Danish shipping company TORM has reached an agreement to sell and leaseback two of its vessels, the LR2 tanker TORM Helene and the MR tanker TORM Mary.

In addition, the company decided to sell its 1999-built MR tanker TORM Anna, TORM said in its latest financial report.

As a result of these transactions, the company's liquidity is expected to rise by US$6.1m following repayment of debt, and after the repayment of the mortgage debt of the vessel along with transaction-related expenses and fees, the shipping firm expects to receive net cash proceeds of US$0.9m.

TORM said that 2016 started on a robust note, however, the product tanker segment experienced softening freight rates over the course of the year.

Operating within the context of the weakening market, TORM generated strong cash flow from operations of USD 171 million during 2016, down from US$214m reported a year earlier, while its EBITDA droped to US$200m from US$210m seen in 2015.

As vessel values decreased by roughly 25% during the year, the company booked an impairment charge of US$185m. The impairment affected TORM's earnings and the company reported a net loss of US$142m in 2016, compared to a net profit of US$126m reached in 2015.

In 2016, TORM's product tanker fleet realized average TCE earnings of US$16,050 per day. 2016 started well with freight rates at similar levels as at the end of 2015.

However, the product tanker market began to soften in the second quarter of the year, as high global inventory levels combined with lower refinery utilization had a negative impact on the demand for long-haul arbitrage movements and product tanker freight rates in general.

High inventory levels remained the most important factor during the second half of 2016, limiting the demand for seaborne transportation.

Looking ahead, TORM said that the supply and demand balance within the product tanker market is expected to gradually improve, as increasing oil consumption and increased ton-mile effects of dislocation of refinery activity are set to have a positive impact on the demand for product tankers.

In 2016, the company's fleet on the water increased by 13% in terms of earning days. Following the delivery of three MR newbuildings in 2016, TORM's owned fleet numbers 77 product tankers on the water and four LR2 newbuildings to be delivered in 2017 and 2018.