Company Announcements Details

Third quarter report 2012Announcement no. 35 / 7 November 2012 Third quarter report 2012 Page 1 of 23TORM recognized a loss before tax of USD 63 million in the third quarter of2012 before special items of USD -15 million. “The financial results in thethird quarter of 2012 were again negatively affected by the challenging marketconditions as well as TORM’s financial situation. Looking forward, the recently completed restructuring agreement will enableTORM to become cash flow positive even at the current rate levels,” says CEOJacob Meldgaard. • The financial results in the third quarter of 2012 continued to be adverselyaffected by TORM’s financial situation. EBITDA for the third quarter of 2012was a loss of USD 11 million including positive mark-tomarket non-cashadjustments of USD 6 million, compared to an EBITDA loss of USD 17 million inthe third quarter of 2011. In addition, financial expenses for the thirdquarter of 2012 included USD 15 million in restructuring costs. The resultbefore tax for the third quarter of 2012 was a loss of USD 78 million, comparedto a loss of USD 70 million in the same period of 2011. • The product tanker freight rates were in the third quarter of 2012 atseasonally low levels. In the West, MR freight rates were negatively affectedby planned refinery maintenance and limited transatlantic arbitrage. In theEast, the freight rates for LR2 and LR1 vessels were supported by e.g. jet fuelcargoes from the Arabian Gulf to Brazil and the naphtha trade in general. TheLR1 and LR2 freight rates also benefited from distillate arbitrage from theMiddle East to the West. The MR freight rates in the East were positivelyimpacted by imbalances within the Asia-Pacific region. • The freight rates in all bulk segments suffered in the third quarter of 2012as the US grain harvest was affected by drought giving the lowest yield in sixyears. The Pacific spot market struggled as expected due to slower Indianactivity during the monsoon season and the partly enforced commodity export banby the Indonesian authorities. • As stated in announcement no. 31 dated 2 October 2012, TORM has signed aRestructuring Agreement with its banks and time charter partners that securesthe Company deferral of bank debt, new liquidity and substantial savings fromthe restructured time charter book. As stated in announcements no. 32 and 33dated 5 November 2012, TORM has finalized the technical completion of therestructuring including the planned changes to the share capital. • TORM’s cost program has led to a reduction of administration costs to USD 15million in the third quarter of 2012, equivalent to a reduction of 11% comparedto the same period of 2011 and 34% compared to 2008. • The book value of the fleet excluding financial lease vessels as of 30September 2012 was USD 2,167 million. Based on broker valuations, TORM’s fleetexcluding financial lease vessels had a market value of USD 1,316 million as of30 September 2012. TORM estimates the fleet's total long-term earning potentialeach quarter based on future discounted cash flows, in accordance with IFRSrequirements. The estimated value for the fleet as at 30 September 2012supports the book value. • Net interest-bearing debt amounted to USD 1,858 million in the third quarterof 2012 compared to USD 1,852 million as at 30 June 2012. • Cash totaled USD 13 million at the end of the third quarter of 2012 and theCompany had no available credit lines. TORM has no order book and therefore noCAPEX related hereto. As at 6 November 2012 the cash and available credit linestotaled USD 65 million as planned. • Book equity amounted to USD 358 million as at 30 September 2012, equivalentto USD 5.2 per share (excluding treasury shares), giving TORM an equity ratioof 14%. • By 30 September 2012, TORM had covered 15% of the remaining tanker earningdays in 2012 at USD/day 13,944 and 6% of the earning days in 2013 at USD/day15,063. 103% of the remaining bulk earning days in 2012 are covered at USD/day10,694 and 57% of the 2013 earning days at USD/day 14,621. • TORM maintains a forecasted loss before tax of USD 350-380 million for 2012excluding accounting effects from the execution of the restructuring, furthervessel sales and potential impairment charges. Due to the complexity, TORM hasasked the Danish Securities Council for a ruling on the accounting effects ofthe restructuring. Announcement no. 35 / 7 November 2012 Third quarter report 2012 2 of 23TeleconferenceContact TORM A/STORM will be holding a teleconference for financial analystsand investors at 15:00 Danish time today. Please call 10minutes before the conference is due to start on +45 32714607 (from Europe) or +1 887 491 0064 (from the USA). Thepresentation documents can be downloaded from TORM'swebsite.Tuborg Havnevej 18, DK-2900 Hellerup, DenmarkTel.: +45 39 17 92 00 / Fax: +45 39 17 93 93www.torm.comJacob Meldgaard, CEO, tel.: +45 39 17 92 00Roland M. Andersen, CFO, tel.: +45 39 17 92 00Christian Søgaard-Christensen, IR, tel.: +45 30 76 12 88Key figures*) Gains/losses from sale of vessels and the mark-to-market adjustments of'Other financial assets' are not annualized when calculating the return on equity.**) Gains/losses from sale of vessels are not annualized when calculating theReturn on Invested Capital. Q1-Q3 Q1-Q3Million USD Q3 2012 Q3 2011 2012 2011 2011Income statementRevenue 256.0 331.8 838.9 937.9 1,305.2Time charter equivalent earnings (TCE) 109.8 148.1 364.4 474.4 644.3Gross prof it 3.1 2.3 31.0 69.2 81.0EBITDA -11.2 -17.0 -41.2 16.6 -43.8Operating prof it (EBIT) -46.4 -53.1 -186.0 -92.6 -388.6Prof it/(loss) before tax -77.6 -70.1 -288.2 -138.7 -451.4Net prof it/(loss) -78.5 -70.4 -289.3 -140.0 -453.0Balance sheetTotal assets 2,507.4 3,118.9 2,507.4 3,118.9 2,779.2Equity 358.3 957.9 358.3 957.9 643.8Total liabilities 2,149.1 2,161.0 2,149.1 2,161.0 2,135.4Invested capital 2,204.4 2,781.8 2,204.4 2,781.8 2,425.1Net interest bearing debt 1,858.2 1,836.1 1,858.2 1,836.1 1,786.8Cash flowFrom operating activities 5.6 -20.6 -70.5 -61.9 -74.8From investing activities -7.9 10.4 3.2 103.8 168.1Thereof investment in tangible f ixed assets -8.0 -4.4 -56.5 -106.8 -118.5From f inancing activities -1.9 -41.1 -5.7 -66.1 -127.8Total net cash f low -4.2 -51.3 -73.0 -24.2 -34.5Key financial figuresGross margins:TCE 42.9% 44.6% 43.4% 50.6% 49.4%Gross prof it 1.2% 0.7% 3.7% 7.4% 6.2%EBITDA -4.4% -5.1% -4.9% 1.8% -3.4%Operating prof it -18.1% -16.0% -22.2% -9.9% -29.8%Return on Equity (RoE) (p.a.)*) -62.7% -27.2% -75.9% -17.9% -51.5%Return on Invested Capital (RoIC) (p.a.)