Positive outlook for Concordia

May 02 2014


Swedish tanker concern Concordia Maritime has reported an increased income and net profit for the first quarter of this year.

Total income amounted to SEK135.2 mill, compared with SEK127.9 mill in 1Q13, while the net profit was SEK12.2 mill, compared with SEK7.6 mill in 1Q13.

EBIDTA came in at SEK51.7, only marginally better than the SEK51.2 recorded in 1Q13. This equated to about $8 mill, the company said.

The available liquid funds amounted to SEK285.2, compared with SEK427.9 mill at the beginning of last year.

New CEO Kim Ullman said; “After my first three months as CEO of Concordia Maritime, it is nice to be able to report a profitable first quarter of 2014. We report a profit before tax of SEK10.2 (SEK5.7) mill for the period. Operating cash flow (EBITDA) amounted to SEK51.7 (SEK51.2) mill, corresponding to $8 ($8) mill. As predicted, the market strengthened further during the beginning of the quarter and the outlook also remains positive for the full year.

“The year started relatively strongly with high freight rates on several routes in the product tanker market. This means that our strategy of increased exposure to the spot market is now beginning to pay off. Our open market vessels generated average income of about $16,000 per day, compared with $13,000 per day for the full year 2013.

“The outlook still looks positive on an annual basis, even though we are currently in a seasonal decline that we expect to continue into the second quarter. The recovery of the global economy combined with the shift in global refining capacity continues to drive demand for product tanker transportation. This is expected to grow by 5–6% in 2014, while growth in supply of vessels should be about 5%.

“However, the spot market is very fragile in nature. This leads us and other analysts to believe that activity in the newbuilding market over the past 12 months indicates a future trend of lower peaks in the spot market, compared with the strong years 2007–2008. At the same time, under­lying demand will make the market’s troughs shallower than those we saw, for example, in 2010–2012.

“To deal with these trends, we have launched our new chartering strategy. In addition to increased exposure to the spot market, we are trying to concentrate employment on trades and cargo systems where our P-MAX tankers’ unique features can be utilised. As previously reported, we entered into two new co-operation agreements with Total and Shell Singapore in January. In addition to these agreements, we are engaged in ongoing dialogues with various players with the aim of finding more new business forms.

“In March, we made the decision to sell the two LR1s ‘Stena Poseidon’ and ‘Palva’, which we owned in a 50:50 joint venture with Neste. In September 2013, Neste announced its intention to exit certain shipping commitments and indicated that they wanted to break the vessels’ charter contracts, which were signed until 2017. Although the market for second-hand tonnage is rising, the price for the vessels and the charter contract settlement terms with Neste were so favourable that we decided to sell now. The positive result from the sales will be realised during the ­second quarter.

“The sale was something of a textbook example. The ships are ordered on the basis of the customer’s needs, they are placed on long-term contracts and give the company a decent return during the charter. A vessel’s value is written down over the years and when a good opportunity arises, you sell at a profit. 

“The sale is also in line with the strategy of streamlining the company’s niche. With the exception of the Suezmax ‘Stena Supreme’, the fleet now consists exclusively of efficient and flexible product tankers, most of which are exposed to the spot market. We also have a newbuilding programme consisting of two sophisticated, custom designed product and chemical tankers of 50,000 dwt each, representing an investment of just over SEK500 mill.

“These vessels will be optimally employed through our partner Stena Weco, a world leader in the transportation of vegetable oils. Finally, it is also encouraging that technical operation and management continued to be impeccable during the quarter. This is a central part of our journey to higher utilisation and better profitability,” he concluded.

 



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