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Concordia Maritime reports full year results

Thursday, 23 February 2012 | 00:00
Result before tax for the full year amounted to SEK 76.3 million, which is in line with our forecast. Cash flow from operations, EBITDA, amounted to USD 37.3 million. Against the backcloth of very weak markets for tanker shipping in general, this was a relatively good year for Concordia Maritime. The earnings level on our fixed contracts was just over USD 20,000 per day, which is considerably higher than current market levels.
The vessels have performed well and we have not encountered any accidents or other incidents. We took redelivery of two vessels from long-term contracts during the year and they are now employed in the open market. The two vessels have also been upgraded to enable them to transport vegetable oils (IMO III classification).
Fourth quarter
The scheduled drydock, conversion to IMO III and the required positioning journeys had a negative impact on fleet income during the fourth quarter.
The loss in operating income during the quarter was largely offset by an insurance payment arising from damage to one of our former V-MAX-type VLCC vessels.
Result after tax amounted to SEK 25.9 (18.9) million, while EBITDA was USD 9.1 (8.3) million.
Future prospects
The imbalance between supply and demand continues in all tanker shipping segments. In the product tanker segment, growth in the fleet has slowed considerably, and many parameters
relating to demand now appear positive. The expansion of refinery capacity in Asia and the increase in oil trade in South America and Africa are examples of factors that are creating new dynamics in transport flows. All in all, this leads us to expect a gradual improvement from the existing freight levels during 2012 and 2013.
Our business is undergoing a change. Most of the vessels in the fleet are currently signed to charters, with relatively predictable earnings and cash flows. As the contracts expire and the ships start to be employed on the open market instead, the market’s overall development will have a greater impact on our earnings and cash flow.
We currently operate two vessels on the open market and two more will be redelivered to us in the fourth quarter of 2012.
Although we expect the market to strengthen during the year, we do not believe that freight rates will reach our average time charter rates, which are approx. USD 20,000 per day.
About 75 percent of the fleet’s total number of income days are still covered by contracts. However, given the fact that we have more vessels on the open market than in 2011,
we expect a reduction in income and therefore a lower profit for 2012. We do not provide a forecast in absolute numbers.
During the period, 10 of the fleet’s 12 vessels were signed to charters. Current charter coverage means that freight rates are well in excess of those on the spot market.
Eight of the ten P-MAX vessels are currently employed on fixed contracts, while two, Stena Performance and Stena Provence, have been employed on the open market since July 2011.
The chartering is managed by Stena Weco. During the fourth quarter, Stena Provence was converted to allow transportation of vegetable oils. The vessel has also been positioned to adapt to Stena Weco’s cargo system. The positioning journey and conversion resulted in a loss of income corresponding to 55 days, which has negatively affected the fourth quarter results.
During the fourth quarter, the two panamax tankers Stena Poseidon and Palva, which are owned in a joint venture with Neste Shipping, underwent compulsory five-year checks,
including drydock. However, the vessels were drydocked in China, which resulted in a loss of income. This also had an adverse effect on the results for the fourth quarter.
Newbuilding program
The suezmax tanker which was ordered in early 2010 is expected to be taken into operation in July 2012.
The insurance case concerning the damage to Stena Victory in 2009 was completed during the fourth quarter. The compensation received exceeded the expected amount, which made a positive contribution of USD 1.9 million to results and EBITDA.
Fleet value
At the end of 2011, the book value of the fleet was approx. USD 75 million higher than the market value. Market value is defined as the average of three independent broker valuations
based on immediate delivery to the open market. This means that the valuation does not take into account any existing time charters. In accordance with IFRS, the contract portfolio
and expected future cash flows have been used to value the fleet. This is calculated basis earnings of 19,000 USD per day for the non-contracted days for the vessels’ remaining economic life. This method justifies the fleet’s carrying amount and consequently there was no impairment at the end of 2011.
Source: Concordia Maritime
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