**) -8.0% -7.5% -10.5% -4.3% -14.4%Equity ratio 14.3% 30.7% 14.3% 30.7% 23.2%Exchange rate USD/DKK, end of period 5.77 5.51 5.77 5.51 5.75Exchange rate USD/DKK, average 5.95 5.28 5.80 5.31 5.36Share related key figuresEarnings per share, EPS USD -1.1 -1.0 -4.2 -2.0 -6.5Diluted earnings per share, EPS USD -1.1 -1.0 -4.2 -2.0 -6.5Cash f low per share, CFPS USD 0.1 -0.3 -1.0 -0.9 -1.1Share price, end of period (per share of DKK 5 each) DKK 2.8 7.3 2.8 7.3 3.7Number of shares, end of period Million 72.8 72.8 72.8 72.8 72.8Number of shares (excl. treasury shares), average Million 69.6 69.6 69.6 69.569.6 Announcement no. 35 / 7 November 2012 Third quarter report 2012 3 of 23ResultsIn general, TORM’s financial results continued to be negatively affected by thecombination of adverse market conditions and the uncertainty about the Company’s difficult financialsituation. The result before tax for the third quarter of 2012 was a loss of USD 78million, compared to a loss of USD 70 million in the same period of 2011. The result before depreciation (EBITDA) forthe third quarter of 2012 was a loss of USD 11 million, compared to a loss of USD 17 million in the same periodof 2011. The result was positively impacted by mark-to-market non-cash adjustments of USD 6 million in total,compared to a loss of USD 5 million in the same period of 2011. The results for the third quarter of 2012 and also2011 were not impacted by sale of vessels.The Tanker Division reported an operating loss of USD 42 million in the thirdquarter of 2012, compared to an operating loss of USD 34 million in the same period last year.The Bulk Division had an operating loss in the third quarter of 2012 of USD 4million, compared to a loss of USD 16 million in the third quarter of 2011.Other (not allocated) activities include financial expenses of USD 15 millionin costs related to the restructuring of the Company’s capital structure.The activity in TORM’s 50% ownership in FR8 Holding Pte. Ltd. is included in“not-allocated” Profit/(loss) by segmentMillion USDTanker Bulk Not Tanker Bulk NotDivision Division allocated Total Division Division allocated TotalRevenue 214.0 42.0 0.0 256.0 698.0 140.9 0.0 838.9Port expenses, bunkers and commissions -128.9 -25.3 0.0 -154.2 -404.6 -83.4 0.0-488.0 Freight and bunkers derivatives 0.4 7.6 0.0 8.0 -0.1 13.6 0.0 13.5Time charter equivalent earnings 85.5 24.3 0.0 109.8 293.3 71.1 0.0 364.4Charter hire -39.4 -25.0 0.0 -64.4 -134.3 -75.1 0.0 -209.4Operating expenses -41.6 -0.7 0.0 -42.3 -121.6 -2.4 0.0 -124.0Gross profit (Net earnings from shipping activities) 4.5 -1.4 0.0 3.1 37.4 -6.40.0 31.0 Prof it from sale of vessels 0.0 0.0 0.0 0.0 -15.9 0.0 0.0 -15.9Administrative expenses -13.0 -1.9 0.0 -14.9 -42.7 -5.3 0.0 -48.0Other operating income 0.4 0.0 0.0 0.4 1.2 0.1 0.0 1.3Share of results of jointly controlled entities 0.3 0.0 -0.1 0.2 -5.1 0.0 -4.5-9.6 EBITDA -7.8 -3.3 -0.1 -11.2 -25.1 -11.6 -4.5 -41.2Impairment losses on jointly controlled entities 0.0 0.0 0.0 0.0 0.0 0.0 -41.5-41.5 Amortizations and depreciation -34.4 -0.8 0.0 -35.2 -101.2 -2.1 0.0 -103.3Operating profit (EBIT) -42.2 -4.1 -0.1 -46.4 -126.3 -13.7 -46.0 -186.0Financial income - - 1.3 1.3 - - 8.1 8.1Financial expenses - - -32.5 -32.5 - - -110.3 -110.3Profit/(loss) before tax - - -31.3 -77.6 - - -148.2 -288.2Tax - - -0.9 -0.9 - - -1.1 -1.1Net profit/(loss) for the period - - -32.2 -78.5 - - -149.3 -289.3Q3 2012 Q1-Q3 2012Announcement no. 35 / 7 November 2012 Third quarter report 2012 4 of 23Outlook and coverageTORM forecasts a loss before tax of USD 350-380 million for the financial year2012 excluding accounting effects from the execution of the restructuring, further vessel sales and potentialimpairment charges. The guidance includes special items of USD -107 million derived from impairment losses ofUSD 42 million related to FR8 and USD 65 million in restructuring costs – primarily fees to advisors to theCompany’s creditors and TORM. Due to the complexity, TORM has asked the Danish Securities Council for a ruling onthe accounting effects of the restructuring.With 6,046 earning days for 2012 open as at 30 September 2012, a change ofUSD/day of 1,000 in freight rates will currently impact the profit before tax by approx. USD 6 million.As at 30 September 2012, TORM had covered 15% of the remaining earning days in2012 in the Tanker Division at USD/day 13,944 and 103% of the remaining earning days in the Bulk Divisionat USD/day 10,694. The table below shows the figures for the period from 1 October to 31 December 2012. 2013and 2014 are full year figures. Covered and chartered-in days in TORMData as of 9/30/20122012 2013 2014 2012 2013 2014Ow ned daysLR2 799 2,824 2,904LR1 637 2,509 2,509MR 3,427 14,037 14,075Handysize 1,001 3,975 3,944Tanker Division 5,864 23,344 23,432Panamax 180 726 694Handymax - - -Bulk Division 180 726 694Total 6,044 24,070 24,126T/C-in days at f ixed rate T/C-in costs, USD/dayLR2 - - - - - -LR1 785 75 - 17,914 11,000 -MR 242 1,049 726 13,188 14,046 15,145Handysize - - - - - -Tanker Division 1,027 1,124 726 16,800 13,843 15,145Panamax 573 1,964 1,817 14,216 12,880 12,386Handymax 339 - - 12,509 - -Bulk Division 912 1,964 1,817 13,581 12,880 12,386Total 1,939 3,088 2,543 15,286 13,230 13,174T/C-in days at f loating rateLR2 182 726 725LR1 - - -MR 91 363 363Handysize - - -Tanker Division 273 1,089 1,088Panamax 91 726 411Handymax 147 363 363Bulk Division 238 1,089 774Total 511 2,178 1,862Total physical days Covered daysLR2 981 3,550 3,629 176 391 337LR1 1,422 2,584 2,509 236 365 175MR 3,760 15,449 15,164 634 743 -Handysize 1,001 3,975 3,944 30 - -Tanker Division 7,164 25,557 25,246 1,076 1,499 512Panamax 844 3,416 2,922 1,007 990 25Handymax 486 363 363 365 1,167 869Bulk Division 1,330 3,779 3,285 1,372 2,157 895Total 8,494 29,336 28,531 2,448 3,656 1,407Coverage rates, USD/dayLR2 18% 11% 9% 15,687 16,650 16,617LR1 17% 14% 7% 14,228 15,666 15,666MR 17% 5% 0% 13,759 13,932 -Handysize 3% 0% 0% 5,378 - -Tanker Division 15% 6% 2% 13,944 15,063 16,292Panamax 119% 29% 1% 11,387 15,380 20,436Handymax 75% 321% 240% 8,781 13,978 16,725Bulk Division 103% 57% 27% 10,694 14,621 16,831Total 29% 12% 5% 12,122 14,803 16,634Fair value of f reight rate contracts that are mark-to-market in the incomestatement (USD m): Contracts not included above 0.0Contracts included above 6.5NotesThis coverage table took ef fect per 5 November 2012 upon technical completionof the restructuring. Actual no. of days can vary f rom projected no. of days primarily due to vessel sales and delays of vessel deliveries. T/C-in days atfixed rate do not include ef fects f rom prof it split arrangements. T/C-indays at floating rate determine rates at entry of each quarter, and then TORM willrecieve approx. 