26th Nov 2008 07:00
TGE Marine AG
("TGE" or "the Company")
26 November 2008
Trading Update
TGE Marine AG (AIM: TGE), a leading provider of engineering services for the design and construction of gas carriers and offshore units, today provides an update on trading.
On 26 September 2008 TGE issued its preliminary results for the year ended 30 June 2008 and stated that the principal markets TGE serves continue to be robust in the face of difficult global economic conditions. A substantial element of expected turnover for 2009 was underpinned by the Company's order book and, subject to the successful completion of new orders, the Board expected TGE to make good progress during 2009.
Since September, the Board has witnessed a significant deterioration to the macro-economic environment which has directly impacted the markets in which TGE operates. The background of falling economic activity and restricted credit has heralded further falls in input prices and general shipyard activity. In TGE's niche of smaller gas carriers, even when owners can secure financing, projects are being put on hold in anticipation of materially lower build costs.
Specifically, following meetings with clients during November, the three contracts TGE identified previously as expected to sign before the end of 2008 have been put on hold and contract activity in early 2009 is now expected to be limited. Additionally, a contract to supply two gas shipsets for two ethylene carriers signed in February 2008, is now expected to be cancelled and neither contribution or compensation are being recognised as received during 2009. In aggregate the value of contracts deferred is approximately €80m, with contracts of approximately €20m expected to be cancelled.
Consequently, the Board has reduced its performance expectations for FY09 and FY10, and is now preparing for a period of reduced order intake prior to any recovery.
However, the Board continues to believe that TGE's niche markets will recover, potentially sooner than the broader shipbuilding market, for the following reasons:
To date time charter rates for petrochemical gas carriers have not declined significantly which highlights a relatively tight market for transport capacity, and when combined with falling new build prices, will enhance the economic attractions of new ship investment.
The recent boom in general shipbuilding 'crowded out' new builds for petrochemical gas carriers meaning there has been very limited speculative building activity and there is currently limited capacity overhang.
Demand for smaller gas-carriers is driven more by the requirements for fleet renewal and the extra capacity needed to service longer average shipping distances than it is by volume growth in petrochemical gases consumed. As such it is less predicated on global economic growth.
The economic, environmental, and strategic drivers for investment in TGE's new markets of small scale LNG and CO2 storage and transportation remain valid in the current economic climate so while projects may be delayed these markets are still expected to provide significant opportunities for TGE's longer term business.
Hence, while the recent market upheaval has had a significant impact on the short to medium term trading forecasts, the Board continues to believe the longer term prospects for the business are good.
Further information on the company, including the notice and agenda for the AGM can be found on the company's website - www.tge-marine.com. Investors are reminded that an AGM is to be held on 10th December at TGE Marine offices in Bonn.
Commenting on today's announcement, Manfred Kűver, CEO, said:
"TGE remains the clear market leader in the design and build of smaller gas carriers and offshore units, however, as we have witnessed clients being forced to defer or cancel orders, it is clear that we will not be immune from the current global economic situation. Until some stability returns to the market and a new price level is established the attitude of ship owners is likely to remain very cautious.
"However, at some point TGE's niche markets will recover and there will arise significant opportunities to work on both petrochemical gas carriers and in our new markets of smaller LNG carriers and offshore LNG storage units. Following the IPO we have no debt and a strong balance sheet and. with this in mind we will seek to navigate the challenges currently facing the business and retain our confidence in TGE's longer term potential."
- Ends -
Enquiries:
|
TGE Marine AG |
+49 (0)228 604 480 |
|
|
Dr Manfred Küver |
Chief Executive Officer |
|
|
Roland Fisher |
Chief Financial Officer |
|
|
Singer Capital Markets Limited |
+44 (0)20 3205 7500 |
|
|
Jos Trusted |
||
|
James Maxwell |
||
|
Pelham Public Relations |
+44(0)20 7743 6676 |
|
|
Mark Antelme Henry Lerwill |
||
Notes to editors
TGE is a leading provider of engineering services for the design and construction of gas carriers and offshore units. The Company provides a turnkey solution for the engineering design, procurement and construction supervision of marine gas handling and storage systems as well as vessel designs.
The Company specialises in the containment and handling of cryogenically stored gases (often these are both highly toxic and flammable), and has a market leading position in the ethylene carrier segment.
The majority of TGE's customers are commercial shipyards building gas carrier ships. To date, the Company has supplied gas handling and storage systems for in excess of 100 gas carriers in more than 20 shipyards in Europe, Asia and South America. In particular, the Group has been active in China since 1989 and, to the Directors' knowledge, acted as the engineering provider to every Chinese-built IGC compliant gas carrier delivered.
The Company is headquartered in Bonn, Germany with a representative office in Shanghai, China.
For further information on the Company, including access to an electronic version of the Company's AIM Admission Document, please visit the Company's website (www.tge-marine.com).
Related Shares:
Generation Ess.