OREANDA-NEWS. February 27, 2009. JSC Latvijas kugnieciba (Latvian Shipping Company – LASCO) Group’s unaudited consolidated financial report for 2008 proves that the correctly chosen strategy for operational performance and the sale of the elderly fleet tonnage has allowed to benefit from the market situation and attain positive fleet performance result in the amount of USD 63,4 million in 12 months of 2008 and an excellent profit from the sale of the vessels of USD 45,2 million.

Throughout the year 2008 LASCO Group has been proceeding with the implementation of its strategic goal set – increasing the Group’s value securing its place among the ten leading shipowners in the world in medium range tanker segment. In 12 months of 2008 LASCO Group has worked with net profit in the amount of USD 58,6 million. The profit earned in 2008 is USD 8,4 million or 13 per cent lower compared to 2007 revealing general unfavourable market tendencies during the report period and at the end of it in particular.

LASCO Group’s assets have increased by USD 293,2 million reaching USD 1150,2 million on December 31, 2008. This is the first time in LASCO history when the Group’s assets have exceeded one billion USD. The significant increase is mainly attributed to the delivery of new vessels along with the purchase of assets in alternative non-shipping related investment sectors - acquiring exclusive real estate objects, as well as shares in media and publishing companies. In accordance with the requirements of the International Financial Reporting Standards in LASCO balance sheet there is recognised asset – goodwill in the amount of USD 16,7 million and long term deferred tax liability of the same amount comprised of the 15 per cent difference between the fair value of the purchased assets and their book value.

“Having assessed LASCO development perspectives, situation in the international shipping market and considering the amount of accumulated financial resources our objective is to diversify company’s potential financial risks to maximum extent. In accordance with the forecasts of shipping experts the shipping industry may remain stagnant for the next few years,” underlines Imants Sarmulis, chairman of LASCO Management Board.

LASCO Group’s cost effectiveness indicator – return on equity (ROE) for the 12 months period 2008 (01.01.2008. – 31.12.2008) is 10,8 per cent, but the earnings per share are USD 0,29. At the end of the period shareholder’s equity has reached USD 542,0 million, i.e. USD 54,4 million more than at the beginning of the year.

Over the 12 month period of 2008 all the fleet sectors have worked with profit their vessel operating profit reaching USD 63,4 million.

However, caused by the external factors leading to the biggest downturn in all industry segments world wide during the final quarter of 2008 including decline of oil price, the above mentioned result is USD 6,4 million or 9 per cent lower compared to the respective period a year before.

LASCO Tanker fleet has brought the biggest contribution to the fleet performance result, or 81 per cent of the total, impact of the LPG fleet has augmented slightly and reached 16 per cent, the share of the Reefer fleet is 2 per cent, but the revenues from the dry cargo vessel represent a little more than 1 per cent of the total LASCO Group vessel performance result.

During the report period 90 per cent of all the tankers in LASCO tanker fleet have been chartered out, whereas those operating on the voyage charter basis have been working in the Baltic, Northern European, Black Sea, Mediterranean, trans Atlantic, as well as the Middle and the Far East markets in dark and light oil product shipments. Tanker voyage charter rates have slightly increased at the beginning of the 2008 reaching their highest level in the middle of the year, but already in the first half of July the rates started to fall and experienced particularly heavy drop during the final quarter of the report period. One could observe shortage of cargoes and overall passivity in the market that is unusual for the season. Consequently, the unfavourable tendencies intensified also in time charter markets.

Both the LPG carriers of the LASCO fleet continued to operate within the ScandiGas pool over the twelve months period of 2008. The revenues from both the LPG carriers have been USD 2,8 million higher than the respective indicator a year before.

In 2008 the sale of the old reefer fleet tonnage has been finalized. The revenues from the transaction are foreseen for investment into four medium range tanker newbuildings.

During the report period the dry cargo vessel of the LASCO fleet continued to work in accordance with the time charter agreement signed earlier showing moderate, but stable performance result at the level of the previous year.

LASCO has gained new energy by implementation of its fleet modernization programme – within its framework over a three year there have been 14 vessel newbuildings received ordered from 3.Ma” shipyard in Croatia and Hyundai Mipo Dockyard Co., Ltd in Korea. The accomplishment of the tanker fleet renewal programme has resulted in reduction of the average age of the LASCO fleet from 17,5 years of age at the end of 2005 to 9,7 years at the end of 2008. This is an important signal to all the business partners demonstrating focused development and increase of the service quality standards of LASCO Group. Implementation of the above mentioned programme has brought positive impact on the LASCO fleet total tonnage rising from 1,01 million DWT to 1,29 DWT.

In addition to the fleet renewal programme project mentioned above there are four medium range 52 000 DWT tankers being built at “Hyundai Mipo Dockyard Co., Ltd” in Korea in accordance with the tanker fleet development scenario foreseen in LASCO Operational Strategy for the period till year 2015.

The optimum parameters of the tanker newbuildings ordered provide for their comprehensive employment in oil product, chemical cargo and vegoil shipments.

At the prevailing difficult economical situation in the global markets LASCO has focused on optimization of the internal structure of the company and assessment of all the costs by keeping the resources that are needed objectively.

After the report period there have been changes made in the top of LASCO Supervisory Council. Maris Gailis, former Supervisory Council member, has been elected as the Chairman. The former prime Minister of Latvia has considerable international experience, broad vision and his long-term private experience in shipping business will certainly be a positive further contribution into efficient supervision of LASCO.

“The core element of LASCO development strategy has always been and remains fleet development and modernization. The Group’s performance results over the previous years show solid profit in tens of millions Lats proves that the strategy to invest in medium range tanker fleet has been correct. The change of the Chairman of the Supervisory Council will not affect the business strategy accepted and approved before focusing basically on the fleet development,” points out Maris Gailis, chairman of LASCO Supervisory Board.