SCF turns the corner

Mar 22 2019

PAO Sovcomflot (SCF Group) reported a profit of $11.9 mill against a loss of $106.2 mill in 4Q17.

EBITDA was $166.1 mill for the quarter, compared with $137.1 mill for the same period of 2017.

Adjusted profit for 4Q18 was $13.9 mill, compared with an adjusted loss of $30.8 mill for 4Q17.

For the full year, SCF made a loss of $45.6 mill, against a loss of $113 mill in the previous year.

EBITDA was $580.7 mill, compared with $545.4 mill in 2017, while the company declared an adjusted profit of $6.9 mill last year, against an adjusted loss of $5.3 mill recorded for 2017.

SCF said that 2018 proved to be a second consecutive challenging year for the tanker industry, as trading conditions remained extremely difficult and with spot rates well below their historical averages.

However, there was a visible rebound in freight rates in 4Q18, reflecting a balancing between tanker supply and demand, following a sustained period of tanker fleet removals and an increase in crude oil demand from Asian refiners in particular.

The annual result reflected a strong contribution from the industrial shipping business, comprising offshore services and LNG transportation. These activities now account for 57.2% of the Group’s TCE revenues (up from a 50.9% share in 2017).

Taking into account the challenging conditions in the conventional tanker markets, and in accordance with IFRS accounting standards, the Group undertook an impairment review of vessel values for last year.

This resulted in an impairment charge of $49.3 mill for 2018, compared with $29 mill for the previous year. Adjusting for this charge and other non-operating costs, amounting to $3.2 mill in total (2017 = $78.7 mill), the Group achieved an adjusted profit for the year as mentioned above.

During the year, Sovcomflot ordered a further two so called ‘Green Funnel’ Aframaxes, as well as three LNG-fuelled MRs from Zvezda shipyard (Primorsky Krai).

In addition, timecharters for four Ice Class shuttle tankers for the Sakhalin 2 and Varandey projects were extended or renewed, thereby adding new fixed-rate follow-on business with core clients and further strengthening SCF’s global leadership in the provision of shuttle tanker services to upstream projects in the Arctic and Sub-Arctic regions.

Sergey Frank, SCF President and CEO, commented: “During the reporting period, SCF Group achieved solid operating and financial results despite another difficult year for the conventional tanker market. 

A strong performance from the Group’s gas and offshore divisions offset continued weakness in the conventional tanker fleet over 2018 and helped drive the Group’s operating profit to $187.3 mill.

Looking forward, we remain firmly committed to growing our industrial businesses and this will be central to SCF Group strategy through to 2025. Whilst our conventional tanker fleet swung into profit in 4Q18, it was insufficient to offset the impact of the dire tanker markets experienced by the industry as a whole in the first half of the year. 

“The outlook for 2019 remains positive and our performance in 1Q19 has exceeded expectations. There is industry optimism that 2H19 and 2020 in particular will provide better times for the tanker markets with increased demand for oil and oil products, restrained newbuilding supply and the potential for favourable disruption resulting from the introduction of Marpol 2020 towards the end of the year. The company is well positioned to take advantage of continued improvement in the conventional tanker markets,” he claimed.

Evgeniy Ambrosov, Senior Executive Vice-President, Business development,   said: “Over 2018, we have implemented a series of projects in close co-operation with our esteemed partners. The start of commercial operations of our Green Aframax tanker series, with the flagship ‘Gagarin Prospect’, was the most conspicuous amongst them. This project was implemented with our partners Shell - together we are leading the industry towards the adoption of LNG fuel.

“A powerful fleet of icebreaking supply and standby vessels, servicing the offshore oil & gas projects on Sakhalin island, was reinforced with another vessel of the series ‘Evgeny Primakov’, which has started its work under the 20-year time-charter agreement with Sakhalin Energy.

“The co-operation with Novatek has seen its further success, when the icebreaking LNGC ‘Christophe de Margerie’ loaded the first LNG cargo from Yamal LNG’s third train. Our LNGCs and ‘SCF Melampus’ started the open water ‘ship-to-ship’ transfers of export cargo from Yamal LNG,” he said.

Igor Tonkovidov, Executive Vice-President and COO & CTO, said: “In 2018 the Group delivered on our promise to introduce cleaner-burning LNG as a primary fuel for our large-capacity tankers. We consider our pioneering ‘Green Funnel’ initiative represents a major milestone for the tanker industry.

“Sovcomflot places the highest importance on safety and our philosophy that ‘Safety Comes First’ underpins all our activities. In this context, we established our Marine Operations Centre in St Petersburg during 2018. This state-of-the-art facility represents a major breakthrough and is the first of its kind in Russia, providing heightened levels of safety and efficiency for our fleet operations, especially in regions with challenging operating conditions,” he concluded.

Nikolay Kolesnikov, Executive Vice-President, CFO, added: “The Group has successfully met all its financing and refinancing needs having raised almost $900 mill of debt capital in 2018 from domestic and international financial institutions.

“Our ability to access the debt capital markets reflects the robustness of SCF’s business model, underpinned by strong future contracted revenues, which stood at $8.4 bill at the 2018 year end. The funds raised in 2018 have addressed the Group’s mid-term financing requirements and provide an additional liquidity cushion,” he explained.

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