Frontline, the world’s largest independent oil tanker company headed by John Fredriksen, has come under severe pressure from the decline in global shipping rates and has reported a consequential 84% fall in third quarter operating profit amounting to a $6 million net loss.
With the expectation of clawing back and creating substantial free cash-flow for dividend payments as the tanker market begins to improve, Frontline remains relatively unperturbed by the result, despite earnings before interest and tax (EBIT) having dropped to $28m from $173m a year earlier.
“The market in the third quarter was difficult, among the worst ever, but we are out of the tunnel and there’s light,” claimed Jens Martin Jensen, Chief Executive. “Based on the results achieved so far in the quarter, the board expects that the company will return to net profitability in the fourth quarter.”
The company statement added: “The market balance for 2010 will be pushed in a positive direction by the phase out of approximately 12% of the fleet due to single hull restriction, and is likely to be further strengthened by the expected increases in OPEC production volumes and delays/cancellations of newbuilding orders.”
Adding that floating storage is “still an attractive option which is likely to continue to give fundamental support to the trading market,” the company remains confident of market revival, despite the tanker industry still expecting record newbuild deliveries over the next 12 months, with the orderbook currently representing around 35% of the world fleet of VLCCs.