Russian state-owned shipping company Sovcomflot (SCF) ended 2017 in loss due to extremely challenging conditions witnessed by tanker markets.
The company’s net loss for the year ended December 31, 2017, was at USD 113 million, against a net profit of USD 206.8 million seen in 2016. SCF’s revenue reached USD 1.43 billion, rising by 3.4 percent from USD 1.38 billion reported a year earlier.
“2017 proved to be one of the worst years for the conventional tanker market in the last quarter of a century,” according to SCF.
Conventional tanker freight rates fell by almost 50 percent year-on-year, reflecting an oversupply of speculative orders following the 2015 market spike, as well as the effect of sustained production cuts by OPEC and other oil producing nations and a backwardation in the oil trade.
Set against this background, the group’s time charter equivalent (TCE) revenue dropped by 7.4 percent to USD 1.05 billion in 2017, compared to USD 1.14 billion reported in the previous year, demonstrating the robust nature of its industrial-focused business model.
Over 2017, SCF continued to implement its strategy to expand the fixed income, industrial shipping segments of its business with Offshore Services and Gas Transportation increasing their revenues by 48.7 percent and 17.4 percent, respectively. The total share of group revenue from industrial shipping activities amounted to 51 percent of its revenue base in 2017, enabling SCF to achieve a positive operating profit for the year.
Profit before tax, when adjusted for the impairment reserve of the fleet and non-operating costs, amounted to USD 10.1 million in 2017, compared to USD 263 million, signifying that the group remained profitable at an operating level despite the severe market conditions affecting its conventional fleet.
“Despite the very strong headwinds seen in the conventional tanker markets over 2017, with freight rates down by almost 50 percent reflecting one of the worst years in a quarter of a century, we continued to implement our core strategy of industrialising our business model. Sovcomflot’s growing industrial portfolio (offshore services and gas transportation) enabled us to remain profitable operationally,” Sergey Frank, President and CEO of Sovcomflot, said.