10% profit/loss compared to this rate. Covered, %Announcement no. 35 / 7 November 2012 Third quarter report 2012 5 of 23Tanker DivisionThe product tanker freight rates were in the third quarter of 2012 atseasonally low levels as expected. The freight markets did not improve mainly due to mixed macroeconomic growth signals and asupply overhang of tonnage. In the West, the third quarter of 2012 was impacted by planned refinerymaintenance in Europe, reducing demand for gasoline from Europe to the USA. Likewise the arbitrage for diesel from theUS Gulf to Europe only saw limited activity and the tropical storm Isaac hampered product supply. The combinationof these factors affected the MR freight rates negatively. The LR2 market was positively affected by the naphthaarbitrage from the West to the East as a result of Indian refinery maintenance closures.In the East, the freight rates for LR2 and LR1 vessels were supported by e.g.jet fuel cargoes from the Arabian Gulf to Brazil and the naphtha trade in general. In addition, the Europeanrefinery closures widened the distillate arbitrage from the Middle East to the West and positively impacted the LR1 andLR2 freight rates. The MR freight rates were positively impacted by imbalances within the Asia-Pacific region,exacerbated by refinery issues, boosting intra-regional product flows. The closure of the Richmond refinery inCalifornia, USA, and a subsequent shortage of clean products gave way for a series of MR transpacific fixtures.The global product tanker fleet grew by less than 1% in the third quarter of2012 (source: SSY). The Tanker Division’s results were to a significant degree adversely affectedby TORM’s financial situation. However, the Company outperformed spot benchmarks across all segments in thethird quarter of 2012. TORM achieved LR2 spot rates of USD/day 13,581 in the third quarter of 2012, whichwas 25% higher than in the third quarter last year. The LR1 spot rates were at USD/day 13,512, up by 37%year-on-year, whereas TORM’s largest segment (MR) was at USD/day 10,612, down by 10% year-on-year. The Handysizespot rates were at USD/day 11,263, up by 6% year-on-year.The Tanker Division’s operating loss for the third quarter of 2012 was USD 42million, compared to a loss of USD 34 million in the same period of 2011. Mark-to-market effects were positivewith USD 1 million. Q4 11 Q1 12 Q2 12 Q3 12 ChangeQ3 11- Q3 12LR2 (Aframax, 90-110,000 DWT)Available earning days 1,158 1,092 899 854 989 -15%Spot rates1) 10,836 11,959 10,814 10,206 13,581 25%TCE per earning day2) 12,423 15,647 7,865 14,157 11,082 -11% 12,313Operating days 1,196 1,121 1,001 1,001 1,012 -15%Operating expenses per operating day3) 6,721 6,133 5,976 7,001 6,800 1% 6,468LR1 (Panamax 75-85,000 DWT)Available earning days 2,208 2,081 2,076 1,879 1,716 -22%Spot rates1) 9,841 7,678 12,515 11,237 13,512 37%TCE per earning day2) 9,467 9,020 12,977 11,747 12,723 34% 11,561Operating days 644 644 637 637 644 0%Operating expenses per operating day3) 6,481 6,419 6,389 5,798 6,136 -5% 6,186MR (45,000 DWT)Available earning days 4,511 4,477 4,681 4,362 4,176 -7%Spot rates1) 11,749 14,080 14,363 11,510 10,612 -10%TCE per earning day2) 12,910 13,335 14,082 11,418 9,843 -24% 12,236Operating days 3,496 3,496 3,557 3,549 3,588 3%Operating expenses per operating day3) 6,732 5,929 6,743 6,756 6,825 1% 6,566Handysize (35,000 DWT)Available earning days 992 978 989 981 1,007 1%Spot rates1) 10,582 9,483 12,823 10,939 11,263 6%TCE per earning day2) 12,020 9,809 13,122 12,189 10,873 -10% 11,498Operating days 1,012 1,012 1,001 1,001 1,012 0%Operating expenses per operating day3) 5,436 6,919 5,577 5,686 6,165 13% 6,089Tanker Division Q3 11 12 monthavg.1) Spot rates = Time Charter Equivalent Earnings for all charters with lessthan 6 months duration = Gross freight income less bunker, commissions and portexpenses. 2) TCE = Time Charter Equivalent Earnings = Gross freight income less bunker,commissions and port expenses. 3) Operating expenses are related to owned vessels.Announcement no. 35 / 7 November 2012 Third quarter report 2012 6 of 23Bulk DivisionThe freight rates in all bulk segments suffered in the third quarter of 2012 asthe US grain harvest was affected by drought giving the lowest yield in six years. This was combined with thecontinued macroeconomic crisis including e.g. the European debt issues as well as a supply overhang of tonnage.In the Atlantic spot market, the freight rates for Panamax dropped to USD/day11-12,000 on front haul voyages and to USD/day 2-3,000 on round voyages. The main reasons were an oversupply oftonnage ballasting inbound, the weak US grain season and logistical disruptions from the tropical stormIsaac. The Handymax segment was also affected by the lack of grain activity and the freight rates dropped byUSD/day 6-7,000 on front haul voyages to USD/day 12-13,000.The Pacific spot market struggled as expected due to the slower Indian activityin the monsoon season and the partly enforced commodity export ban by the Indonesian authorities. The freightrates for Panamax and Handymax dropped to USD/day 3-4,000 on round voyages.The number of newbuilding deliveries in the third quarter of 2012 declinedcompared to the first two quarters of 2012 with 41 Capesize, 81 Panamax and 62 Handymax vessels being delivered(source: SSY). TORM continued to experience a continued high number of waiting days in thethird quarter of 2012 due to the adverse effects of the Company’s financial situation. TORM’s Panamax timecharter equivalent (TCE) earnings in the third quarter of 2012 were USD/day 7,793 or 36% below the same period in2011. The realized TCE earnings for Handymax during the third quarter of 2012 were USD/day 9,051, which is 28%lower than in the same period of 2011.The Bulk Division’s operating loss for the third quarter of 2012 was USD 4million, compared to a loss of USD 16 million in the same period of 2011. Unrealized non-cash mark-to-market effectswere positive with USD 4 million. Q3 12 ChangeQ3 11- Q3 12Panamax (60-80,000 DWT)Available earning days 2.279 3.127 1.848 1.447 1.205 -47%TCE per earning day1) 12.140 14.357 9.670 9.647 7.793 -36% 11.291Operating days 184 184 182 182 184 0%Operating expenses per operating day2) 5.126 3.896 3.934 5.130 4.212 -18% 4.292Handymax (40-55,000 DWT)Available earning days 1.152 1.361 642 260 757 -34%TCE per earning day1) 12.510 13.403 11.763 4.353 9.051 -28% 11.185Operating days - - - - - -Operating expenses per operating day2) - - - - - - -12 monthavg.Bulk Division Q3 11 Q4 11 Q1 12 Q2 121) TCE = Time Charter Equivalent Earnings = Gross freight income less bunker,commissions and port expenses. 2) Operating expenses are related to owned vessels.Announcement no. 35 / 7 November 2012 Third quarter report 2012 7 of 23Fleet developmentNo sale or purchase of vessels was concluded in the third quarter of 2012, andTORM did not order any new vessels in the third quarter of 2012. TORM’s owned fleet consists of 66 producttankers and two dry bulk vessels. TORM does not have any newbuildings on order. At the end of the third quarterof 2012, outstanding CAPEX relating to the order book was thus zero, compared to USD 167 million in thesame period of 2011. TORM’s operated fleet as at 30 September 2012 is shown in the table below. Inaddition to the 68 owned vessels, TORM had chartered-in 17 product tankers and nine bulk vessels on longer timecharter contracts (minimum one year contracts) and eight bulk vessels on shorter time charter contracts (lessthan one year contracts). Another 20 product tankers were either in pool or under commercial management with TORM.No. of vesselsQ2 2012 Changes Q3 2012 2012 2013 2014Owned vesselsLR2 9.0 - 9 .0LR1 7.0 - 7 .0MR 39.0 - 39.0Handysize 11.0 - 11.0Tanker Division 66.0 - 66.0 - - -Panamax 2.0 - 2 .0Handymax - -Bulk Division 2 .0 - 2 .0 - - -Total 68.0 - 68.0 - - -T/C-in vessels with contract period >= 12 monthsLR2 2.0 - 2 .0LR1 13.0 -2.0 11.0MR 10.0 -6.0 4.0Handysize - -Tanker Division 25.0 -8.0 17.0 - - -Panamax 9.0 -2.0 7.0 1 .0Handymax 2.0 - 2 .0Bulk Division 11.0 -2.0 9.0 - 1 .0 -Total 36.0 - 10.0 26.0 - 1 .0 -T/C-in vessels with contract period < 12="" monthslr2lr1mrhandysizetanker="" division="" -="" -="" -panamax="" 3.0="" -2.0="" 1.0handymax="" 2.0="" 5="" .0="" 7="" .0bulk="" division="" 5="" .0="" 3="" .0="" 8="" .0total="" 5.0="" 3="" .0="" 8="" .0pools/commecial="" management="" 18.0="" 2.0="" 20.0total="" fleet="" 127.0="" -5.0="" 122.0current="" fleetnew="" buildings="" and="" t/c-in="" deliverieswith="" a="" period="">= 12 monthsAnnouncement no. 35 / 7 November 2012 Third quarter report 2012 8 of 23Notes on the financial reportingAccounting policiesThe interim report for the period 1 January – 30 September 2012 is presented inaccordance with IAS 34 "Interim Financial Reporting" as adopted by the EU and additional Danishdisclosure requirements for interim reports of listed companies. The interim report hasbeen prepared using the accounting policies as for the Annual Report for 2011. The accountingpolicies are described in more detail in the Annual Report for 2011. As from 1 January 2012, TORM hasimplemented the amendment to IFRS 7 regarding disclosures about transfer of financial assets.The amended standard has not affected the recognition and measurement in TORM's interimreport for the first nine months of 2012. The interim report of the third quarter of 2012 isunaudited, in line with the normal practice.Income statementThe gross profit for the third quarter of 2012 was USD 3 million, compared toUSD 2 million for the corresponding period in 2011.The third quarter of 2012 was not impacted by sale of vessels, as also was thecase for the third quarter of 2011. Administrative costs in the third quarter of 2012 were USD 15million, compared to USD 17 million in the third quarter of 2011, as a result of the Company’s costprogram. The result before depreciation (EBITDA) for the third quarter of 2012 was aloss of USD 11 million, compared to a loss of USD 17 million for the corresponding period of 2011.Depreciation in the third quarter of 2012 was USD 35 million, USD 1 millionlower than in the third quarter of 2011. This decrease was due to fewer vessels.The primary operating result for the third quarter of 2012 was a loss of USD 46million, compared to a loss of USD 53 million in the same quarter of 2011.The third quarter of 2012 was positively impacted by mark-to-market non-cashadjustments of USD 6 million in total: Positive USD 4 million in connection with FFA/bunkerderivatives and a positive net effect from other financial derivatives amounting to USD 2 million. The thirdquarter of 2011 had negative mark-to-market non-cash adjustments of USD 5 million.Financial expenses of USD 33 million include USD 15 million in restructuringcosts – primarily fees to advisors to the Company’s creditors and TORM.The result after tax was a loss of USD 79 million in the third quarter of 2012,as against a loss of USD 70 million in the third quarter of 2011.AssetsTotal assets were down from USD 2,779 million as at 31 December 2011 to USD2,507 million as at 30 September 2012. The book value of the fleet excluding financial leasevessels as of 30 September 2012 was USD 2,167 million. Based on broker valuations, TORM’s fleetexcluding financial lease vessels had a market value of USD 1,316 million as of 30September 2012. TORM estimates the fleet's total long-term earning potential each quarter based onfuture discounted cash flows in accordance with IFRS requirements. The estimated value for the fleetas at 30 September 2012 supports the book value. During third quarter of 2012, it was decided toinitiate wind down of the jointly controlled entity, FR8. The book value of TORM’s 50% share in FR8is USD 0 million. DebtNet interest-bearing debt was USD 1,858 million as at 30 September 2012,compared to USD 1,852 million as at 30 June 2012. As at 30 September 2012, TORM was in breach of itsfinancial covenants under the existing loan agreements. As at 30 September 2012, TORM didnot have a standstill agreement with the bank group and therefore the Company no longerhad the right to defer payments until such time as the final Restructuring Agreement had beenentered into. On 5 Announcement no. 35 / 7 November 2012 Third quarter report 2012 9 of 23November 2012 TORM finalized the technical completion of its restructuringafter which the bank debt will be reclassified as non-current liabilities.EquityEquity declined in the third quarter of 2012 from USD 435 million as at 30 June2012 to USD 358 million as at 30 September 2012 primarily due to the loss during the period.Equity as a percentage of total assets was 14% as at 30 September 2012, compared to 23% as at 31December 2011. TORM held 3,230,432 treasury shares as at 30 September 2012, equivalent to 4.4%of the Company's share capital. This is the same level as of 30 June 2012. Followingthe restructuring on 5 November 2012, TORM today holds 6,970,272 treasury shares, equivalent to 1.0%of the Company’s share capital.LiquidityTORM had cash of USD 13 million at the end of the third quarter of 2012 and nocredit lines available. TORM has no order book and therefore no CAPEX related hereto. As at6 November 2012 and following the restructuring, the cash and available credit linestotaled USD 65 million as planned.Post balance sheet eventsAs stated in announcement no. 31 dated 2 October 2012, TORM has signed aRestructuring Agreement with its banks and time charter partners that secures the Company deferral of bank debt,new liquidity and substantial savings from the restructured time charter book.As stated in announcements no. 32 and 33 dated 5 November 2012, TORM hasfinalized the technical completion of the restructuring with its banks and time charter partners. In connectionwith the restructuring, the Board of Directors in TORM A/S completed the decrease of TORM’s share capital decided atthe Annual General Meeting held on 23 April 2012. The nominal amount per share was decreased from DKK 5.00to DKK 0.01 by transfer of the reduction amount to a special reserve fund. Subsequently, the Board ofDirectors decided to exercise the authorization in article 2.14 of the Articles of Association and increase theshare capital of TORM A/S by issuing 665.2 million new shares by conversion of debt of totally DKK 1.174.100.581(approximately USD 200 million) to TORM’s banks and time charter partners or their assignees. The new sharesissued correspond to 90% of TORM’s registered share capital and votes registered with the Danish BusinessAuthority. As stated in announcement no. 34 dated 5 November 2012, TORM has receivednotification that the following shareholders now hold more than 5% of the share capital in the Company: HSHNordbank AG, Danske Bank, Nordea Bank Danmark A/S, Deutsche Bank AG and DBS Bank Ltd.Please refer to “note 6 - Post balance sheet date events” for more details.Financial calendarTORM's Annual Report for 2012 will be published on 28 February 2013. TORM'sfinancial calendar can be found at www.torm.com/investor-relations.Announcement no. 35 / 7 November 2012 Third