.0
0.8
0.8
TORM 2015Notes NOTE 13
USDm
TAX
Current tax for the year
Adjustments related to previous years
Adjustment of deferred tax asset
Total
RECONCILIATION OF THE EFFECTIVE CORPORATION TAX RATE FOR
THE YEAR
Corporation tax rate in Denmark
Differences in tax rates, foreign subsidiaries
Adjustment of tax related to previous years
Effect from the tonnage tax scheme
Effective corporate tax rate
71
2015
2014
-1.3
0.2
0.1
-1.0
-
-
-
0.0
2015
2014
23.5%
-0.4%
-0.1%
-22.2%
0.8%
-
-
-
-
0.0%
During the year, the Company has been subject to Danish corporate tax rate as a result of the reverse acquisition of
TORM A/S. The Danish corporate tax rate has decreased from 24.5% in 2014 to 23.5% in 2015.
The Company participates in the tonnage tax scheme in Denmark. The participation in the tonnage tax scheme is binding
until 31 December 2025.
Under the Danish tonnage tax scheme, income and expenses from shipping activities are not subject to direct taxation.
Instead, the taxable income is calculated from:
• The net tonnage of the vessels used to generate the income from shipping activities
• A rate applicable to the specific net tonnage of the vessel, based on a sliding scale
• The number of days the vessels are used during the year
The Company expects to participate in the tonnage tax scheme after the binding period and at a minimum to maintain an
investing and activity level equivalent to the time of entering the tonnage tax scheme.
USDm
DEFERRED TAX LIABILITY
Balance as of 1 January
Addition from business combination
Balance as of 31 December
2015
2014
0.0
45.1
45.1
0.0
-
0.0
Essentially all deferred tax relates to vessels included in the transition account under the Danish tonnage tax scheme.
NOTE 14
COMMON SHARES
Balance as of 1 January
Reverse acquisition
Balance as of 31 December
2015
2014
2015
2014
Number of
shares
million
Number of
shares
million
Nominal
value
DKKm
Nominal
value
DKKm
39.6
24.2
63.8
39.6
-
39.6
593.5
364.0
957.5
593.5
-
593.5
For accounting purposes due to the reverse acquisition of TORM A/S, the common shares have been adjusted retrospec t-
ively to reflect the issued capital and common shares of TORM A/S amounting to USD 88m as of 1 January 2014.
TORM 2015Notes
72
NOTE 14 - CONTINUED
Common shares
As of 31 December 2015, TORM’s share capital comprises 63,836,249 A shares of DKK 15 each, one B share of DKK 0.01
and one C share of DKK 0.01. All issued shares are fully paid.
In connection with the asset contribution by Njord, one C share of DKK 0.01 in nominal value has been issued to Njord
Luxco against payment in cash of DKK 10. The C share represents 525,000,000,000 votes at the general meeting in re-
spect of certain specified matters, including election of members to the Board of Directors (including the Chairman, but
excluding the Deputy Chairman) and certain amendments to the Articles of Association proposed by the Board of Direct-
ors. The C share has no pre-emption rights in relation to any issue of new shares of other classes and carries no right to
receive dividends, liquidation proceeds or other distributions from TORM. The C share cannot be transferred or pledged,
except to an affiliate of Njord Luxco.
In addition, one B Share of DKK 0.01 in nominal value has been issued to SFM Trustees Limited, as Minority Trustee,
against payment in cash of DKK 10. The B share has one vote at the general meeting, has no pre-emption rights in rela-
tion to any issue of new shares of other classes and carries no right to receive dividends, liquidation proceeds or other
distributions from TORM. The holder of the B share has the right to elect one member to the Board of Directors (being
the Deputy Chairman), up to three alternates as well as one Board Observer. The B share cannot be transferred or
pledged, except for a transfer to a replacement trustee.
The B share and the C share are redeemable by TORM A/S in the event that (i) TORM has received written notification
from Njord Luxco (or its affiliates) that Njord Luxco and its affiliates (as defined in the Articles of Association) hold less
than 1/3 in aggregate of TORM’s issued and outstanding shares, (ii) five business days have elapsed from the Board of
Direct ors’ receipt of such written notice either without any Board member disputing such notice or with at least 2/3 of
the Board members confirming such notice, and (iii) both of the B share and the C share are redeemed at the same time.
Issued warrants
As part of the Restructuring in 2015, Former TORM A/S issued 7,181,578,089 warrants each entitling their holder to sub-
scribe for one new A share in Former TORM A/S of DKK 0.01 nominal value corresponding to 7.5% of the post-restructur-
ing equity without pre-emption rights for TORM’s existing shareholders.
Because of the reverse acquisition, as explained in note 2, the fair value of the warrants is seen as the consideration that
Njord is paying for the acquisition of Former TORM A/S. The fair value of the warrants of USD 18m is recognized under
Retained profit in equity as a result of the reverse acquisition of Former TORM A/S.
The warrants were consolidated on a 1,500:1 basis into 4,787,692 warrants with effect from 24 September 2015. The war-
rants are exercisable at any time after 13 July 2016, but no later than 13 July 2020. The exercise price for the warrants is
DKK 96.3 per TORM A/S A share and is subject to certain terms and conditions, including adjustment provisions in case
of e.g. changes in capital structure.
TREASURY SHARES
Balance as of 1 January
Reverse acquisition
Additions
Balance as of 31 December
2015
2014
2015
2014
Number of
shares
('000)
Number of
shares
('000)
Nominal
value
DKKm
Nominal
value
DKKm
2015
% of
share
capital
2014
% of
share
capital
0.0
4.4
10.9
15.3
0.0
-
-
0.0
0.0
0.0
0.2
0.2
0.0
-
-
0.0
0.0
0.0
0.2
0.2
0.0
-
-
0.0
The total consideration for the treasury shares was USD 0.2m (2014: USD 0.0m). At 31 December 2015, the Company’s
holding of treasury shares represented 15,319 shares (2014: 0 shares) of DKK 15 each at a total nominal value of DKK
0.2m (2014: DKK 0.0m) and a market value of USD 0.2m (2014: USD 0.0m).
The retained treasury shares equate to 0.2% (2014: 0.0%) of the Company’s common shares.
TORM 2015Notes
NOTE 15
USDm
OTHER LIABILITIES
Partners
Accrued operating expenses
Accrued interest
Wages and social expenses
Derivative financial instruments
Payables to joint ventures
Acquired time charter contracts
Miscellaneous, including items related to shipping activities
Total
Please refer to note 23 for further information on fair value hierarchies.
