Concordia hit by huge fleet write-down

Feb 02 2018

Concordia Maritime has reported a loss, excluding impairment, of SEK186.5 mill before tax and an EBITDA of SEK51.3 mill ($6 mill) for 2017.

Including a write-down of vessel values by SEK473.7 mill in 3Q17, the loss was increased to SEK660.2 mill.


This compares with a positive SEK56.9 mill and SEK319.9 mill ($37.4 mill) reported for 2016, respectively.


For the fourth quarter of last year, the result before tax was a negative SEK42 mill, EBITDA was SEK10.1 mill ($1.2 mill), compared with a positive SEK33.5 mill and SEK108.4 mill ($12.2 mill) for 4Q16, respectively.


Spot market income for Concordia’s product tanker fleet during 4Q17 was $12,300 per day, slightly higher than the average income for this market - around $10,300 per day, - while the daily income from the Suezmax ‘Stena Supreme’ during the period was $18,300, compared with an average market income of $17,400 per day.


Commenting on the results, CEO Kim Ullman, said; “As expected, 2017 was a weak year for the market and for Concordia Maritime. The combination of reduced shipping volumes. Due to OPEC’s output cuts and extensive ship deliveries, contributed to an imbalance, which in turn resulted in low rates in all tanker market segments.”


He said that last year, Concordia Maritime focused on adapting and positioning the fleet in line with the weak market and preparing for the upturn, which the company believed was coming this year.


For example, in 4Q17, Concordia chartered in another Eco MR and in January of this year, added another two ECO MRs. In addition, the company extended the charters of the ECO MRs taken in.


Niche trades have continued to be identified for the P-MAX types where their unique properties are beneficial. This strategy contributed to their income for last year being around 25% higher than the market average in the MR sector, Ullman said. Six of the 10 P-MAXes are employed on contracts up to and including the summer of this year.


He also said that the company had continued its efforts to reduce vessel-related environmental impacts. Overall, CO2 emissions fell by more than 8,220 tonnes and SOx by 68 tonnes last year.


As for this year, Ullman thought that the return to normal OPEC and other producers production rates is expected to contribute to an increase in transport needs this year. At the same time, global oil consumption is forecast to increase by about 1.4 mill barrels per day. This provides good incentives for increased demand for tanker shipments from the summer of this year. 


Among the main reasons for the weak market in recent years has been the extremely high stock levels that were built up in 2015 and half of 2016. Storage then led to a lower demand for tanker shipments. Stocks were also high at the beginning of last year, but fell sharply after the spring, as a result of OPEC output cuts. Stocks are forecast to return to normal levels by the middle of 2018.


On the supply side, the orderbooks are relatively low and net growth in new MRs this year is expected to be just 2%, compared with about 4.5% in 2017. In addition, tougher environmental requirements, such as the Ballast Water Convention and the new directive on sulfur limits by 2020, will increase the incentive to pahse out and scrap older vessels, Ullman said.


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