quarter report 2012 10 of 23About TORMTORM is one of the world’s leading carriers of refined oil products as well asa significant player in the dry bulk market. The Company operates a fleet of approximately 120 modern vessels in cooperation with other respectedshipping companies sharing TORM’s commitment to safety, environmental responsibility and customer service.TORM was founded in 1889. The Company conducts business worldwide and isheadquartered in Copenhagen, Denmark. TORM’s shares are listed on NASDAQ OMX Copenhagen (ticker: TORM) and on NASDAQ in New York(ticker: TRMD). For further information, please visit www.torm.com.Safe Harbor statements as to the futureMatters 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 concerningplans, objectives, goals, strategies, future events or performance, and underlying assumptions and statements other than statements of historicalfacts. The forward-looking statements in this release are based upon various assumptions, many of which are based, in turn, upon furtherassumptions, including without limitation, management’s examination of historical operating trends, data contained in our records and other dataavailable from third parties. Although TORM believes that these assumptions were reasonable when made, because these assumptions are inherentlysubject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, TORM cannotguarantee that it will achieve or accomplish these expectations, beliefs or projections.Important factors that, in our view, could cause actual results to differmaterially from those discussed in the forward- looking statements include the strength of the world economy and currencies, changes in charter hire ratesand vessel values, changes in demand for “tonne miles” of oil carried by oil tankers, the effect of changes in OPEC’s petroleum productionlevels and worldwide oil consumption and storage, changes in demand that may affect attitudes of time charterers to scheduled andunscheduled dry-docking, changes in TORM’s operating expenses, including bunker prices, dry-docking and insurance costs, changes in the regulation ofshipping operations, including requirements for double hull tankers or actions taken by regulatory authorities, potential liability from pending orfuture litigation, domestic and international political conditions, potential disruption of shipping routes due to accidents and political events or acts byterrorists. Risks and uncertainties are further described in reports filed by TORM with theUS Securities and Exchange Commission, including the TORM Annual Report on Form 20-F and its reports on Form 6-K. Forward-lookingstatements are based on management’s current evaluation, and TORM is only under an obligation to update and change the listed expectations to theextent required by law. Announcement no. 35 / 7 November 2012 Third quarter report 2012 11 of 23Statement by the Board of Directors and Executive ManagementThe Board and Management have today discussed and adopted this interim reportfor the period 1 January – 30 September 2012. In this respect, we refer to note 1 and note 6 in this thirdquarter report 2012. This interim report is unaudited and was prepared in accordance with theInternational Financial Reporting Standards for Interim Financial Reporting, IAS 34, as adopted by the EU andadditional disclosure of listed Danish companies.We believe the accounting practices used are reasonable, and that this interimreport gives a true and accurate picture of the Group's assets, debt, financial position, results and cash flows.Copenhagen, 7 November 2012Executive ManagementBoard of DirectorsJacob Meldgaard, CEORoland M. Andersen, CFONiels Erik Nielsen, ChairmanChristian Frigast, Deputy ChairmanJesper JarlbækKari Millum GardarnarRasmus Johannes HoffmannAnnouncement no. 35 / 7 November 2012 Third quarter report 2012 12 of 23Consolidated income statementMillion USD Q3 2012 Q3 2011 Q1-Q3 2012 Q1-Q3 2011 2011Revenue 256.0 331.8 838.9 937.9 1,305.2Port expenses, bunkers and commissions -154.2 -182.8 -488.0 -472.5 -675.0Freight and bunkers derivatives 8.0 -0.9 13.5 9.0 14.1Time charter equivalent earnings 109.8 148.1 364.4 474.4 644.3Charter hire -64.4 -103.5 -209.4 -279.7 -398.3Operating expenses -42.3 -42.3 -124.0 -125.5 -165.0Gross profit (Net earnings from shipping activities) 3.1 2.3 31.0 69.2 81.0Prof it f rom sale of vessels 0.0 0.0 -15.9 1.4 -52.6Administrative expenses -14.9 -16.8 -48.0 -51.6 -71.2Other operating income 0.4 0.4 1.3 2.9 3.2Share of results of jointly controlled entities 0.2 -2.9 -9.6 -5.3 -4.2EBITDA -11.2 -17.0 -41.2 16.6 -43.8Impairment losses on jointly controlled entities 0.0 0.0 -41.5 0.0 -13.0Impairment losses on tangible and intangible assets 0.0 0.0 0.0 0.0 -187.0Amortizations and depreciation -35.2 -36.1 -103.3 -109.2 -144.8Operating profit (EBIT) -46.4 -53.1 -186.0 -92.6 -388.6Financial income 1.3 -0.5 8.1 1.5 9.9Financial expenses -32.5 -16.5 -110.3 -47.6 -72.7Profit/(loss) before tax -77.6 -70.1 -288.2 -138.7 -451.4Tax -0.9 -0.3 -1.1 -1.3 -1.6Net profit/(loss) for the period -78.5 -70.4 -289.3 -140.0 -453.0Earnings/(loss) per share, EPSEarnings/(loss) per share, EPS (USD) -1.1 -1.0 -4.2 -2.0 -6.5Earnings/(loss) per share, EPS (DKK)* -6.7 -5.3 -24.1 -10.7 -34.9Diluted earnings/(loss) per share, (USD) -1.1 -1.0 -4.2 -2.0 -6.5Diluted earnings/(loss) per share, (DKK)* -6.7 -5.3 -24.1 -10.7 -34.9*) The key figures have been translated f rom USD to DKK using the averageUSD/DKK exchange change rate for the period in question. Announcement no. 35 / 7 November 2012 Third quarter report 2012 13 of 23Consolidated income statement per quarterMillion USD Q3 12 Q2 12 Q1 12 Q4 11 Q3 11Revenue 256.0 272.3 310.6 367.3 331.8Port expenses, bunkers and commissions -154.2 -161.6 -172.2 -202.5 -182.8Freight and bunkers derivatives 8.0 -8.1 13.6 5.1 -0.9Time charter equivalent earnings 109.8 102.6 152.0 169.9 148.1Charter hire -64.4 -60.6 -84.4 -118.6 -103.5Operating expenses -42.3 -41.4 -40.3 -39.5 -42.3Gross profit (Net earnings from shipping activities) 3.1 0.6 27.3 11.8 2.3Profit from sale of vessels 0.0 0.0 -15.9 -54.0 0.0Administrative expenses -14.9 -16.5 -16.6 -19.6 -16.8Other operating income 0.4 0.4 0.5 0.3 0.4Share of results of jointly controlled entities 0.2 -7.4 -2.4 1.1 -2.9EBITDA -11.2 -22.9 -7.1 -60.4 -17.0Impairment losses on jointly controlled entities 0.0 -41.5 0.0 -13.0 0.0Impairment losses on tangible and intangible assets 0.0 0.0 0.0 -187.0 0.0Amortizations and depreciation -35.2 -34.1 -34.0 -35.6 -36.1Operating profit (EBIT) -46.4 -98.5 -41.1 -296.0 -53.1Financial income 1.3 3.2 3.6 8.4 -0.5Financial expenses -32.5 -36.8 -41.0 -25.1 -16.5Profit/(loss) before tax -77.6 -132.1 -78.5 -312.7 -70.1Tax -0.9 0.0 -0.2 -0.3 -0.3Net profit/(loss) for the period -78.5 -132.1 -78.7 -313.0 -70.4Earnings/(loss) per share, EPSEarnings/(loss) per share, EPS (USD) -1.1 -1.9 -1.1 -4.5 -1.0Diluted earnings/(loss) per share, (USD) -1.1 -1.9 -1.1 -4.5 -1.0Announcement no. 35 / 7 November 2012 Third quarter report 2012 14 of 23Consolidated statement of comprehensive incomeMillion USD Q3 2012 Q3 