NOTE 16
EFFECTIVE INTEREST RATE AND FAIR VALUE OF MORTAGE DEBT AND BANK LOANS
73
2015
2014
3.3
13.1
4.7
17.0
0.2
0.1
0.2
3.5
42.1
0.0
0.0
0.2
0.0
0.0
0.0
-
1.2
1.4
In July 2015, TORM completed the Restructuring. The group of banks aligned key terms and conditions as well as financial
covenants across all existing debt facilities under the New Term Facility. As part of the Restructuring, TORM obtained
a New Working Capital Facility of USD 75m. The New Working Capital Facility is secured by the same assets as the New
Term Facility, but it ranks ahead of the New Term Facility with respect to the proceeds of enforcement of the collateral.
Please refer to note 3 for further information on the Company’s liquidity and capital resources and note 21 and 22 for further
information on interest rate swaps and financial risks.
The table below shows the effective interest and fair value of the mortgage debt and bank loans.
USDm
LOAN
USD
USD
USD
USD
Weighted average effective interest rate
Fair value
Fixed/
floating
Floating
Floating
Floating
Floating
2015
Effective
interest
Maturity
Fair
value Maturity
2014
Effective
interest
Fair
value
2019
2019
2021
2021
4.1%*)
4.1%*)
4.3%
4.4%*)
4.3%
125.7
26.0
548.9
66.6
767.2
2019
4.9%
141.9
-
-
-
4.9%
141.9
*) Effective interest rate includes deferred and amortized bank fees and commitment fee.
The fair value has been determined in accordance with generally accepted pricing models based on discounted cash flows and with the most significant
input being the discount rate that reflects the credit risk of the counterparty.
The fair value of mortage debt and bank loans is considered for fair value measurement at level 2 in the fair value hierarchy.
NOTE 17
USDm
COLLATERAL SECURITY FOR MORTGAGE DEBT AND BANK LOANS
Fair value of loans collateralized by vessels
Total
2015
2014
767.2
767.2
141.9
141.9
The total carrying amount for vessels that have been provided as security amounts to USD1,329m as of 31 December 2015 (2014: USD 216m).
In addition, the vesssels have been provided as security for the undrawn Working Capital Facility of USD 75m.
TORM 2015Notes
74
NOTE 18
USDm
GUARANTEE COMMITMENTS AND CONTINGENT LIABILITIES
Guarantee commitments
Total
2015
2014
0.0
0.0
-
0.0
The guarantee commitments of the Group are less than USD 0.1m and relate to guarantee comitments to the Danish Shipowners’ Association.
The Group is involved in some legal proceedings and disputes. It is the opinion of Management that the outcome of these proceedings and disputes will
not have any material impact on the Group's financial position, results of operations and cash flows.
NOTE 19
CONTRACTUAL OBLIGATIONS, MORTGAGE DEBT AND BANK LOANS
TORM has various contractual obligations and commercial commitments to make future payments including lease obliga-
tions, purchase commitments, interest payments and repayment of mortgage debt and bank loans.
The following table summarizes the Company’s contractual obligations.
As of 31 December 2015:
USDm
Mortgage debt and bank loans 1)
Interest payments related to scheduled interest
fixing
Estimated variable interest payments 2)
Total
USDm
Finance lease liabilities 3)
Interest element regarding finance lease
Newbuilding installments 4)
Chartered-in vessels (Operating lease) 5)
Derivative financial liabilities
Other operating leases 6)
Trade payables and other liabilities
Total
USDm
Contractual rights – as lessor:
Charter hire income for vessels on time
charter and bareboat charter (Operating
lease) 7)
Total
2018
74.3
14.4
14.3
2019
155.4
12.0
13.1
103.0
180.5
2020 Thereafter
57.1
382.8
10.0
9.8
76.9
7.1
6.6
396.5
909.8
2016
48.8
16.8
9.0
74.6
2016
0.6
4.0
75.1
28.7
0.2
3.9
54.7
167.2
2017
48.8
15.6
13.9
78.3
2017
12.9
2.8
62.4
21.0
-
2.1
-
2018
2019
2020 Thereafter
-
-
86.4
7.8
-
1.5
-
-
-
-
-
-
0.8
-
0.8
-
-
-
-
-
0.1
-
0.1
-
-
-
-
-
0.1
-
0.1
101.2
95.7
Total
767.2
75.9
66.7
Total
13.5
6.8
223.9
57.5
0.2
8.5
54.7
365.1
2016
2017
2018
2019
2020 Thereafter
Total
35.8
35.8
17.5
17.5
17.5
17.5
-
0.0
-
0.0
-
0.0
70.8
70.8
TORM 2015Notes NOTE 19 – CONTINUED
As of 31 December 2014:
USDm
Mortgage debt and bank loans 1)
Interest payments related to scheduled interest
fixing
Estimated variable interest payments 2)
Total
USDm
Finance lease liabilities
Interest element regarding finance lease
Newbuilding installments 4)
Chartered-in vessels (Operating lease)
Derivative financial liabilities
Other operating leases
Trade payables and other liabilities
Total
USDm
Contractual rights – as lessor:
Charter hire income for vessels on time
charter and bareboat charter (Operating
lease) 7)
Total
75
Total
141.9
1.3
22.2
2019 Thereafter
2015
16.2
1.3
3.9
21.4
2016
16.2
-
5.5
21.7
2017
16.2
-
5.6
21.8
2018
15.4
-
5.0
20.4
77.9
-
2.2
80.1
-
-
-
0.0
165.4
2015
2016
2017
2018
2019 Thereafter
-
-
-
-
153.5
17.1
-
-
-
13.3
166.8
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
0.0
0.0
170.6
0.0
0.0
0.0
13.3
17.1
0.0
0.0
0.0
0.0
183.9
2015
2016
2017
2018
2019 Thereafter
Total
1.0
1.0
-
0.0
-
0.0
-
0.0
-
0.0
-
0.0
1.0
1.0
1) The presented amounts to be repaid do not include directly related
costs arising from the issuing of the loans of USD 1.0m (2014: USD
0.4m), which are amortized over the term of the loans.
2) Variable interest payments are estimated based on the forward rates
for each interest period. This corresponds to an average net interest
including margin of 3.3% for 2016 (2014: the average net interest rate
for 2015 was 3.8%).
3) One leasing agreement includes a purchase liability at expiry of the
leasing period.
4) As of 31 December 2015, TORM had seven contracted newbuildings
(2014: six) to be delivered during 2016-2018.
5) Leases have been entered into with a mutually non-cancelable lease
period of up to three years. Certain leases include a profit sharing ele-
ment implying that the actual charter hire may be higher. The average
period until redelivery of the vessels is 1.9 years (2014: 0.0 years).
