Welcome to the presentation of the second quarter results for Odfjellesi, which we are streaming live here from Bergen today. We appreciate the interest in the company. As usual, we will be taking questions at the end of the presentation. But if you're watching this presentation offline and you don't have the ability to ask questions, please feel free to contact us also offline. As usual, I think there's a chance on your top right hand screen top right hand corner of your screen, you should be able to post questions along and we will address them towards the end of the presentation.
The agenda for today is I will give you some highlights for the quarter, then Terje will as usual, Terje Eberson will come on and speak about the financials, and then I will come back with a brief update on operational review and strategy, not so much strategy this time around. And then we'll talk about prospects and market updates. The highlights of the second quarter in a nutshell, it was not a very exciting quarter for Odfjell. We are slightly up compared to the first quarter, mainly because of operational improvements, but we were in the middle of quite challenging markets and we continue to be in challenging markets. The time charter earnings in Otjel Tankers was $123,000,000 which is up $3,000,000 compared to the first quarter.
The net results from terminals was in line with the first quarter with $1,000,000 and we had an EBIT of $11,000,000 compared to $8,000,000 in the previous quarter. So that's also up $3,000,000 Our net results came in at minus $8,000,000 compared to minus $16,000,000 in the previous quarter, but there were some more one off adjustments in those numbers. So they're not directly comparable, but Terje will comment on that a little bit later. Second quarter is also another busy quarter for us in terms of COA renewals. We did renew a few contracts, and they were up average 5%, and I'll speak more about the COAs and the COA renewals later on in the presentation.
In terms of subsequent events, earlier this week, we announced that we have concluded the exit from our from the gas segment, something we have tried to achieve for quite some time. And Terje has a slide with the impact of that later on in the presentation as well. I don't want to go into the key figures. We will get back to that. But as you can see in the quote on the bottom right hand corner of this slide, we say that we continue to operate well, but the near term markets remain unpredictable due to COVID-nineteen and a challenging product tanker market.
We do maintain our fundamentally positive view on the chemical tanker markets and the markets in our key hubs for the terminals. But the third quarter is usually a seasonally slow quarter, which together with the continued slow product tanker market may result in a slightly weaker third quarter compared to the second quarter, but there are some uncertainties with that. I'll talk more about the market fundamentals and the challenges we're facing later on in the presentation. So at this point, I will hand it over to Thierry to take you through the financials, and then I will come back later.
Thank you very much, Christian, and good morning to all of you. I will start with the income statement, which we are now presenting according to equity method, which we started with from the first quarter, which means that we are only consolidating all the joint ventures, meaning our terminal assets into one line in the P and L and in the balance sheet. If I start with the figures this quarter, we see that net time charter earnings increased slightly from US120.4 million to US123.4 million dollars this quarter. Main reason for the improvement is related to we had less interference from the Texas Freeze, meaning that we had a slight increase in volumes on a number of days this quarter compared to the first quarter. Charter expenses, 4,100,000.0, very much comparable to the first quarter, where we see that operating expenses increased from US47.4 million dollars to US49 million dollars this quarter.
Main effect being that we had some insurance claims this quarter, and I also saw that we had full effect from increase in number of vessels that we had in the first quarter. So it's not an alarming increase in operating expenses, but we continue to see kind of high costs related to crew due to COVID situation still being challenging. Share of net result from associates and joint ventures at 500,000.0 That is our net revenue from the Thermal business. That includes also US1.7 million dollars in depreciation of surplus values. So if you deduct that, you have the net result that we have received from our joint ventures being US2.3 million dollars in the second quarter.
G and A continued to be on the low side also due to the COVID situation with less traveling activities and less social activities. But the decrease is also related to the fact that we had some one offs or increase in the first quarter that is not materialized in the second quarter. Then we have an EBITDA of $56,600,000 compared to 53,200,000.0 in the first quarter. Depreciation ended at $45,800,000 Major part of that, around $30,000,000 is related to our own assets or financial leases, while $15,000,000 is related to depreciation of value in use assets that are capitalized according to IFRS 16. After depreciation and capital gain, we are left with an EBIT of US11.1 million dollars an increase compared to US7.8 with $3,000,000 around $3,000,000 being very much the same increase that we had in the Nat Time charter earnings this quarter compared to the first quarter.