2011 Q1-Q3 2012 Q1-Q3 2011 2011Net profit/(loss) for the period -78.5 -70.4 -289.3 -140.0 -453.0Other comprehensive income:Exchange rate adjustment arising on translationof entities using a measurement currency differentf rom USD 0.1 -0.3 0.4 -0.3 -0.4Fair value adjustment on hedging instruments -2.5 -18.0 -11.6 -28.1 -29.7Value adjustment on hedging instruments transferredto income statement 4.2 0.0 14.1 0.8 1.7Fair value adjustment on available for sale investments 0.2 9.1 -0.1 9.2 8.7Other comprehensive income after tax 2.0 -9.2 2.8 -18.4 -19.7Total comprehensive income -76.5 -79.6 -286.5 -158.4 -472.7Announcement no. 35 / 7 November 2012 Third quarter report 2012 15 of 23Consolidated balance sheet – Assets30 September 30 September 31 DecemberMillion USD 2012 2011 2011NON-CURRENT ASSETSIntangible assetsGoodwill 0.0 89.2 0.0Other intangible assets 1.8 1.9 1.9Total intangible assets 1.8 91.1 1.9Tangible fixed assetsLand and buildings 1.6 2.0 2.0Vessels and capitalised dry-docking 2,233.6 2,453.0 2,258.6Prepayments on vessels 0.0 138.1 69.2Other plant and operating equipment 6.9 8.3 8.1Total tangible f ixed assets 2,242.1 2,601.4 2,337.9Financial assetsInvestment in jointly controlled entities 0.9 66.4 50.3Loans to jointly controlled entities 0.0 8.7 8.2Other investments 12.1 12.2 11.6Total f inancial assets 13.0 87.3 70.1TOTAL NON-CURRENT ASSETS 2,256.9 2,779.8 2,409.9CURRENT ASSETSBunkers 66.2 62.2 84.6Freight receivables 122.9 132.8 140.2Other receivables 27.3 17.6 26.0Other financial assets 0.0 0.9 0.0Prepayments 21.6 29.8 11.8Cash and cash equivalents 12.5 95.8 85.5250.5 339.1 348.1Non-current assets held for sale 0.0 0.0 21.2TOTAL CURRENT ASSETS 250.5 339.1 369.3TOTAL ASSETS 2,507.4 3,118.9 2,779.2Announcement no. 35 / 7 November 2012 Third quarter report 2012 16 of 23Consolidated balance sheet – Equity and liabilities30 September 30 September 31 DecemberMillion USD 2012 2011 2011EQUITYCommon shares 61.1 61.1 61.1Treasury shares -17.3 -17.3 -17.3Revaluation reserves 6.1 6.7 6.2Retained prof it 331.6 932.7 620.0Proposed dividends 0.0 0.0 0.0Hedging reserves -27.4 -29.1 -29.8Translation reserves 4.2 3.8 3.6TOTAL EQUITY 358.3 957.9 643.8LIABILITIESNon-current liabilitiesDeferred tax liability 53.3 53.9 53.7Mortgage debt and bank loans 0.0 1,664.5 0.0Finance lease liabilities 27.4 74.4 29.4Deferred income 5.5 0.0 6.4TOTAL NON-CURRENT LIABILITIES 86.2 1,792.8 89.5Current liabilitiesMortgage debt and bank loans 1,793.7 189.6 1,794.6Finance lease liabilities 49.6 3.4 48.3Trade payables 111.1 74.8 115.6Current tax liabilities 1.0 1.1 1.2Other liabilities 106.3 90.9 85.0Acquired liabilities related to options on vessels 0.0 0.5 0.0Deferred income 1.2 7.9 1.2TOTAL CURRENT LIABILITIES 2,062.9 368.2 2,045.9TOTAL LIABILITIES 2,149.1 2,161.0 2,135.4TOTAL EQUITY AND LIABILITIES 2,507.4 3,118.9 2,779.2Announcement no. 35 / 7 November 2012 Third quarter report 2012 17 of 23Consolidated statement of changes in equity as at 1 January – 30September 2012Consolidated statement of changes in equity as at 1 January – 30September 2011Common Treasury Retained Proposed Revaluation Hedging Translation Totalshares shares prof it dividends reserves reserves reservesMillion USDEquity at 1 January 2012 61.1 -17.3 620.0 0.0 6.2 -29.8 3.6 643.8Comprehensive income for the year:Net profit/(loss) for the year - - -289.3 - - - - -289.3Other comprehensive income for the year - - - - -0.1 2.5 0.4 2.8Total comprehensive income for the year - - -289.3 - -0.1 2.5 0.4 -286.5Disposal treasury shares, cost - - - - - - - 0.0Loss from disposal of treasury shares - - - - - - - 0.0Share-based compensation - - 1.0 - - - - 1.0Total changes in equity Q1-Q3 2012 0.0 0.0 -288.3 0.0 -0.1 2.5 0.4 -285.5Equity at 30 September 2012 61.1 -17.3 331.7 0.0 6.1 -27.3 4.0 358.3Common Treasury Retained Proposed Revaluation Hedging Translation Totalshares shares prof it dividends reserves reserves reservesMillion USDEquity at 1 January 2011 61.1 -17.9 1,072.3 0.0 -2.5 -1.8 4.1 1,115.3Comprehensive income for the year:Net profit/(loss) for the year - - -140.0 - - - - -140.0Other comprehensive income for the year - - - - 9.2 -27.3 -0.3 -18.4Total comprehensive income for the year - - -140.0 - 9.2 -27.3 -0.3 -158.4Disposal treasury shares, cost - 0.6 - - - - - 0.6Loss from disposal of treasury shares - - -0.6 - - - - -0.6Share-based compensation - - 1.0 - - - - 1.0Total changes in equity Q1-Q3 2011 0.0 0.6 -139.6 0.0 9.2 -27.3 -0.3 -157.4Equity at 30 September 2011 61.1 -17.3 932.7 0.0 6.7 -29.1 3.8 957.9Announcement no. 35 / 7 November 2012 Third quarter report 2012 18 of 23Consolidated statement of cash flowsQ1-Q3 Q1-Q3Million USD Q3 2012 Q3 2011 2012 2011 2011Cash flow from operating activitiesOperating prof it -46.4 -53.1 -186.0 -92.6 -388.6Adjustments:Reversal of prof it/(loss) f rom sale of vessels 0.0 0.0 15.9 -1.4 52.6Reversal of amortizations and depreciation 35.2 36.1 103.3 109.2 144.8Reversal of impairment of jointly controlled entities 0.0 0.0 41.5 0.0 13.0Reversal of impairment of tangible and intangible assets 0.0 0.0 0.0 0.0 187.0Reversal of share of results of jointly controlled entities -0.2 2.9 9.6 5.3 4.2Reversal of other non-cash movements -4.0 5.7 -2.3 -6.3 -6.8Dividends received 0.0 0.0 0.4 0.0 0.0Dividends received f rom jointly controlled entities 0.0 0.2 0.0 1.2 1.4Interest received and exchange rate gains 0.1 -1.3 0.1 5.2 5.0Interest paid and exchange rate losses -0.8 -13.8 -21.7 -47.5 -67.0Advisor fees related to f inancing and restructuring plan -15.4 0.0 -55.4 0.00.0 Income taxes paid/repaid -0.2 -1.1 -0.7 -2.3 -2.7Change in bunkers, accounts receivables and payables 37.3 3.8 24.8 -32.7 -17.7Net cash flow from operating activities 5.6 -20.6 -70.5 -61.9 -74.8Cash flow from investing activitiesInvestment in tangible f ixed assets -8.0 -4.4 -56.5 -106.8 -118.5Investment in equity interests and securities 0.0 -0.1 0.0 -0.1 0.0Loans to jointly controlled entities 0.0 0.5 8.2 1.6 2.1Sale of equity interests and securities 0.1 0.0 1.9 0.0 0.0Sale of non-current assets 0.0 14.4 49.6 209.1 284.5Net cash flow from investing activities -7.9 10.4 3.2 103.8 168.1Cash flow from financing activitiesBorrow ing, mortgage debt 0.0 0.0 22.5 87.0 87.0Borrow ing, f inance lease liabilities 0.0 0.0 0.0 46.8 46.8Repayment/redemption, mortgage debt 0.0 -38.5 -26.4 -194.7 -254.1Repayment/redemption, f inance lease liabilities -1.9 -2.6 -1.8 -5.2 -7.5Net cash flow from financing activities -1.9 -41.1 -5.7 -66.1 -127.8Net cash flow from operating, investing and financing activities -4.2 -51.3-73.0 -24.2 -34.5 Cash and cash equivalents, beginning balance 16.7 147.1 85.5 120.0 120.0Cash and cash equivalents, ending balance 12.5 95.8 12.5 95.8 85.5Announcement no. 35 / 7 November 2012 Third quarter report 2012 19 of 23Consolidated quarterly statement of cash flowsMillion USD Q3 12 Q2 12 Q1 12 Q4 11 Q3 11Cash flow from operating activitiesOperating prof it -46.4 -98.5 -41.1 -296.0 -53.1Adjustments:Reversal of prof it/(loss) f rom sale of vessels 0.0 0.0 15.9 54.0 0.0Reversal of amortizations and depreciation 35.2 34.1 34.0 35.6 36.1Reversal