6) Other operating leases primarily consist of contracts regarding office
spaces, cars and apartments as well as IT-related contracts.
7) Charter hire income for vessels on time charter and bareboat charter is
recognized under “Revenue”. The average period until redelivery of the
vessels is 0.6 year (2014: 0.1 year).
TORM 2015Notes
76
NOTE 20
USDm
FINANCE LEASE LIABILITIES - AS LESSEE
Lease liabilities regarding finance lease assets:
2015
Falling due within one year
Total current
Falling due between one and five years
Falling due after five years
Total non-current
Total
Fair value*)
2014
Falling due within one year
Total current
Falling due between one and five years
Falling due after five years
Total non-current
Total
Fair value*)
Minimum
lease
payments
Interest
element
Carrying
amount
4.6
4.6
15.7
-
15.7
-4.0
-4.0
-2.8
-
-2.8
0.6
0.6
12.9
0.0
12.9
20.3
-6.8
13.5
-
0.0
-
-
0.0
0.0
-
0.0
-
-
0.0
0.0
13.5
0.0
0.0
0.0
0.0
0.0
0.0
0
*) The fair value of finance lease liabilities is considered for fair value measurement at level 2 in the fair value hierarchy.
The fair value has been determined in accordance with generally accepted pricing models based on discounted cash
flows and with the most significant input being the discount rate that reflects the credit risk of the counterparty.
Finance lease in 2015 relates to one MR product tanker (2014: none) chartered on bareboat and expiring no later than in
2017. At the expiry of the charter period, the Company has an obligation to purchase the vessel.
During the year, the Company has recognized an expense of USD 0.7m under “Financial expenses” for contingent rent of
the vessel relating to a profit split element of the lease agreement.
Please refer to note 23 for further information on fair value hierarchies.
TORM 2015Notes NOTE 21
DERIVATIVE FINANCIAL INSTRUMENTS
The table below shows the fair value of the derivative financial instruments:
USDm
Hedge accounting cash flows:
Derivative financial instruments regarding bunkers:
Bunker swaps
Derivative financial instruments regarding interest and currency exchange rate:
Forward exchange contracts
Interest rate swaps
Total
Of which included in:
Current assets
Other receivables
Current liabilities
Other liabilities
Total
77
Fair value
as of 31
December
2015
Fair value
as of 31
December
2014
-0.2
0.8
0.8
1.4
1.6
-0.2
1.4
-
-
-
0.0
-
-
0.0
Please refer to note 23 for further information on fair value hierarchies.
Bunker swaps with a fair value of USD -0.2m of a closed hedge will be recognized in the income statement in 2016.
Forward exchange contracts with a fair value of USD 0.8m are designated as hedge accounting to hedge a part of
TORM’s payments in 2016 regarding administrative and operating expenses denominated in DKK with a notional value of
DKK 235.1m.
Interest rate swaps with a fair value of USD 0.8m are designated as hedge accounting to hedge a part of TORM’s interest
payments during the period 2016 to 2021 with a notional value of USD 382.3m.
The table below shows realized amounts as well as fair value adjustments regarding derivative financial instruments
recognized in income statements and equity in 2015 and 2014:
Income statement
2015
USDm
Forward Freight Agreements
Bunker swaps
Forward exchange contracts
Interest rate swaps
Total
2014
Forward Freight Agreements
Bunker swaps
Forward exchange contracts
Interest rate swaps
Total
Port
expenses,
bunkers and
commissions
Equity
hedging
reserves
Revenue
0.6
-
-
-
-
-0.9
-
-
0.6
-0.9
-
-
-
-
-
-
-
-
0.0
-0.2
0.8
0.8
1.4
-
-
-
-
0.0
0.0
0.0
Please refer to the section “Risk Management” and note 22 for further information on commercial and financial risks.
TORM 2015Notes
78
NOTE 22
RISKS ASSOCIATED WITH TORM’S ACTIVITIES
The risks can generally be divided into four main cate-
gories: 1) Long-term strategic risks, 2) Industry and mar-
ket-related risks, 3) Operational and compliance risks and
4) Financial risks.
All things being equal and to the extent the Company’s ves-
sels have not already been chartered out at fixed rates, a
freight rate change of USD/day 1,000 would lead to the fol-
lowing change in profit before tax and equity based on the
expected number of earning days for the coming financial
year:
The risks described under each of the four categories
are considered to be among the most significant risks for
TORM within each category.
USD m
SENSITIVITY TO CHANGES
IN FREIGHT RATES
2016
2015
1) LONG-TERM STRATEGIC RISKS
Industry-changing risks, such as the substitution of oil for
other energy sources, technological changes and radical
changes in transportation patterns, are considered to have
a relatively high potential impact, but are long-term risks.
Management continues to monitor long-term strategic
risks to ensure the earliest possible mitigation of potential
risks also to develop necessary capabilities to exploit op-
portunities created by the same risks.
2) INDUSTRY AND MARKET-RELATED RISKS
Industry and market-related risk factors relate to changes
in the markets and in the political, economic and physical
environment that Management cannot control, such as
freight rates and vessel and bunker prices.
FREIGHT RATE FLUCTUATIONS
The Company’s income is principally generated from voy-
ages carried out by its fleet of vessels. As such, TORM is
exposed to the considerable volatility that characterizes
freight rates on such voyages.
In the Tanker Segment, it is the Company’s strategy to
seek a certain exposure to this risk, as volatility also rep-
resents an opportunity, because earnings historically
have been higher in the day-to-day market compared to
time charters. The fluctuations in freight rates for differ-
ent segments and different routes may vary substantially.
However, TORM is aiming at reducing the sensitivity to the
volatility of such specific freight rates by achieving econ-
omies of scale, by actively seeking the optimal geographi-
cal positioning of the fleet and by optimizing the service
offered to customers.
Within the Tanker Segment, freight income is to a certain
extent covered against general fluctuations through the
use of physical contracts, such as cargo contracts and
time charter agreements with durations of 6-36 months. In
addition, TORM uses financial instruments such as Forward
Freight Agreements (FFAs) with coverage of typically 0-24
months forward, based on market expectations and in ac-
cordance with the Company’s risk management policies. In
2015, 5% (2014: 9%) of freight earnings deriving from the
Company’s tankers was secured in this way. Physical time
charter contracts accounted for 95% (2014: 100%) of over-
all hedging. In 2015, the Company entered into FFAs with
a total notional contract value of USD 2m (2014: USD 0m).
At the end of 2015, the coverage for 2016 for all segments
was at a relatively low level of 8% (2014: 7%).
FFA trade and other freight-related derivatives are subject
to specific policies and guidelines approved by the Board
of Directors, including trading limits, stop-loss policies, seg-
regation of duties and other internal control procedures.
