Sovcomflot reports strong first half 2014 results

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sovOAO Sovcomflot (SCF Group), Russia’s largest shipping company, today (Friday) announced its financial and operating results for the six months ended 30 June 2014.

Gross revenue (freight and hire) was up to $675.2 million compared to $628.4m for the same period last year and time charter equivalent revenues were up 16% to $490.7m. EBITDA increased by 30% to $251.7 million and net profit went up to $63.6 million.

There was further expansion of the LNG fleet as Velikiy Novgorod, a tri-fuel 170,200m³ Atlanticmax ice class LNG carrierwas delivered – the first vessel of the series specially designed for and employed under a long-term charter by Gazprom Group.

Other highlights included VLCC SCF Shanghai (321,280 tonnes dwt) entering service on a long-term time-charter agreement with PetroChina International; the Arctic shuttle tanker Mikhail Ulyanov transporting the first shipment of crude oil from Russia’s first offshore energy project on the Arctic shelf and Sovcomflot and France’s CGG establishing a new JV marine seismic company to focus on the growing 3D seismic market in the Arctic and sub-Arctic regions. The SCF Group company Novoship also successfully completed the modernisation at the Port of Sochi for 2014 Winter Olympic Games

Commenting on the Group’s results Sergey Frank, President and CEO of OAO Sovcomflot, said: “The tanker market remains challenging, with freight rates fluctuating near their historic lows during Q2 after a strong start to the year in Q1 from which Sovcomflot benefited from improved conditions within the crude oil segment in particular. With a stronger presence in the higher margin gas transportation and offshore markets, the Group is able to report robust results for the first half, with solid growth in earnings.

“Looking ahead, tanker market conditions remain volatile and so we are cautious about the market outlook for the full year. However, a significant and growing portion of Sovcomflot’s revenues comes from long-term charter contracts supporting industrial energy projects in the LNG transportation and offshore services sectors, which will underpin our earnings going forward and these sectors continue to be key areas of focus in our long-term business strategy.”

Evgeny Ambrosov, Senior Executive Vice President of OAO Sovcomflot, Chief Operating Officer, said:“Supported by a highly skilled team both at sea and ashore, with a balanced portfolio of modern conventional tanker fleet and technically sophisticated vessels, servicing a growing number of industrial projects, we are well placed to continue serving the evolving energy transportation needs of our clients.

“This is especially true in heavy ice and harsh environment conditions with a third of our fleet comprising of ice class vessels. During the first half of 2014 we maintained a balanced mix of fixed income and spot market operations. Our chartering policy has proven its worth, enabling Sovcomflot to ride out the significant tanker market volatility of recent years and maintain a steady pace in growing the business.”

Nikolay Kolesnikov, Senior Executive Vice President of OAO Sovcomflot, Chief Financial Officer, said: “Our business model continues to provide welcome earnings visibility, at a time of market volatility. Significantly, the Group’s future contracted revenues reached $7.2 billion at the end of the first half of 2014. Throughout the first half, our gearing has remained stable, ending the period below 46% and with positive free cash flow. During the first half we continued to manage our assets proactively, with the addition of two new vessels and the disposal of eight older tankers from our fleet. As we report our half year results today, the Group has taken delivery of Pskov, its second 170,200m³ Atlanticmax ice class LNG carrier on a long-term charter to Gazprom”.

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