Concordia riding the storm

Feb 01 2019

Just as expected, 2018 was a weak year – both for the market and for Concordia Maritime, CEO Kim Ullman said speaking at the company’s results presentation.

For the full year 2018, the result before tax, excluding impairment, was a negative SEK181.9 mill, compared to a loss of SEK186.5 mill for 2017. 


EBITDA amounted to SEK56.8 mill (SEK51.3 mill for 2017) million, corresponding to $6.5 mill ($6 mill in 2017).


The result before tax for the fourth quarter of last year amounted to a loss of SEK19.4 mill, compared to a loss of SEK42 mill in 4Q17. EBITDA was SEK77.1 mill (SEK10.1 mill for 4Q17), corresponding to $8.9 mill, compared to $1.2 mill in 4Q17.


Delays due to previously signed charter contracts meant that, for our part, the market development in 4Q18 was not noticed until the end of the quarter, Ullman explained.


Looking at the tanker market as a whole, 2018 began in a minor key and ended in a major. The first three quarters of the year were greatly affected by OPEC’s reduced production and the stock withdrawals in consuming countries that taken place since summer 2016.


Overall, this resulted in reduced transport demand, which, in combination with extensive ship deliveries, led to low freight rates.


However, since October, there has been a sharp rise in virtually all segments, with freight rates at levels not seen in several years. The upturn was mainly due to OPEC, the US and Russia gradually increasing oil production since July.


Overall, we now have the market situation that we have long predicted. It should be pointed out that the market is still volatile, with relatively strong upward and downward fluctuations, but at a higher level than before, he said.


For Concordia Maritime, the focus during the last year was on having good cost control and continuing to adapt and position the fleet according to the current market conditions. We have continued to seek niche trades for our P¬MAX vessels, where their unique properties are particularly beneficial.


This strategy contributed to the product tanker fleet’s earnings for the year being significantly higher than the market average in the MR segment. In the Suezmax segment, we chose to participate in the chartering ¬in of four vessels at the begin¬ning of the year. We sold the shares in the charters to Stena Bulk at the end of last year, thereby realising the increase in value that arose from an increasingly stronger market.


This year has started considerably stronger than the previous year. At the end of January, the rates have gone down, albeit from high levels.


The decline in rates is due to the decision of OPEC and its allies to cut output by about 1.2 mill barrels of oil per day. This reduction was partly offset by increased US exports, but with refinery maintenance and newbuilding deliveries, it means that we expect lower levels in the first half of 2019 than during the December peak, but generally higher levels than in 2018.


In the second half of 2019, we expect the market to strengthen as a result of a renewed increase in production and moderate ship deliveries. Through our exposure to the spot market, we are well positioned to take advantage of the positive trend in the market, Ullman said.


Spot market earnings for the product tanker fleet in 4Q18 were $13,700 per day, which was higher than average earnings per day for the market at around $11,000 per day. Earnings for the Suezmax fleet in the quarter were $25,800 per day, compared with the average earnings for the market of $36,800 per day.


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