By the end of 2015, TORM has completed its exit from
bulk and is no longer exposed to this market.
Increase in freight rates of USD/day 1,000:
Change in profit before tax
Change in equity
26.7
26.7
6.1
6.1
SALES AND PURCHASE PRICE FLUCTUATIONS
As an owner of 74 vessels, TORM is exposed to risks as-
sociated with changes in the value of the vessels, which
can vary considerably during their useful lives. As of 31
December 2015, the carrying value of the fleet was USD
1,492m (2014: USD 502m). Based on broker valuations,
TORM’s fleet had a market value of USD 1,626m as of
31 December 2015 (2014: USD 513m).
During the year, TORM has increased its fleet by 49 prod-
uct tankers and two bulk vessels. The two bulk vessels
were subsequently sold which completed TORM’s exit from
the bulk market.
During the year, TORM has taken delivery of three new-
buildings and 48 second-hand vessels, 45 of which were
acquired as part of the Restructuring in July 2015. Fur-
thermore, TORM has seven vessels on order for delivery in
2016-2018.
BUNKER PRICE FLUCTUATIONS
The cost of fuel oil consumed by the vessels, known in the
industry as bunkers, accounted for 57% of the total voyage
costs in 2015 (2014: 69%) and is by far the biggest single
cost related to a voyage.
TORM is exposed to fluctuations in bunker prices that are
not reflected in the freight rates achieved by the Company.
To reduce this exposure, TORM hedges part of its bunker
requirements with oil derivatives.
Bunker trade is subject to specific risk policies and guide-
lines approved by the Board of Directors including trading
limits, stop-loss, stop-gain and stop-at-zero policies, segre-
gation of duties and other internal control procedures.
TORM applies hedge accounting to certain bunker hedge
contracts. Hedge accounting is applied systematically and
is based on specific policies.
In 2015, TORM covered 0.7% (2014: 0.0%) of its bunker re-
quirements by using hedging instruments.
All things being equal, a price change of 10% per ton of
bunker oil (without subsequent changes in freight rates)
would lead to the following change in expenditure based
on the expected bunker consumption in the spot market:
USD m
2016 2015
SENSITIVITY TO CHANGES
IN THE BUNKER PRICES
Increase in the bunker prices of 10% per ton:
Change in profit before tax
Change in equity
-12.8
-12.8
-5.6
-5.6
TORM 2015Notes
79
NOTE 22 – CONTINUED
3) OPERATIONAL AND COMPLIANCE RISKS
Operational risks are risks associated with the ongoing
operations of the business and include risks such as safe
operation of vessels, availability of experienced seafarers
and staff, terrorism, piracy, insurance and counterparty risk.
Receivables, cash and cash equivalents
The majority of TORM’s customers are companies that
operate in the oil industry. It is assessed that these compa-
nies are, to a great extent, subject to the same risk factors
as those identified for TORM’s Tanker Segment.
INSURANCE COVERAGE
In the course of the fleet’s operation, various casualties,
accidents and other incidents may occur that may result in
financial losses for TORM. For example, national and inter-
national rules, regulations and conventions mean that the
Company may incur substantial liabilities in the event that
a vessel is involved in an oil spill or emission of other envir-
onmentally hazardous agents.
In order to reduce the exposure to these risks, the fleet
is insured against such risks to the extent possible. The
total insurance program comprises a broad cover of risks
in relation to the operation of vessels and transportation
of cargoes, including personal injury, environmental dam-
age and pollution, cargo damage, third-party casualty and
liability, hull and machinery damage, total loss and war.
All TORM’s owned vessels are insured for an amount cor-
responding to their market value plus a margin to cover
any fluctuations. Liability risks are covered in line with
international standards. It is TORM’s policy to cooperate
with financially sound international insurance companies
with a credit rating of BBB or better, presently some 14-
16 companies, along with two P&I Clubs, to diversify risk.
The P&I Clubs are members of the internationally recog-
nized collaboration, International Group of P&I Clubs, and
the Company’s vessels are each insured for the maximum
amounts available in the P&I system. At the end of 2015,
the aggregate insured value of hull and machinery and
interest for TORM’s owned vessels amounted to USD 2.0bn
(2014: USD 0.7bn).
COUNTERPARTY RISK
The negative development in the shipping industry since
2009 caused counterparty risk to be an ever-present chal-
lenge demanding close monitoring to manage and decide
on actions to minimize possible losses. The maximum
counterparty risk associated is equal to the values recog-
nized in the balance sheet. A consequential effect of the
counterparty risk is loss of income in future periods, e.g.
counterparts not being able to fulfill their responsibilities
under a time charter, a contract of affreightment or an op-
tion. The main risk is the difference between the fixed rates
under a time charter or a contract of affreightment and
the market rates prevailing upon default.
The Company has focused closely on its risk policies and
procedures during the year to assure that risks managed in
the day-to-day business are kept at agreed levels and that
changes in the risk situations are brought to Management’s
attention.
The Company’s counterparty risks are primarily associated
with:
• Receivables, cash and cash equivalents
• Contracts of affreightment with a positive fair value
• Derivative financial instruments and commodity
instruments with positive fair value
In the Tanker Segment, a major part of the Company’s
freight revenues stems from a small group of customers.
Two customers accounted for 10% of the freight revenues
in 2015 each. The concentration of earnings on a few cus-
tomers requires extra attention to credit risk. TORM has a
credit policy under which continued credit evaluations of
new and existing customers take place. For longstanding
customers, payment of freight normally takes place after
a vessel’s cargo has been discharged. For new and smaller
customers, the Company’s credit risk is limited, as freight
most often is paid prior to the cargo’s discharge, or, alter-
natively, that a suitable bank guarantee is placed in lieu
thereof.
As a consequence of the payment patterns mentioned
above, the Company’s receivables within the Tanker Seg-
ment primarily consist of receivables from voyages in
progress at year end and, to a lesser extent, of outstand-
ing demurrage. The Company has not experienced any
significant losses in respect of charter payments or any
other freight agreements. With regard to the collection of
demurrage, the Company’s average stands at 96% (2014:
99%), which is considered to be satisfactory given the dif-
ferences in interpretation of events. In 2015, demurrage
represented 17.7% (2014: 8.3%) of the total freight rev-
enues.
The Company only places cash deposits with major banks
covered by a government guarantee or with strong and
acceptable credit ratings.
Derivative financial instruments and commodity instru-
ments
In 2015, 100% of TORM’s Forward Freight Agreements
(FFAs) and bunker swaps were cleared through NASDAQ,
effectively reducing counterparty credit risk by daily clear-
ing of balances. Over the counter bunker swaps have
restrictively been entered into with major oil companies,
banks or highly reputable partners with a satisfactory
credit rating.
