LSC expects to finish 2012 with EBITDA of US$ 35.8 millionRiga, 2012-11-29 06:57 CET --
”The average age of our twenty ships is now 6 years, which makes us the owners of one of the largest and most modern international fleets”, on the annual Business Update was stressed by Simon Blaydes, Chairman of the Management Board of Latvian Shipping Company (LSC).
“Latvian Shipping is very much an international business and operates all over the world. Therefore we also have been affected by the global challenges of the worldwide shipping market. Though I have to stress that we have been fairly lucky in our sector of medium and handy sized tankers – other sectors in the shipping market such as crude oil tankers, container ships and the dry bulk sector are in much worse condition and many large ship-owners have gone bankrupt”, explained Blaydes. He attributed the relative well-being of LSC to the fact that the glut of deliveries in this shipping sector has ended and there are longer haul trades emerging reflecting refinery expansions in the Middle East and Asia and closures in Europe – trading routes are changing and becoming longer which is beneficial to LSC.
„We have reacted to these conditions by getting most of our ships chartered on long-term contracts – most ships are currently contracted for at least 12 months which helps to stabilise cash-flows. The charter rates in the last months have not significantly changed. We see only slight increase by 1.45% of average charter rates for medium-sized tankers since the 1st quarter of this year”, continues the CEO of the Latvian Shipping.
“The three main reasons for the current difficulties the shipping market is experiencing can be summed up as follows – there has been an unprecedented weakening of the economic climate since 2008 especially in our traditional OECD country markets. That combined with the massive over-ordering of ships in the preceding boom years and subsequent negative consequences of oversupply of ships. And finally now - the traditional ship lending banks have lost their appetite to invest in any shipping given the current status”, Blaydes explained the global shipping market.
Blaydes admitted that revenues of LSC have declined substantially between 2009 and 2010 and into 2011 reflecting in the main how LSC’s business has changed: “We decommissioned 7 older loss-making ships during 2009 and re-focussed most of our business on the time charter market to stabilise revenues due to the difficult trading conditions.”
“The recent increase in revenue in 9 months of 2012 versus 9 months of 2011 begins to show some improvement. Our EBITDA perhaps better indicates the improvement the business is making as we progress through 2012” was stressed by Blaydes. LSC’s EBITDA for the 9 months of 2012 is USD 28.2 million which is already almost twice as high as the entire EBITDA for the whole of 2011 (USD 14.2 million).
These results, together with some additional administrative cost savings, have positively influenced LSC’s net income which demonstrates a much smaller loss of USD 6.7 million in 9 months this year versus 9 months of 2011’s (USD 17.8 million). This relatively small loss is after a charge for depreciation of USD 20.9 million and interest charges of USD 13.95 million.
The 9 months results also show a significant impairment charge of USD 28.2 million which is due to the reduction in the value of LSC’s 20 ships because of the deteriorating shipping market. This has no cash impact on the business but shows an estimate of the change in value of the ships.
“Last year in our Business Update we said that LSC would become more transparent under the new management. One very visible proof point to that has been our practice to publish our average charter rates for the fleet every quarter that we started in the spring. This particular subject has been of quite serious and legal relevance to Latvian Shipping for the period 2003/4 through 2010 and we feel that publishing these rates demonstrates transparency and accountable business practices that have been introduced in this company”, continues Blaydes.
“From our side as a company we have done all possible to ensure successful future prospects for LSC however most of the key factors to our recovery are now somewhat out of our hands”, was admitted by Simon Blaydes. In the company’s Business Update he indicated five pre-conditions to prosperous future of Latvian Shipping: there has to be a return to economic growth and activity particularly in OECD countries. Second, tanker demand growth needs to exceed supply (new tanker delivery). Third, trade flows and the developing refining market needs to result in more long haul voyages increasing product ton miles which would increase demand for shipping services. Fourth, major customers need to continue to improve their standards and demand higher quality ships. LSC is well placed to meet these higher standards and outperform its competitors. And finally, success and ultimate recovery of the significant sums LSC is pursuing through various legal claims both here in Latvia and other jurisdictions.
About JSC “Latvijas kuģniecība” (Latvian Shipping Company)
In the medium-sized and handy tankers categories JSC „Latvijas kuģniecība” (NASDAQ OMX RIGA: LSC1R) is among the leading ship owners in the world, and in terms of transport volumes of petroleum products it is also in a leading position among similar companies in Northern Europe. It owns 20 modern ships, employing more than 700 professional and highly qualified seamen from Latvia. The total carrying capacity of the LK fleet is 957 974 DWT and the average age of the fleet is 6 years. All ships have received ISM (International Safety Management) certificates. Ilze Nagla
Public Relations Manager
JSC “Latvijas kuģniecība”
Tel.: 29267454, 67715914
E-mail: ilze.nagla@vnafta.lv
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