of impairment of jointly controlled entities 0.0 41.5 0.0 13.0 0.0Reversal of impairment of tangible and intangible assets 0.0 0.0 0.0 187.0 0.0Reversal of share of results of jointly controlled entities -0.2 7.4 2.4 -1.12.9 Reversal of other non-cash movements -4.0 11.2 -9.5 -0.5 5.7Dividends received 0.0 0.4 0.0 0.0 0.0Dividends received f rom jointly controlled entities 0.0 0.0 0.0 0.2 0.2Interest received and exchange rate gains 0.1 -0.2 0.2 -0.2 -1.3Interest paid and exchange rate losses -0.8 -2.9 -18.0 -19.5 -13.8Advisor fees related to f inancing and restructuring plan -15.4 -18.0 -22.0 0.00.0 Income taxes paid/repaid -0.2 0.0 -0.5 -0.4 -1.1Change in bunkers, accounts receivables and payables 37.3 5.5 -18.0 14.9 3.8Net cash flow from operating activities 5.6 -19.5 -56.6 -13.0 -20.6Cash flow from investing activitiesInvestment in tangible f ixed assets -8.0 -4.4 -44.1 -11.6 -4.4Investment in equity interests and securities 0.0 0.0 0.0 0.1 -0.1Loans to jointly controlled entities 0.0 8.2 0.0 0.5 0.5Sale of equity interests and securities 0.1 1.8 0.0 0.0 0.0Sale of non-current assets 0.0 0.3 49.3 75.4 14.4Net cash flow from investing activities -7.9 5.9 5.2 64.4 10.4Cash flow from financing activitiesBorrow ing, mortgage debt 0.0 0.0 22.5 0.0 0.0Borrow ing, f inance lease liabilities 0.0 0.0 0.0 0.0 0.0Repayment/redemption, mortgage debt 0.0 0.0 -26.4 -59.4 -38.5Repayment/redemption, f inance lease liabilities -1.9 0.9 -0.8 -2.3 -2.6Net cash flow from financing activities -1.9 0.9 -4.7 -61.7 -41.1Net cash flow from operating, investing and financing activities -4.2 -12.7-56.1 -10.3 -51.3 Cash and cash equivalents, beginning balance 16.7 29.4 85.5 95.8 147.1Cash and cash equivalents, ending balance 12.5 16.7 29.4 85.5 95.8Announcement no. 35 / 7 November 2012 Third quarter report 2012 20 of 23NotesNote 1 - Impairment testAs at 30 September 2012, Management performed a review of the recoverableamount of the assets by assessing the recoverable amount for the significant assets within the Tanker Division, theBulk Division and the investment in 50% of FR8. Based on the review, Management concluded that:• Assets within the Tanker Division were not further impaired as of 30September 2012 as the value in use exceeds the carrying amount• Assets within the Bulk Division were not impaired as the fair value lesscosts to sell exceeded the carrying amount • To maintain the impairment of the investment in FR8 of USD 42 million to zerorecognized in Q2 2012 in addition to the impairment losses recognized in previous yearsTanker DivisionThe methodology used for calculating the value in use is unchanged compared tothe Annual Report for 2011 and accordingly the freight rate estimates in the period 2012 to 2015 are based on theCompany's business plans, which in 2014 and 2015 assume a gradual increase towards the 10-year historic average spot freightrate. The freight rates from 2016 are based on the 10-year historic average spot freight rates from Clarksons adjusted by theinflation rate. The WACC of 8.0% (30 September 2011: 8.2%) is unchanged compared to 31 December2011. The 10-year historic average spot freight rates as of 30 September 2012 are asfollows: • LR2 USD/day 26,709 (30 September 2011: USD/day 27,811)• LR1 USD/day 22,493 (30 September 2011: USD/day 23,293)• MR USD/day 19,892 (30 September 2011: USD/day 20,227)Management believes that these major assumptions are reasonable.The calculation of value in use is very sensitive to changes in the keyassumptions which are considered to be related to the future development in freight rates, the WACC applied as discounting factor inthe calculations and the development in operating expenses. The sensitivities have been assessed as follows, all otherthings being equal: • A decrease in the tanker freight rates of USD/day 500 would result in afurther impairment of USD 135 million for the Tanker Division• An increase of the WACC of 1.0% would result in a further impairment of USD181 million for the Tanker Division • An increase of the operating expenses of 5.0% would result in a furtherimpairment of USD 90 million for the Tanker Division In case the market conditions do not improve in order to sustain the current10-year historic average spot freight rates, the Company may have to make further impairments of the assets.It should be emphasized that in a forced sale the recoverable amount of thevessels would be significantly lower than the carrying amount under a going concern assumption.Based on broker valuations, TORM’s fleet excluding financial lease vessels hada market value of USD 1,316 million as of 30 September 2012.Announcement no. 35 / 7 November 2012 Third quarter report 2012 21 of 23Note 2 - Vessels and capitalized dry-docking30 September 30 September 31 DecemberUSD million 2012 2011 2011Cost:Balance at 1 January 2,999.3 3,113.9 3,113.9Additions 13.4 10.7 20.7Disposals -49.6 -249.0 -334.6Transferred to/f rom other items 102.9 199.3 199.3Transferred to non-current assets held for sale 0.0 0.0 0.0Balance 3,066.0 3,074.9 2,999.3Depreciation and impairments:Balance at 1 January 740.7 553.8 553.8Disposals -8.7 -54.3 -67.8Depreciation for the year 100.4 106.1 140.6Impairment loss 0.0 0.0 97.8Transferred to/f rom other items 0.0 16.3 16.3Balance 832.4 621.9 740.7Carrying amount 2,233.6 2,453.0 2,258.6Note 3 - Prepayments on vessels30 September 30 September 31 DecemberUSD million 2012 2011 2011Cost:Balance at 1 January 69.2 243.3 243.3Additions 41.7 94.1 94.8Disposals -8.0 0.0 -7.8Transferred to/f rom other items -102.9 -199.3 -199.3Transferred to non-current assets held for sale 0.0 0.0 -61.8Balance 0.0 138.1 69.2Depreciation and impairments:Balance at 1 January 0.0 16.3 16.3Disposals 0.0 0.0 0.0Depreciation for the year 0.0 0.0 0.0Transferred to/f rom other items 0.0 -16.3 -16.3Balance 0.0 0.0 0.0Carrying amount 0.0 138.1 69.2Announcement no. 35 / 7 November 2012 Third quarter report 2012 22 of 23As at 30 September 2012, TORM’s equity ratio of 14.3% and cash at bank of USD12.5 million resulted in a breach of its financial covenants under the existing loan agreements. As at 30 September 2012, TORM therefore does nothave an unconditional right to defer payments on the loans for more than 12 months and the mortgage debt and bank loans are in principlepayable on demand. Accordingly the mortgage debt and bank loans are classified as current liabilities in the balance sheet.Please refer to “note 6 - Post balance sheet date events” for an outline of therestructuring of TORM. Note 4 - Mortgage debt and bank loans30 September 30 September 31 DecemberMillion USD 2012 2011 2011Mortgage debt and bank loansTo be repaid as follow s:Falling due within one year 1,793.7 189.6 1,794.6Falling due betw een one and tw o years 0.0 281.8 0.0Falling due betw een tw o and three years 0.0 154.1 0.0Falling due betw een three and four years 0.0 737.3 0.0Falling due betw een four and five years 0.0 111.2 0.0Falling due after five years 0.0 380.1 0.0Carrying amount 1,793.7 1,854.1 1,794.6Note 5 - Segment informationMillion USDTanker Bulk Not Tanker Bulk NotDivision Division