4) FINANCIAL RISKS
Financial risks relate to the Company’s financial position,
financing and cash flows generated by the business, in-
cluding foreign exchange risk and interest rate risk. The
Company’s liquidity and capital resources are described in
note 3 and note 19.
FOREIGN EXCHANGE RISK
TORM uses USD as its functional currency, because the
majority of the Company’s transactions are denominated in
USD. The foreign exchange risk is thereby limited to cash
flows not denominated in USD. The primary risk relates to
transactions denominated in DKK, EUR and SGD and re-
lates to administrative and operating expenses.
TORM 2015Notes 80
NOTE 22 – CONTINUED
The part of the Company’s expenses that are denominated
in currencies other than USD account for approximately
98% (2014: 0%) of administrative expenses, approximately
26% (2014: 0%) of operating expenses and approximately
3% (2014: 0%) of capital expenditures. Approximately
55% (2014: 0%) of TORM’s administrative and operating
expenses in DKK and EUR in 2016 are hedged through FX
forward contracts. TORM assumes identical currency risks
arising from exposures in DKK and EUR. Other significant
cash flows in non-USD-related currencies occur occasion-
ally, including certain purchase obligations denominated
in JPY. No other significant cash flows in non-USD-related
currencies occurred in 2015.
All things being equal, a change in the USD/DKK or USD/
EUR exchange rate of 10% would result in a change in
profit before tax and equity as follows for the coming fi-
nancial year:
USDm
2016
2015
SENSITIVITY TO CHANGES IN THE
USD/DKK or USD/EUR EXCHANGE RATE
Effect of a 10% increase of DKK:
Change in profit before tax
Change in equity
INTEREST RATE RISK
TORM’s interest rate risk generally relates to interest-
bearing mortgage debt and bank loans. All the Company’s
loans for financing vessels are denominated in USD, and all
are floating rate loans. At the end of 2015, TORM has fixed
65% (2015: 25%) of the interest exposure for 2016. The fix-
ing is a result of floating rate loans where Libor 3 or Libor
6 was fixed in 2015 into 2016 and interest hedging through
interest rate swaps.
All things being equal, a change in the interest rate level
of 1% point will result in a change in the interest rate ex-
penses as follows for the coming financial year:
USDm
2016
2015
SENSITIVITY TO CHANGES
IN INTEREST RATES
Effect of 1% point increase in the
interest rate:
Change in profit and loss
Change in equity
-3.3
9.5
-1.4
-1.4
-2.8
-2.8
0
0
TORM’s interest-bearing debt increased from year-end
2014 to year-end 2015 by USD 639m (2014: increase of
USD 142m) to USD 781m (2014: USD 142m), primarily due
to the reverse acquisition.
TORM 2015Notes NOTE 23
FINANCIAL INSTRUMENTS
USDm
CATEGORIES OF FINANCIAL ASSETS AND LIABILITIES:
Loans and receivables
Freight receivables
Other receivables
Cash and cash equivalents
Total
Derivative financial instruments (assets)
Other receivables (hedge accounting)
Total
Financial liabilities measured at amortized cost
Mortage debt and bank loans
Finance lease liabilities
Trade payables
Other liabilities
Total
Derivative financial instruments (liabilities)
Other liabilities (hedge accounting)
Total
81
2015
2014
83.1
2.5
168.3
253.9
35.2
0.8
38.1
74.1
1.6
1.6
-
0.0
766.3
141.6
13.5
22.3
24.6
-
11.9
1.3
826.7
154.8
0.2
0.2
-
0.0
The fair value of the financial assets and liabilities above equals the carrying amount except for mortage debt and bank
loans for which the fair value can be found in note 16.
FAIR VALUE HIERARCHY FOR FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE IN THE BALANCE SHEET
Below shows the fair value hierarchy for financial instruments measured at fair value in the balance sheet. The financial in-
struments in question are grouped into Levels 1 to 3 based on the degree to which the fair value is observable.
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical
assets or liabilities
• Level 2 fair value measurements are those derived from input other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (as prices) or indirectly (derived from prices)
• Level 3 fair value measurements are those derived from valuation techniques that include input for the asset or liability
that are not based on observable market data (unobservable input)
TORM 2015Notes
82
NOTE 23 – CONTINUED
USDm
Derivative financial instruments (assets):
Other receivables (hedge accounting)
Total financial assets
Derivative financial instruments (liabilities):
Other liabilities (hedge accounting)
Total financial liabilities
USDm
Derivative financial instruments (assets):
Other receivables (hedge accounting)
Total financial assets
Derivative financial instruments (liabilities):
Other liabilities (hedge accounting)
Total financial liabilities
2015
Quoted
prices
(Level 1)
Observ-
able
input
(Level 2)
Un-
observ-
able input
(Level 3)
-
0.0
-
0.0
-
0.0
-
0.0
1.6
1.6
0.2
0.2
2014
Quoted
prices
(Level 1)
Observ-
able
input
(Level 2)
Un-
observ-
able input
(Level 3)
-
0.0
-
0.0
-
0.0
-
0.0
-
0.0
-
0.0
Total
1.6
1.6
0.2
0.2
Total
0.0
0.0
0.0
0.0
There were no transfers between Level 1 and 2 in 2015 and 2014.
Derivative financial instruments of USD 1.4m (2014: USD 0.0m) are measured at fair value based on discounted cash flows
on a recurring basis. Future cash flows are estimated on forward curves for bunker swaps, FFAs, forward exchange con-
tracts and interest rate swaps from observable forward curves at the end of the reporting period and contract forward
rates discounted at a rate that reflects the credit risk of the counterparties.
TORM 2015Notes 83
NOTE 24
RELATED PARTY TRANSACTIONS
The Company’s ultimate controlling party is Oaktree OPPS Fund IX LP, a fund incorporated in the Cayman Islands, and the
immediate controlling shareholder is Njord Luxco.
Shareholders' contribution and dividend paid are disclosed in the consolidated statement of changes in equity.
Management remuneration is disclosed in note 5.
There have been limited transactions with related parties during the financial year of less than USD 0.1m (2014: 0.0m).
NOTE 25
NON-CURRENT ASSETS SOLD DURING THE YEAR
During the third quarter of 2015, TORM sold its two bulk vessels for USD 18m in connection with the wind-down of the
Company’s bulk activities. Both vessels have been delivered to the new owners during the fourth quarter of 2015. The
sales did not result in any gain or losses.
