Latvian Shipping Company Publishes 2011Audited Financial Statements
OREANDA-NEWS. April 28, 2012. JSC Latvian Shipping Company (hereafter – LSC) (NASDAQ OMX RIGA: LSC1R) and its subsidiaries (hereafter – LSC Group or Group) have published audited financial statements for 2011. The net loss of LSC Group in 2011 was LVL 24 million (USD 48.24 million), which is three times less than in 2010.
In both 2011 and 2010 a considerable amount of the net losses relates to asset impairments, provisions for which are required to be made according to the International Financial Reporting Standards. The impairment provisions made in 2011 are as follows: (1) assets held for sale (3 older handy size vessels), in the amount of USD 12.56 million, (2) total fleet value adjustment, in the amount of USD 13.1 million, (3) value adjustment of investment in real estate properties in the amount of USD 1.2 million.
This result reflects the continuing difficult financial situation that ship-owners are experiencing with 2011 recording historically low market rates. The reasons for this are varied and complex but the main factors are less demand for oil products caused by the global economic downturn especially within the more developed western economies coupled with an increase in the number of new tankers. Prior to 2008 strong global economic growth stimulated demand for shipping and this encouraged the construction of new tankers. The consequence of this increase in vessel supply and current decrease in demand is lower earnings for ship-owners.
During 2011 the Group took delivery of two new build tankers, the “Latgale” and the “Zemgale” ordered in 2007 from “Hyundai Mipo Dockyard Co., Ltd” shipyard in Korea. In 2011 LSC sold two unbuilt liquefied petroleum gas carriers in order to finance the two new build product tankers as well as the 17 year old vessel “Indra” for scrap. Further, LSC has reclassified three of its oldest vessels as assets for sale in order to ensure sustainable financing for the remaining fleet.
In 2011 total net voyage result from shipping was USD 87.99 million (2010 – USD 88.31 million) and shows stabilization in income. The net voyage result is calculated by deducting voyage costs (bunkers, port and agent charges, etc.) from voyage income and shows the company’s income, irrespective of whether the fleet is employed in the spot or time charter market. Vessel operating profit was USD 15.11 million, a 19.1% improvement on the previous year (2010 – USD 12.69 million), however, the operating profit did not cover the fleet financing expenses (USD 20.73 million).
At December 31, 2011 the total value of the LSC Group assets was USD 651.92 million. The previous year the figure was USD 680.47 million. The decrease is mainly attributed to the impairment provisions as explained above. The total value of the LSC Group fleet has decreased from USD 570.50 million to USD 510 million and in addition to the impairment provisions also reflects depreciation. The total equity value of the Group at December 31, 2011 was USD 267.84 million (2010 – USD 313.92 million).
During 2011 significant litigation has continued in the UK Courts with regard to substantial losses suffered in previous years by LSC Group. A series of transactions concluded by the previous management were also challenged through the courts in Latvia regarding the dissipation of funds and other assets during 2010 and before.
Prospects for 2012
Given the very difficult financial environment the global shipping market remains very challenging. Ship-owners in all market segments are experiencing severe liquidity problems. LSC has also been exposed to these difficult conditions but has been cushioned from the worst effects with a majority of the fleet being employed on time charter thus ensuring a more predictable income stream.
However there are some signs for optimism for the product tanker market. The level of recent closures of uneconomic refineries in Western Europe and the USA is likely to increase demand for oil products which will need to be supplied by the more modern refineries that have been built, and will continue to be built, in the middle and far-east. Additionally, economic growth in emerging economies, for example South America and Africa, is also expected to increase demand for product tankers.
Lastly it is expected that due to the current economic environment, and with less banking finance available, that fewer product tankers will be built. This should help to improve the current in-balance between the number of product tankers and product movements.
Комментарии