allocated Total Division Division allocated TotalRevenue 698.0 140.9 0.0 838.9 721.6 216.3 0.0 937.9Port expenses, bunkers and commissions -404.6 -83.4 0.0 -488.0 -377.0 -95.5 0.0-472.5 Freight and bunkers derivatives -0.1 13.6 0.0 13.5 4.1 4.9 0.0 9.0Time charter equivalent earnings 293.3 71.1 0.0 364.4 348.7 125.7 0.0 474.4Charter hire -134.3 -75.1 0.0 -209.4 -148.1 -131.6 0.0 -279.7Operating expenses -121.6 -2.4 0.0 -124.0 -123.0 -2.5 0.0 -125.5Gross profit (Net earnings from shipping activities) 37.4 -6.4 0.0 31.0 77.6-8.4 0.0 69.2 Prof it f rom sale of vessels -15.9 0.0 0.0 -15.9 1.8 -0.4 0.0 1.4Administrative expenses -42.7 -5.3 0.0 -48.0 -42.2 -9.4 0.0 -51.6Other operating income 1.2 0.1 0.0 1.3 2.8 0.1 0.0 2.9Share of results of jointly controlled entities -5.1 0.0 -4.5 -9.6 2.1 0.0 -7.4-5.3 EBITDA -25.1 -11.6 -4.5 -41.2 42.1 -18.1 -7.4 16.6Impairment losses on jointly controlled entities 0.0 0.0 -41.5 -41.5 0.0 0.00.0 0.0 Amortizations and depreciation -101.2 -2.1 0.0 -103.3 -106.8 -2.4 0.0 -109.2Operating profit (EBIT) -126.3 -13.7 -46.0 -186.0 -64.7 -20.5 -7.4 -92.6Financial income - - 8.1 8.1 - - 1.5 1.5Financial expenses - - -110.3 -110.3 - - -47.6 -47.6Profit/(loss) before tax - - -148.2 -288.2 - - -53.5 -138.7Tax - - -1.1 -1.1 - - -1.3 -1.3Net profit/(loss) for the period - - -149.3 -289.3 - - -54.8 -140.0BALANCE SHEETTotal non-current assets 2,207.3 37.4 12.2 2,256.9 2,599.7 102.5 77.6 2,779.8The activity in TORM's 50% ow nership of FR8 Holding Pte. Ltd. is included in'Not-allocated'. Q1-Q3 2012 Q1-Q3 2011During the year, there have been no transactions betw een the Tanker Divisionand the Bulk Division, and therefore all revenue derives f rom external customers.Announcement no. 35 / 7 November 2012 Third quarter report 2012 23 of 23Note 6 - Post balance sheet date eventsAs stated in announcement no. 31 dated 2 October 2012, TORM has signed aRestructuring Agreement with its banks and time charter partners that secures the Company deferral of bank debt, newliquidity and substantial savings from the restructured time charter book. The highlights of the restructuring include:•Current shareholders retain 10.0% ownership, compared to 7.5% communicatedearlier •USD 100 million in new working capital facility available until 30 September2014 •Maturities for the existing bank debt of USD 1.8 billion are extended until 31December 2016 with new uniform covenants and terms and divided into three tranches•Deferral of installments on the entire bank debt until 30 September 2014 andreduced repayments until 31 December 2016•Interest on existing debt is only paid if TORM has sufficient liquidity untilat least 30 June 2014 with potential extension to 30 September 2014•Mark-to-market savings estimated at approximately USD 270 million from amendedtime charter agreements •TORM expects to be cash flow positive even at the current rate levels•As part of the restructuring, certain specific option rights have been agreedthat may result in a sales process for up to 22 vessels and repayment of the related debt.As stated in announcements no. 32 and 33 dated 5 November 2012, TORM hasfinalized the technical completion of the restructuring with its banks and time charter partners. In connection with therestructuring, the Board of Directors in TORM A/S completed the decrease of TORM’s share capital decided at the AnnualGeneral Meeting held on 23 April 2012. The nominal amount per share was decreased from DKK 5.00 to DKK 0.01 by transfer ofthe reduction amount to a special reserve fund. Subsequently, the Board of Directors decided to exercise theauthorization in article 2.14 of the Articles of Association and increase the share capital of TORM A/S by issuing 665.2 millionnew shares by conversion of debt of totally DKK 1.174.100.581 (approx. USD 200 million) to TORM’s banks and timecharter partners or their assignees. The new shares issued correspond to 90% of TORM’s registered share capital andvotes registered with the Danish Business Authority.The Company’s group of banks has through the implementation of therestructuring aligned key terms and conditions and financial covenants across all existing debt facilities, and all maturities onexisting credit facilities have been adjusted to 31 December 2016. Interest on the existing debt will only be paid if the Companyhas sufficient liquidity, and otherwise the remainder will be rolled up until at least 30 June 2014 with potentialextension until 30 September 2014. On average the interest margin is increased to approximately 240 basis points across theexisting bank debt. The Company will pay interest on the new working capital facility until 30 September 2014.The new financing agreements provide for a deferral of installment on theexisting bank debt until 30 September 2014, in which period rescheduled principal amortizations will only fall due if theCompany has sufficient liquidity. Provided that the Company generates sufficient cash, certain cash sweep mechanisms will apply.Annualized minimum amortizations of USD 100 million will commence with effect from 30 September 2014 until 31 December2016. If vessels are sold, the related debt will fall due. New financial covenants apply uniformly across the bankdebt facilities. If the difficult conditions in the tanker and bulk markets during 2012 willcontinue to prevail for a longer period, the Company anticipates to be in breach with the new financial covenants during thecourse of 2013. However, in market conditions where the most current pick-up in product tanker freight rates willprove sustainable over the coming years, the Company will be in compliance with its financial covenants and be able toservice interest and installment obligations on the bank debt as they become due.With effect from the restructuring dated 5 November 2012, TORM’s future timecharter liabilities as per the original charter parties are reduced by approx. USD 590 million from USD 818 million to USD 228million by aligning rates to current market level or by redelivering time charter vessels.As stated in announcement no. 34 dated 5 November 2012, TORM has receivednotification that the following shareholders now hold more than 5% of the share capital in the Company: HSH Nordbank AG,Danske Bank, Nordea Bank Danmark A/S, Deutsche Bank AG, and DBS Bank Ltd.Note 7 - Accounting policiesThe interim report for the period 1 January – 30 September 2012 is presented inaccordance with IAS 34 "Interim Financial Reporting" as adopted by the EU and additional Danish disclosure requirementsfor interim reports of listed companies. The interim report has been prepared using the accounting policies as for theAnnual Report for 2011. The accounting policies are described in more detail in the Annual Report for 2011. As from 1 January2012, TORM has implemented the amendment to IFRS 7 regarding disclosures about transfer of financial assets.The amended standard has not affected the recognition and measurement in TORM's interim report for the first nine monthsof 2012. The interim report of the third quarter of 2012 is unaudited, in line with the normal practice.