Other financial items, we had a capital gain related to refinancing this quarter of US1.6 million dollars in gain, while we see that the net interest expenses is continuing to decrease due to the fact that we are decreasing the debt and we also are refinancing some of our debt with a lower margin than we had historically. After taxes, we then have a net result of US7.8 million negative compared to US15.6 million negative in the first quarter. And if we adjust for the one offs this quarter being the capital gain of US1.6 million we have a net adjusted result of negative result of negative US14 million dollars in the first quarter. Looking at the balance sheet, we see that we have ships on our balance sheet around US1.5 billion dollars a slight decrease due to depreciation, of course. We also see that right of use of asset is slightly reduced due to some of the operating leases is decreasing, the number of vessels and number of days.
While we see that the investments in associated joint ventures also slightly down to US179.8 due to the fact that we have received some dividends from the joint ventures during this quarter. We have a cash position of $56,900,000 compared to 71,900,000.0 in the first quarter. And if you include undrawn bank loan facilities, we have a cash position of 111,000,000 compared to 130,000,000 end of first quarter. The reduction is also due to the fact that we are reducing our debt and we
are
refinancing vessels with a lower loan to value than we had before the refinancings. Equity, we have a ratio of 29.4% excluding IFRS 16 related debt compared to around 29.1% in the first quarter. What we see on the debt side that non current interest bearing debt is reduced from SEK1.1 billion to around SEK1 billion end of second quarter, but that has to be seen in relation to the increase in the current portion of interest bearing debt going from around US100 million dollars to US193.5 million dollars That is related to the fact that we have reclassified the bond that is maturing in June to being short term debt and not a long term debt based on the company rules. We are reducing debt this quarter by around US33 million dollars and also with around US10 million dollars including some vessels being refinanced with a lower loan to value. Cash flow statement.
This quarter, we see that cash flow from operating activities increased under the $37,000,000 compared to 19,300,000.0 in the first quarter. Main reason, of course, that we are delivering slightly improvement in the results, but also due to the fact that we didn't see the negative development in working capital that we saw in the first quarter. So we had a positive impact from that in the second quarter, but we still have too high working capital compared to where we want to be. Looking at the investing activities, we had some investment in assets, being docking expense and also some energy saving devices on our vessels, total US8.4 million dollars this quarter. Then after receiving dividends from our joint venture, we had net cash flow from investing activities of negative US5 million dollars compared to negative US21.1 million in the first quarter.
On the debt side, as I said, we are reducing our debt. So we had negative cash flow from refinancing activities at US47.5 million dollars this quarter, leading to a net cash flow for the quarter of negative US50 million dollars and reducing our cash at around US56.9 million dollars end of the second quarter. But as I said, if we include our undrawn bank facilities, are around $110,000,000 and around where we want to be and we're planning to be end of this quarter. Bunker expenses remains one of the main cost components. We saw that the bunker prices increased this quarter compared to previous quarter.
Looking at the total bunker expenses for the fuel burn from our own vessels and also the pool vessels, that increased from US48 million dollars to US58 million this quarter. But if you take out positive effects for financial hedging, the bunker adjustment clauses, positive with US4.3 million dollars and also deducts third party fuel vessels, we have US40 million dollars net bunker expenses compared to US34.2 million in the first quarter. So we see that the gap effect from the contract portfolio and the bunker adjustment clauses in our contracts. Going forward and for the second half of this year, we expect to be around 50% covered with the contract portfolio and the bank adjustment clauses. And we also have some financial hedging around 10 of our exposure, but today have a positive mark to market of around US5 million dollars On the debt side, not that much to report about on, but we see that we have very limited refinance needs in the coming quarters.
We have a bond maturing in June next year. We still have ample of time, we think, and we are also have time to consider we hope to repay that and then potentially refinance that with some other debts that could be more or less expensive. But of course, we just repay without refinancing or refinance the internal debt will also be market dependent, of course. On the lower part of this slide, you see that the debt is continuing to be reduced. This is showing how it could be reduced for the next two years if we just continue repaying our debt according to the installment profiles and not refinancing the bonds that is maturing in 2022, then we could be on the track to be around our target, $750,000,000 to $900,000,000 in outstanding debt by end of twenty twenty three.
