Weak Tanker Rates Push Sovcomflot to Red
Russian shipping company PAO Sovcomflot (SCF Group) ended the first nine months of 2017 in loss as tanker spot market freight rates reached their lowest levels of late.
“This year has proven to be a very challenging period for the tanker industry and the situation now faced by many conventional tanker shipowners is especially severe,” Sergey Frank, President and CEO of PAO Sovcomflot, said.
An over-supply of tonnage and reduced demand, resulting from oil capacity cut-backs led by OPEC, have resulted in low freight rates over a sustained period which have weighed upon the earnings of all participants in the tanker shipping industry.
“With tanker freight rates in some segments of the spot market declining by more than 50 per cent year-on-year, Sovcomflot’s results have not been immune from the earnings weakness affecting our industry,” Frank added.
In the nine-month period ended September 30, the company’s net loss stood at USD 6.8 million, against a net profit of USD 218.1 million reported in the first nine months of 2016.
Gross revenue for the period was slightly up at USD 1.06 billion, compared to a revenue of USD 1.03 reported a year earlier, representing a rise of 2.1 percent.
For the quarter ended September 30, the shipping firm witnessed a net loss of USD 21.9 million, against a net profit of USD 52.1 million reported in the same three-month period in 2016. The company’s revenue for the period USD 350.4 million from USD 359.1 million seen a year earlier.
While the rates impacted adversely upon the earnings of the group’s conventional tanker fleet over 2017, a continued growth and resilience in SCF’s offshore and gas fleets provided the company with a much needed relief.
Despite the drop in tanker rates, Sovcomflot continued with its core strategy of developing its specialised offshore and gas transportation operations over 2017. The company’s offshore and harsh environment business segment was “the stand-out performer,” with nine-month TCE revenue and operating profits both up over 50 percent.
Looking ahead into 2018, Sovcomflot informed that it anticipates a soft freight rate environment to remain in the conventional tanker sectors, whilst the company’s industrial shipping model will remain a source of strength and balance.