NOTE 26
CASH FLOWS
USDm
Reversal of other non-cash movements:
Amortization of acquired assets and liabilities
Exchange rate adjustments
Other adjustments
Total
USDm
Change in bunkers, receivables and payables, etc.:
Change in bunkers
Change in receivables
Change in prepayments
Change in trade payables and other liabilities
Adjusted for fair value changes of derivative financial instruments
Total
2015
2014
0.7
0.1
0.1
0.9
-
-
-
0.0
2015
2014
15.6
6.1
4.9
-11.9
2.2
16.9
-8.8
-27.1
1.5
14.0
-
-20.4
TORM 2015Notes
84
NOTE 27
ENTITIES IN THE GROUP
Parent Company:
TORM A/S
Investments in subsidiaries*):
Denmark
Entity
Ownership Country
Entity
Ownership Country
DK Vessel HoldCo GP ApS
100% Denmark
DK Vessel HoldCo K/S
100% Denmark
OCM (Gibraltar) Njord Midco Ltd..
100% Gibraltar
OCM Njord Gunhild Inc.
100% Marshall Islands
OCM Njord Helene Inc.
100% Marshall Islands
OCM Njord Helvig Inc.
100% Marshall Islands
OCM Njord Chartering Inc
100% Marshall Islands
OCM Njord Ingeborg Inc.
100% Marshall Islands
100% Singapore
OCM Njord Mary Inc.
100% Marshall Islands
OCM Njord Ragnhild Inc.
100% Marshall Islands
100% Singapore
OCM Njord Thyra Inc.
100% Marshall Islands
100% Singapore
OCM Njord Vita Inc.
100% Marshall Islands
OCM Njord Valborg Inc.
100% Marshall Islands
OCM Singapore Njord Holdings
Agnes, Pte. Ltd.
OCM Singapore Njord Holdings
Alice, Pte. Ltd.
OCM Singapore Njord Holdings
Almena, Pte. Ltd.
OCM Singapore Njord Holdings
Amalie, Pte. Ltd.
OCM Singapore Njord Holdings
Aslaug, Pte. Ltd.
OCM Singapore Njord Holdings
Hardrada, Pte. Ltd.
OCM Singapore Njord Holdings
St.Michaelis Pte. Ltd.
OCM Singapore Njord Holdings
St. Gabriel Pte. Ltd.
OCM Singapore Njord Holdings
Harald Pte. Ltd.
OCM Singapore Njord Holdings
Gorm Pte. Ltd.
OCM Singapore Njord Holdings
Knut Pte. Ltd.
OCM Singapore Njord Holdings
Valdemar Pte. Ltd.
OCM Singapore Njord Holdings
Agnete, Pte. Ltd.
OCM Singapore Njord Holdings
Alexandra, Pte. Ltd.
OCM Singapore Njord Holdings
Anabel, Pte. Ltd.
OCM Singapore Njord Holdings
Arawa Pte. Ltd.
OCM Singapore Njord Holdings
Leif Pte. Ltd.
OCM Singapore Njord Holdings
Rolf Pte. Ltd.
OMI Holding Ltd.
100% Mauritius
Torghatten & TORM Shipown-
ing ApS
TORM Brasil Consultoria em
Transporte Maritimo LTDA.**)
100% Denmark
100% Brazil
TORM Crewing Service Ltd.
100% Bermuda
TORM Shipping India Private
Limited
100%
India
TORM Singapore Pte. Ltd.
100% Singapore
100% Delaware
100% Denmark
100% Denmark
100% Singapore
100% Denmark
100% Singapore
100% Singapore
100% Singapore
100% Singapore
100% Denmark
100% Denmark
100% Singapore
100% Singapore
100% Singapore
100% Singapore
100% Singapore
100% Singapore
TORM USA LLC
TT Shipowning K/S
VesselCo 1 K/S
100% Singapore
VesselCo 2 Pte. Ltd.**)
VesselCo 3 K/S
100% Singapore
VesselCo 4 Pte. Ltd.**)
VesselCo 6 Pte. Ltd.
VesselCo 7 Pte. Ltd.
VesselCo 8 Pte. Ltd.
VesselCo A ApS
VesselCo C ApS
100% Singapore
100% Singapore
100% Singapore
100% Singapore
100% Singapore
100% Singapore
100% Singapore
OCM Holdings Mrs Inc.
100% Marshall Islands
OCM Njord Anne Inc.
OCM Njord Freya Inc.
OCM Njord Gerd Inc.
100% Marshall Islands
100% Marshall Islands
100% Marshall Islands
OCM Njord Gertrud Inc.
100% Marshall Islands
Interest in legal entities included as joint ventures*):
Long Range 2 A/S
LR2 Management K/S
50%
Denmark
50%
Denmark
TORM SHIPPING (PHILS.), INC.
25%
Philippines
*) Entities with activities in the financial year.
**) Dissolved during the year.
TORM 2015Notes
NOTE 28
EARNINGS PER SHARE
Net profit for the year (USDm)
Million shares
Average number of shares
Average number of treasury shares
Average number of shares outstanding
Dilutive effect of outstanding warrants
Dilutive effect of outstanding share options
Average number of shares outstanding incl. dilutive effect of share options and warrants
Earnings per share (USD)
Diluted earnings per share (USD)
85
2015
2014
126.0
12.6
51.0
0.0
51.0
0.2
0.0
51.2
2.5
2.5
32.5
0.0
32.5
0.0
0.0
32.5
0.4
0.4
When calculating diluted earnings per share for 2015, 1,687 share options (2014: 0 share options) have been omitted as they are anti-dilutive, but poten-
tially the share options might dilute earnings per share in the future.
Weighted average number of shares have been adjusted for the reverse acquisition as disclosed in note 2.
TORM 2015Notes 86
Statement by Management
STATEMENT BY
MANAGEMENT
We have today presented the annual report of TORM
A/S for the financial year 1 January - 31 December
2015.
BOARD OF
DIRECTORS:
EXECUTIVE
MANAGEMENT:
The annual report is prepared in accordance with Inter-
national Financial Reporting Standards as adopted by
the EU and additional Danish disclosure requirements
for annual reports of listed companies.
In our opinion, the consolidated financial statements
and the parent financial statements give a true and fair
view of the Group’s and the Parent’s financial position
as of 31 December 2015 as well as of their financial
performance and cash flows for the financial year 1
January - 31 December 2015.
We also believe that the management report contains a
fair review of the development and performance of the
Group’s and the Parent’s business and of their financial
position as a whole, together with a description of the
principal risks and uncertainties that they face.
We recommend the annual report for adoption at the
Annual General Meeting.