But again, that will also then be market dependent, whether we have to refinancing some of the loans that we are not including in the figures. This is comparing our time charter earnings with our cash breakeven. Beyond that, they're around US21000 cash breakeven this quarter. That was a good reduction from last quarter, around US23000 dollars But that will vary from quarter to quarter. And we still see that the time charter earnings is below the forecasted cash breakeven for this year.
And we also see that we still have a way to go to reach our target to be at cash breakeven around US18000 to US90000 dollars per day. As Christian mentioned in the highlights, we did a transaction this quarter, signing up with Bebe Epic Khozan for sale of two of our last the two last gas vessels in our portfolio. In total, the purchase price will be covered in cash and also partly in shares in BEV EPIC Hausan. We will receive around US20 million dollars in cash, which corresponds to the debt on the vessels. And for the remaining part of the equity we have in the vessels, we will receive around 6,900,000,000.0 shares in Bare Epec Wissan.
And if you use the share price for the day and also exchange rate, that corresponds to around US17 million dollars and then adding up to US37 million dollars in payment for the vessels, which is slightly above the values of the vessels in our books today. So that will be a small capital gain, most likely booked in fourth quarter or potentially in the third quarter. But in addition, also, we'll improve our kind of equity ratio and the balance sheet when we finalize that transaction. Then I will leave the word to the U. Kirstjen.
Thank you, Terje. I will start by taking you through an operational review and update. And if you take a look at this slide, what you're seeing on the left hand side is comparison of Otfix index and the Clarksons Chemical Tankers Spot Index. I mentioned a few times that you are we are a little bit comparing apples to oranges, but they do represent a proxy for the markets. And as you can also see in this quarter, the odd fixed picked up at 2.6%, but the Clarkson index picked up by 1.4 It doesn't feel like it picked up.
It feels like a flat market. So but there was a small uptick. When you talk about the market, it's quite important to understand that this is not a demand problem. I mean, the fundamental demand for chemicals, anyone who is trying to source plastics or fibers or any kind of raw materials at the moment know that there's a very, very strong demand. So it's actually a disruption to the supply chains and a lack of supply and a lack of inventory that's driving the disruptions to the markets at the moment.
When you look at the various the four categories, I would say, you look at specialty chemicals and actually vegiles as well, that market is actually doing okay. We have okay nominations, and that's quite a good activity. Whereas when you go into the easy chemicals and the CPP, that's where the swing tonnage and the added supply that comes with it is teasing us a little bit, I would say. But it's quite important to note that it's not a demand driven disruption at the moment. It's a supply chain driven disruption.
When you take a look at our COA portfolio, I'll start you off in the middle of this page. On the bottom, you can see the COA renewals. As I mentioned in the beginning, the second quarter is not a big quarter for renewing COAs, but we did renew a few and they are up 5%. The same number for the first quarter was minus 5%. But when you only renew a few contracts each quarter, you will see if it's a backhaul contract one quarter and a fronthaul the next, then you will see some this figure jumping a little bit around.
But I think the most important thing is to note that our average COE rate renewal is up 4% since 2019. And at the same time, we have passed on the cost of the low sulfur fuel that happened in the beginning of twenty twenty. So it is a positive trend for our COA rates. On the left hand side, you are looking at the COA coverage. That was 50% in the second quarter, a little bit lower nominations than we're used to.
So with the same contract portfolio in a normalized market, that number would be a little bit higher. But we are within our sweet spot for contract coverage, which is between 5060%. Our tank terminals, in spite of the challenging circumstances due to COVID-nineteen, a lot of people moving around these terminals every day, we continue to operate well and maintain safe and efficient operations. The EBITDA in the second quarter was $8,000,000 compared to $7,000,000 in the previous quarter and as improvements in The U. S.
And the Antwerp outweighed the reduced results in Asia. The U. S. Markets, as I mentioned a few times, still suffering from low inventories. Inventories is what a terminal does.
So when you have low inventory, you also have low levels of utilization in the terminal. That's how it works. That's, of course, affecting our U. S. Terminals.
