OREANDA-NEWS. On 15 April 2008 was announced successful operational results of JSC Latvijas Kugnieciba Group for 2007 witnessed JSC Latvijas Kugnieciba as a competitive company in international shipping environment - the JSC Latvijas Kugnieciba Group’s Net Profit for 2007 reaching USD 67,0 millions thus twice or by 33.3 millions USD exceeding the respective results for 2006.

The achievement of the results of JSC Latvijas Kugnieciba Group for 2007 lies not only on a professional commercial and operations management of the fleet including the effective application of the various types of charter agreements responding to the changing market conditions, but also to comparatively high freight rates in tankers market and sale of two Panamax type tankers at a good price.

Chairman of LASCO Supervisory Council Uldis Pumpurs underlines the outstanding financial results for 2007 achieved thanks to professional and focused work of company’s management and its employees as well as comparatively high freight rates in tanker market. U.Pumpurs points out: “The major value of any company is people, first of all, professional and loyal employees. Close team work in particular secures accomplishment of our key strategic objective – tankers fleet renewal. Despite that due to global economical processes 2008 is not foreseen as an easy year for shipping industry, the implementation of the fleet renewal program will allow the JSC Latvijas Kugnieciba develop and strengthen its traditional market share. The maintenance of newer fleet in not only more cost effective but also generates higher results than older tonnage fleet.”

During the reporting period JSC Latvijas Kugnieciba Group worked actively to achieve the strategic objective set – ensure the increase in Group’s value maintaining its position among the ten leading handy sized and middle range tanker owners in the world. Group focusing its efforts on the core business – cargo shipments worldwide – expanded its activities in handy sized and middle range tankers markets covering Far East, Americas, West Africa, Indian Ocean, Western Europe, as well as Mediterranean, Baltic and Black Sea regions.

During the reporting period Net Voyage Result or net income from vessels’ operations of JSC Latvijas Kugnieciba has grown considerably reaching USD 209.7 million exceeding the respective result of the previous reporting period by USD 54.3 million. The advancement is related to restructuring the fleet of JSC Latvijas kuмniecоba – the number of tanker newbuildings delivered has increased and, given the level of their freight rates, their income is considerably higher than that of the older vessels.

In 2007 Vessel Operating Profit of JSC Latvijas Kugnieciba Group has reached USD 69.8 million, that is by USD 24.7 million USD higher than in 2006.

In order to ensure successful performance of JSC Latvijas Kugnieciba Group in future the Supervisory Council of the company has assessed the company’s strategy for the period until 2015. Leading specialists of the Group, internationally recognised shipping brokers and consultants have participated in development of the strategy. As a part of strategy development there was carried out the SWOT analysis of JSC Latvijas Kugnieciba, defined the mission, the strategic objective of the company and tasks to achieve it. The most significant assets for long term development of the Group are knowledge and professional skills of JSC Latvijas kuмniecоba personnel, company’s long experience in shipping markets, its recognition and loyal business partners as well as sound positions in handy sized and middle range tankers segment with tonnage 27.500 – 52.000 DWT where JSC Latvijas Kugnieciba was ranked 6-8 in 2007.

In 2007 the main attention has been paid to the continuous implementation of the tankers fleet renewal program. Within the frames of the program ten tankers from 3. Maj Shipyard in Croatia and four tankers from Hyundai Mipo Dockyard Co., Ltd in Korea have been ordered.

In accordance with the time schedule four out of ten tankers ordered from 3. Maj Shipyard in Croatia and all the tankers ordered from Hyundai Mipo Dockyard Co., Ltd. in Korea were delivered during 2007. In 2008 JSC Latvijas Kugnieciba will take delivery of three more tankers from 3. Maj Shipyard in Croatia completing the first stage of the huge fleet renewal programme.

Following the tankers fleet development scenario included in JSC Latvijas Kugnieciba strategy during the reporting period agreements on building four medium range tankers were signed with Hyundai Mipo Dockyard Co.Ltd. in Korea. Optimum size of the planned new buildings is suitable for employment in product, chemical cargo and vegoil shipments.

JSC Latvijas Kugnieciba Group tankers fleet with tonnage 6.300 – 68.500 DWT has been traditionally employed all over the world. The modern double-hull tankers built at Hyundai Mipo Dockyard Co., Ltd. and 3. Maj have focused on oil product shipments – black oil, diesel oil and petrol. In addition the new tankers of JSC Latvijas Kugnieciba were also employed in vegoils and light chemicals shipments.

Net Voyage Result of JSC Latvijas Kugnieciba tanker fleet represented 86 per cent 2006 of the total Group’s Net Voyage Result. Implementation of the fleet renewal programme has contributed considerably to the financial performance of the tankers fleet resulting in increase of freight rates for modern tonnage.

In 2007 JSC Latvijas Kugniecibas reefers fleet consisted of five ice-class reefer vessels with a capacity in range from 289.000 to 387.000 cubic feet. The fleet was traditionally employed in shipments of bananas and other fruits as well as frozen cargoes from North Africa, South and North America to Russia. In 2007 Net Voyage Result of the reefer fleet made up five per cent of the JSC Latvijas Kugnieciba Group’s total Net Voyage Result.

Assessing the situation in reefers market the sale of five reefer vessels owned by JSC Latvijas Kugnieciba Group is planned, investing the financial means received in medium range tankers new buildings.

JSC Latvijas Kugnieciba Group owns two modern LPG carriers Vidzeme and Kurzeme with 20.500 cubic feet capacity each. Net Voyage Result of both vessels was eight per cent of the total Group’s Net Voyage Result. Unusually warm weather conditions and therefore lower energy consumption along with scheduled dry-dock repairs has resulted in lower income from LPG operations in 2007 compared to the previous year.

JSC Latvijas Kugnieciba dry cargo vessel Telo has generated solid and predictable cash flow throughout the year. Its Net Voyage Result has reached one per cent from the total Net Voyage Result of JSC Latvijas Kugnieciba Group.

In 2008 it is planned to sell the older tankers as their further employment is restricted by MARPOL Convention (The International Convention for the Prevention of Pollution from Ships). High impact on freight rates, distribution of cargoes and scrap values of the vessels will have the decisions made by other shipowners with respect to conversion or scrapping of their single hull vessels. Increasing number of vessels or supply will reduce the demand for older tonnage in all the shipping segments given that charterers prefer modern, more reliable and safer vessels first of all.

JSC Latvijas Kugnieciba recognises the importance of the environmental protection policy therefore its attention is paid to ensure safe vessels operations and environmental protection. The implementation of tanker fleet renewal program by JSC Latvijas Kugnieciba considerably decreases the risk of environmental pollution by the new vessels, improves effective utilisation of energy resources and testifies increasing corporate social responsibility of JSC Latvijas Kugnieciba towards ocean and coastal waters environmental protection.

As at 31 December 2007, the fleet in commercial management of JSC Latvijas Kugnieciba consisted of 45 vessels – 37 tankers, 2 LPG carriers, 5 reefer vessels and 1 dry cargo carrier.

In 2008 JSC Latvijas Kugnieciba Group will continue to work towards the accomplishment of the strategic goals set, maximizing the results and paying particular attention to the efficiency of the administrative expenses and mobilization if its tangible and intangible resources.