Copenhagen, 8 March 2016
Christopher H. Boehringer
Chairman
Jacob Meldgaard
CEO
David Neil Weinstein
Deputy Chairman
Kari Millum Gardarnar
Pär Göran Trapp
Rasmus J. Skaun Hoffmann
Torben Janholt
TORM 2015
Auditor’s report
87
INDEPENDENT
AUDITOR’S REPORTS
TO THE SHAREHOLDERS OF TORM A/S
REPORT ON THE CONSOLIDATED FINANCIAL
STATEMENTS AND PARENT FINANCIAL STATEMENTS
We have audited the consolidated financial statements
and parent financial statements of TORM A/S on pages
48 – 101, for the financial year 1 January to 31 Decem-
ber 2015, which comprise the income statement, the
statement of comprehensive income, balance sheet,
statement of changes in equity, cash flow statement
and notes, including accounting policies, for the Group
as well as for the Parent. The consolidated financial
statements and the parent financial statements are
prepared in accordance with International Financial
Reporting Standards as adopted by the EU and Danish
disclosure requirements for listed companies.
MANAGEMENT’S RESPONSIBILITY FOR THE
CONSOLIDATED FINANCIAL STATEMENTS AND THE
PARENT FINANCIAL STATEMENTS
Management is responsible for the preparation of
consolidated financial statements and parent financial
statements that give a true and fair view in accordance
with International Financial Reporting Standards as
adopted by the EU and Danish disclosure requirements
for listed companies and for such internal control as
the Management determines is necessary to enable
the preparation and fair presentation of consolidated
financial statements and parent financial statements
that are free from material misstatement, whether due
to fraud or error.
AUDITOR’S RESPONSIBILITY
Our responsibility is to express an opinion on the con-
solidated financial statements and the parent financial
statements based on our audit. We conducted our
audit in accordance with International Standards on Au-
diting and additional requirements under Danish audit
regulation. This requires that we comply with ethical
requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated
financial statements and the parent financial state-
ments are free from material misstatement.
An audit involves performing procedures to obtain
audit evidence about the amounts and disclosures in
the consolidated financial statements and the parent
financial statements. The procedures selected depend
on the auditor’s judgment, including the assessment of
the risks of material misstatements of the consolidated
financial statements and the parent financial state-
ments, whether due to fraud or error. In making those
risk assessments, the auditor considers internal control
relevant to the entity’s preparation of consolidated fi-
nancial statements and parent financial statements that
give a true and fair view in order to design audit pro-
cedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the ef-
fectiveness of the entity’s internal control. An audit also
includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting
estimates made by Management, as well as the overall
presentation of the consolidated financial statements
and the parent financial statements. We believe that the
audit evidence we have obtained is sufficient and ap-
propriate to provide a basis for our audit opinion.
Our audit has not resulted in any qualification.
OPINION
In our opinion, the consolidated financial statements
and parent financial statements give a true and fair
view of the Group’s and the Parent’s financial position
at 31 December 2015, and of the results of their opera-
tions and cash flows for the financial year 1 January to
31 December 2015 in accordance with International Fi-
nancial Reporting Standards as adopted by the EU and
Danish disclosure requirements for listed companies.
STATEMENT ON THE MANAGEMENT REVIEW
(PAGES 4-47)
Pursuant to the Danish Financial Statements Act, we
have read the management review. We have not per-
formed any further procedures in addition to the audit
of the consolidated financial statements and parent
financial statements.
On this basis, it is our opinion that the information
provided in the management review is consistent with
the consolidated financial statements and parent finan-
cial statements.
Copenhagen, 8 March 2016
DELOITTE
Statsautoriseret Revisionspartnerselskab
CVR: 33 96 35 56
Sumit Sudan
State Authorised
Public Accountant
TORM 2015
TORM 2015 PARENT COMPANY 2015
TORM 2015 90
Parent Company 2015
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TORM 2015
102
Fleet overview
TORM FLEET OVERVIEW
AS OF 31 DECEMBER 2015
TANKERS/
BULKERS
SEGMENT
VESSEL
DWT
BUILT OWNERSHIP
CARRYING
VALUE
(USDm)
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
LR2
LR2
LR2
LR2
LR2
LR2
LR2
LR2
LR1
LR1
LR1
LR1
LR1
LR1
LR1
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
TORM HELENE
TORM KRISTINA
TORM GUDRUN
TORM INGEBORG
TORM VALBORG
TORM MARINA
TORM MAREN
TORM MATHILDE
TORM SARA
TORM EMILIE
TORM ESTRID
TORM ISMINI
TORM SIGNE
TORM SOFIA
TORM VENTURE
TORM ANNE
TORM GUNHILD
TORM CLARA
TORM NECHES
TORM CECILIE
TORM AMAZON
TORM CAROLINE
TORM GERD
TORM GERTRUD
TORM MARY
TORM SAN JACINTO
TORM VITA
TORM CAMILLA
TORM CARINA
TORM FREYA
TORM MOSELLE
TORM ROSETTA
TORM THYRA
TORM HORIZON
TORM HELVIG
TORM RAGNHILD
TORM RESILIENCE
TORM THAMES
NJORD ERIC
TORM KANSAS
TORM PLATTE
TORM REPUBLICAN
99,999.00
105,001.00
101,122.00
99,999.00
99,999.00
109,672.00
110,000.00
110,000.00
72,718.00
74,999.00
74,999.00
74,999.00
72,718.00
72,718.00
74,999.00
44,990.00
44,999.00
45,999.00
47,052.00
44,946.00
47,275.00
44,946.00
45,940.00
45,940.00
45,990.00
47,038.00
45,940.00
44,990.00
44,990.00
45,990.00
47,024.00
47,015.00
45,990.00
46,955.00
44,990.00
44,990.00
49,999.00
47,035.00
49,999.00
46,922.00
46,920.00
46,893.00
1997
1999
2000
2003
2003
2007
2008
2008
2003
2004
2004
2004
2005
2005
2007
1999
1999
2000
2000
2001
2002
2002
2002
2002
2002
2002
2002
2003
2003
2003
2003
2003
2003
2004
2005
2005
2005
2005
2006
2006
2006
2006
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
10.00
16.00
17.00
21.00
22.00
36.00
39.00
39.00
20.00
22.00
23.00
23.00
25.00
27.00*)
27.00*)
9.00
9.00
11.00
14.00*)
12.00
13.00
14.00
15.00
15.00
15.00
16.00*)
14.00
15.00
15.00
16.00
14.00
14.00
16.00
17.00
21.00*)
21.00*)
18.00
21.00
18.00
20.00
21.00
20.00
TORM 2015 TANKERS/
BULKERS
SEGMENT
VESSEL
DWT