And we're also recovering from the Texas freeze and the fire we had on the U. S. Terminal in Houston in the beginning of the year. So there has been enough challenges there. But we do see an improvement in activity levels also in The U.
S. I can also say the construction of a 35,000 cubic meter new tanks in Antwerp is proceeding on schedule. And it also means the challenges I spoke about before in the Houston has meant that the engineering for Bay 13 has been delayed a little bit, but it's still something that we are working on. Turning to prospects and market updates, a little bit back to the inventory side. The effect is that exports out of The U.
S. Are slower than usual. The U. S.-based production producers, they want to produce as much as they can, but they struggle themselves with their supply chains and getting feedstock. And at the same time, you have very strong domestic demand, so it just means less inventory, which means less shipments.
And that means Asian customers and European customers and so on, they've had to source chemicals from other regions. So that's disrupting the usual picture a little bit. On the bottom of this page, you can see therefore that the rates relating to U. S. Trades are flat, whereas the rates intra Asia, where there's more activity is actually going up.
So this is a disruption to the usual flows. And I think U. S.-based producers are scrambling to produce because what you'll see in the next slides is that their margins are high. And that was a segue to this slide. If you just look on the right hand side, the way to the right, you see producers' margins developments for key chemicals.
If you look at methanol and ethylene glycol, you see that U. S.-based producers, their margins are going up, while producers based in Europe and Asia are going down because of the increase in feedstock prices. And that just means that's another argument why we believe that The U. S. Exports are going to resume as soon as production picks up.
You also see the strong demand in other ways. You're seeing it on the for instance, the ethylene glycol prices. You have upgoing prices because of shortage of product. And you're also seeing on the all the way to the left that this is the key product inventories for Asian importers. That inventory is down 37 year on year.
And so they are quite interested in filling these inventories. But as I said, the supply is becoming an issue. So the overall theme, I mentioned a few times, is that demand is not a problem, but it is a disruption to supply chains that's causing the ripples in the markets. The supply dynamics, we don't have a lot to add. In the middle, you can see that the order book in chemical tankers is the lowest point it has been in twenty years.
And all the way on the right hand side, can see that ordering activity is low as well. So the supply side is very much under control. And what is not so much under control is what you're looking at on the left hand side of this slide, and that is the swing tonnage when product tankers IMO two product tankers when that market is as low as it has been historically low in parts of this year, then it's natural that these IMO two ships, they find their way into easy chemicals and into what we call our markets. And that means that the swing tonnage is picking up. So we do need the product tanker markets to, I would say, normalize.
We don't need it to spike. We just need it to normalize and we think that, that will quite quickly reverse the trend of swing tonnage once that happens. So market conclusions, easing lockdowns around the world, good economic activity, healthy supply and demand fundamentals and a lack of ordering activity means that we have we still continue to think that it's a fairly strong picture, but with some short term disruptions. Supply growth in the next coming years will be around 1% compounded per year and we believe demand for transport will grow by around 4%. So that picture has not changed.
But there are short term uncertainties relating to these disruptions that I spoke about and COVID-nineteen related disruptions that will continue to be around for a little while or maybe a longer while, but at least operationally that continues to be a challenge. But the fundamental story that it is not a demand driven drop that is quite important when we look into the future. So in summary, slight improvement in the second quarter compared to the first quarter, driven by operational improvements. Oswald tankers are performing well, but we do need the product tanker marks to normalize. On terminals, stable results, efficient operations despite all the challenges.
We think that is picking up. So our market outlook is strong fundamentally, but with some short term challenges. And that also means that for the third quarter, with usually which is usually a slow quarter and that CPP market, then it means that the third quarter may result may be slightly weaker than the second quarter, but there are some uncertainties relating to that number. So I think that was what we had on the presentation. And then I think we'll move to questions.
I don't know how many questions have been posted, if any. There appears to be no questions so far. So it feels like you were crystal clear. Yes, crystal clear, the opposite. Who knows?
But it's not too late if anyone wants to pose the question. All right. Doesn't seem to be the case. But I can see a lot of people are listening on this presentation. If you didn't have a chance to ask the question, please feel free to call any one of us after this presentation or whenever, and we'll be happy to take your questions.
And in the meantime, I hope that everybody stays safe, and we thank you again for the interest in our company. Thank you.