Sovcomflot Profits slip

Reviewing the company’s financial and operating results for the first half year ended 30 June 2016, on 23 August 2016, the Executive Board of PAO Sovcomflot (“SCF Group”) noted that despite a tanker market downturn, the company was able to demonstrate strong performance and strengthen its financial position while continuing to enhance its industrial projects portfolio in accordance with its Development Strategy. 

H1 2016 Highlights:

USD millions                                  H1 2016  H1 2015   %
 
Gross revenue (Freight and hire)    680.2      749.5      -9.2
EBITDA*                                      385.8       393.5     -1.9
Net profit                                      165.9       216.3     -23.3


  * Successful issue of USD 750 million, 5.375 per cent coupon, seven-year term unsecured Eurobonds;
  * USD 260 million long-term loan agreement signed with VTB Bank in June;
  * Five new vessels launched: pioneering 172,600 m3 capacity ice breaking LNG carrier (Arc7 ice class) for Yamal LNG project (January), three new Arctic shuttle tankers for Novy Port project (February, April, June), and a new ice-breaking supply vessel to serve Sakhalin 2 project (June).

Commenting on the Group’s performance Sergey Frank, President and CEO of PAO Sovcomflot, said, “From January to July, there was a notable downswing in the global tanker market, with spot rates in certain market segments dropping by one third year-on-year, which has affected the financial performance of the entire industry.”

“Analysts foresaw this downturn, so, as part of its Development Strategy, Sovcomflot has focused its efforts on diversifying its business by beefing up its portfolio of long-term industrial projects with a fixed high rate of return. Participation in projects such as Sakhalin-1, Sakhalin-2, Varandey, Prirazlomnoye, Novy Port, and Yamal LNG will guarantee a reliable source of constant income for Sovcomflot even in times of market uncertainty and ensure the stable employment of a significant proportion of our fleet. As of 31 July 2016, future contracted revenue stood at USD 8.2 billion.”

Nikolay Kolesnikov, Executive Vice President, Chief Financial Officer, added, “Despite the tanker market downturn which has seen rates decline by 30% in some market segments, Sovcomflot’s net profit adjusted for non-operating revenues decreased by only 5.8 per cent. This matches the Group’s performance dynamics during 1H2016. Sovcomflot was able to enhance its debt repayment profile significantly following a highly successful unsecured USD 750 million Eurobond issue. The funds raised were used to refinance the Group’s debut Eurobonds issued in 2010.”

“The success of the Eurobond issue gave Moody’s sufficient grounds to upgrade the Group’s corporate rating from Ba2 to Ba1. Together with a new long-term loan agreement signed with VTB Bank, the amount of external debt financing raised by Sovcomflot during 1H2016 exceeded USD 1 billion, and SCF’s contracted shipbuilding programme is now fully financed.”

H1 2016 financial highlights

At the annual general meeting of PAO Sovcomflot, on 30 June 2016, it was agreed to pay a dividend of RUB 3.04 per share, amounting to a payment of RUB 5.972 billion (USD 92.2 million) and this was paid on 11 July. (2015: RUB 0.57 per share totalling RUB 1.126 billion (USD 20.5 million).

In June 2016, the Group raised USD 750 million of capital through the issue of new, seven-year term, unsecured Eurobonds. The bonds have a coupon of 5.375 per cent and the proceeds have been used to re-finance the Group’s debut unsecured bonds issued in 2010.

This transaction substantially improves the Group’s debt repayment profile. This was seen by the three main rating agencies as a credit positive event with, for example, Moody’s upgrading the Group’s corporate rating from Ba2 to Ba1.

The successful Eurobond issue was followed by a USD 260 million, 13-year loan agreement with VTB Bank. This agreement provides financing for the construction of the prototype Arctic LNG tanker for the Yamal LNG project.

Business segment highlights

Crude Oil Transportation

Time charter equivalent (TCE)** revenues in the first half (H1) ended 30 June 2016 were USD 266.2 million (H1 2015: USD 280.5 million).

Oil Products Transportation

Time charter equivalent (TCE) revenues in the first half (H1) ended 30 June 2016 were USD 105.7 million (H1 2015: USD 126.6 million).

Gas Transportation

Time charter equivalent (TCE) revenues in the first half (H1) ended 30 June 2016 were USD 72.6 million, a notable increase on the previous first half period (H1 2015: USD 63.6 million).

Offshore Development Services

Time charter equivalent (TCE) revenues in the first half (H1) ended 30 June 2016 were USD 115.1 million (H1 2015: USD 114.4 million).

Others

Time charter equivalent (TCE) revenues in the first half (H1) ended 30 June 2016 were USD 16.9 million (H1 2015: USD 32.5 million).