Concordia Maritime - Oil should always travel first class

Assets cashed in to buy new ships, writes Hugh O’Mahony- Wednesday February 23 2005 CONCORDIA’s 2004 asset cash-in has been reflected in a stirring set of results, with the company saying that it intends to protect its financial position from the vagaries of the market. The company, which has now sold all of its operational ships, said 2005 would go down in its history as “the newbuilding year”. Projected revenues before tax of SKr100m ($14.5m) in 2005 would mainly come from share dividends and interest from investments. With SKr601.8m of its revenue in 2004 generated from the sale of ships, Concordia posted a profit of SKr646m, against a SKr15.1m loss in 2003. It said its long-term growth aims would be based “on a policy of not jeopardising the company’s stability by taking large risks, e.g. extensive exposure to the open freight markets.” The 2004 result was based on turnover of just SKr354m, little over half the SKr649m generated in 2003, as the company retired its older tankers in line with regulatory demands, awaiting the kicking-in of its 2003 newbuilding programme. Concordia Maritime president Hans Norén said the company was satisfied that 2005 would be a “gap year”. “We have gradually been moving out of our old fleet and now we are in the re-newal mood. Timing is everything in shipping and the timing of our ordering has created a gap year for Concordia, but we would rather take a gap and come out of it a solid company in good financial shape than order at the wrong time.” Arlington Tankers, formed with Stena last Autumn and listed on the New York Stock Exchange in November, acquired Concordia’s two V-Max VLCCs Stena Visionand Stena Victoryand four tankers from Stena. The sale recouped SKr600m for Concordia, 90% as cash and the rest as a 10% stake in Arlington. Concordia chartered the V-Max tankers for a fixed rate over five years, with an option for three one-year extensions. The deal left Concordia free of debt and with liquid funds of $190m at the end of the year, at a time when it has $255m outstanding on eight product tankers on order, mostly for delivery 2006-2007, including two in which it has a 50% share. “In the space of a few years, Concordia will thus have a modern tanker fleet with a very low debt-equity ratio,” the company said. It said the V-Max tanker sale had enabled it to reduce its newbuild credit facility from $250m to $150m. Each P-Max tanker delivery will trigger the release of $25m. As protection against a further weakening of the US dollar, Concordia has conver-ted $80m of this into euros. Concordia also sold the last pair of its ageing ‘Concordia Class’ VLCCs, Stena Constellation and Stena Congress, last year. Both are being converted for the offshore industry, with the SKr45m snaffled for Constellation shown in the 2004 result, and the SKr45m received for Congress to find its way into 2005 accounts. Meanwhile, delivery of the first of six P-Max product tankers ordered in 2003 from Croatia’s Brodosplit yard is due at the end of 2005. Concordia said it had signed five-year charter contracts with Total for the first two of these ships and 10-year agreements with Russian logistics company Progretra for a further two. Mr Norén said Concordia’s next ‘Max’ exploits looked likely to revolve around a Baltic Max (B-Max) vessel for Baltic duties, about which he declined to give any further details. He would not be drawn on possible partners. Last year, Concordia also formed a 50-50 joint venture with Finnish energy group Fortum to build and own two 75,000 dwt ice class 1A Panamax product tankers last year, also from Brodosplit, for a 10-year time charter to Fortum for the Baltic Sea to North American market.