BUILT OWNERSHIP
Fleet overview 103
CARRYING
VALUE
(USDm)
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
Handysize
Handysize
Handysize
Handysize
Handysize
Handysize
Handysize
Handysize
Handysize
Handysize
Handysize
TORM HARDRADA
45,983.00
TORM LOKE
TORM LAURA
TORM LENE
TORM LILLY
TORM LOTTE
TORM LOUISE
TORM AGNETE
TORM ALEXANDRA
TORM ALICE
TORM ALMENA
TORM ASLAUG
TORM ATLANTIC
TORM AGNES
TORM AMALIE
TORM ANABEL
TORM ARAWA
TORM ASTRID
TORM THOR
TORM THUNDER
TORM TIMOTHY
TORM MADISON
TORM RHONE
TORM TRINITY
TORM CHARENTE
TORM OHIO
TORM GARONNE
TORM LOIRE
TORM SAONE
TORM FOX
TORM TEVERE
TORM GYDA
51,371.00
52,000.00
52,000.00
52,000.00
52,000.00
52,000.00
50,500.00
50,500.00
50,500.00
50,500.00
50,500.00
49,999.00
50,500.00
50,500.00
49,999.00
49,999.00
50,319.00
49,915.00
49,915.00
49,915.00
35,828.00
35,751.00
35,834.00
35,751.00
37,274.00
37,178.00
37,106.00
37,106.00
37,006.00
36,990.00
37,000.00
2007
2007
2008
2008
2009
2009
2009
2010
2010
2010
2010
2010
2010
2011
2011
2012
2012
2012
2015
2015
2015
2000
2000
2000
2001
2001
2004
2004
2004
2005
2005
2009
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
16.00
24.00*)
23.00
23.00
25.00
25.00
25.00
28.00*)
28.00
23.00
24.00
24.00
27.00
22.00
23.00
27.00
26.00
28.00
35.00
35.00
35.00
9.00
9.00
12.00*)
10.00
11.00
15.00
15.00
15.00
17.00
19.00*)
23.00
* Indicates vessels for which TORM believes that, as of 31 December 2015, the basic charter-free market value is
lower than the vessel's carrying amount.
TORM 2015 104
GLOSSARY
Bareboat: See B/B.
B/B: Bareboat. A form of charter arrangement, where the
charterer is responsible for all costs and risks in connection
with the operation of the vessel.
Bulk: Dry cargo – typically commodities such as coal, grain,
iron ore, etc.
Bunker hedge: A forward agreement used to reduce a
company’s exposure to fluctuating bunker costs.
Bunkers: Fuel with which to run a vessel’s engines.
Charter party: A lease or freight agreement between a
shipowner and a charterer for a longer period of time or for
a single voyage.
Capesize: Bulk carriers with a cargo carrying capacity of
120,000-200,000 dwt.
Classification society: Independent organization, which
ensures through verification of design, construction,
building process and operation of vessels that the vessels
at all times meet a long list of requirements to seaworthi-
ness, etc. If the vessels do not meet these requirements,
insuring and mortgaging the vessel will typically not be
possible.
COA: Contract of Affreightment. A contract that involves a
number of consecutive cargos at previously agreed freight
rates.
Coating: The internal coatings applied to the tanks of a
product tanker enabling the vessel to load refined oil
products.
Commercial management: An agreement to manage a
vessel’s commercial operations for the account and risk of
the shipowner.
Demurrage: A charge against the charterer of a vessel for
delaying the vessel beyond the allowed free time. The
demurrage rate will ty pically be at a level equal to the
earnings in USD/day for the voyage.
DKK: Danish kroner.
Dry cargo: See Bulk.
Dwt: Deadweight ton. The cargo carrying capacity of a
vessel.
KPI: Key Performance Indicator. A measure of performance
used to define and evaluate how the Company is making
progress towards its long-term organizational goals.
LR1: Long Range 1. A specific class of product tankers with
a cargo carrying capacity of 60,000 – 80,000 dwt.
LR2: Long Range 2. A specific class of product tankers with
a cargo carrying capacity of 80,000 – 110,000 dwt.
LTAF: Lost Time Accident Frequency. Work-related
personal injuries that result in more than one day off work
per million hours of work.
MR: Medium Range. A specific class of product tankers
with a cargo carrying capacity of 40,000 – 60,000 dwt.
Oil major: One of the world’s largest publicly owned oil and
gas companies. Examples of oil majors are BP, Chevron,
ExxonMobil, Shell and Total.
OPEC: Organization of the Petroleum Exporting Countries.
Panamax: Dry bulk carriers with a cargo carrying capacity
of 60,000–80,000 dwt. The biggest vessel allowed to pass
through the Panama Canal.
P&I club: Protection & Indemnity Club.
Pool: A grouping of vessels of similar size and characteris-
tics, owned by different owners, but commercially operated
jointly. The pool manager is mandated to charter the
vessels out for the maximum be nefit of the pool as a whole.
Earnings are equalized taking account of differences in
vessel specifications, the number of days the vessels have
been ready for charter, etc.
Product tanker: A vessel suitable for carrying clean
petroleum products such as gasoline, jet fuel and naphtha.
Spot market: Market in which vessels are contracted for a
single voyage for near-term delivery.
Supramax: Dry bulk carriers with a cargo carrying capacity
of 40-60,000 dwt.
T/C: Time charter. An agreement covering the chartering
out of a vessel to an end user for a defined period of time,
where the owner is responsible for crewing the vessel, but
the charterer must pay port costs and bunkers.
TCE: See T/C equivalent.
FFA: Forward Freight Agreement. A financial derivative
instrument enabling freight to be hedged forward at a fixed
price.
Technical management: An agreement to manage a
vessel’s technical operations and crew for the account and
risk of the shipowner.
Handymax: Dry bulk carriers with a cargo carrying capacity
of 40,000-60,000 dwt.
Handysize: A specific class of product tankers with a cargo
carrying capacity of 20,000 – 40,000 dwt.
IAS: International Accounting Standards.
IFRS: International Financial Reporting Standards.
IMO: International Maritime Organization.
Kamsarmax: Dry bulk carriers with a cargo carrying
capacity of 80,000–85,000 dwt.
Time charter: See T/C.
Ton-mile: A unit of freight transportation equivalent to a
ton of freight moved one mile.
T/C equivalent: The freight receivable after deducting port
expenses, consumption of bunkers and commissions.
UN Global Compact: The United Nation’s social charter for
enterprises, etc.
Vetting: An audit of the safety and performance status of a
tanker vessel made by oil majors.
TORM 2015 TORM 2015 B
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TORM A/S
TUBORG HAVNEVEJ 18
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DENMARK
TEL.: +45 3917 9200
WWW.TORM.COM
TORM 2015