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SOVCOMFLOT STILL IN THE RED

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By John Helmer, Moscow

Russia’s state-owned tanker company Sovcomflot has reported third-quarter and nine-month financial results [1] showing that it continues to lose fleet operating revenues and run at a loss. In the nine months to September 30, the company says its time-charter equivalent (TCE) revenues were $657.2 million, down 1.6% on the same period of last year. Fleet operating costs were up by 7% to $284 million, primarily because of a jump in charter hire payments. On the bottom line, Sovcomflot says it ran a 9-month loss of $8.6 million; a year ago it was in the black at $42.5 million.

The third-quarter trend was more positive. TCE came to $236.9 million, a gain over the second quarter of 8.4%. Vessel operating profit came to $26.8 million, a threefold increase over the second-quarter result. On the bottom line, there was a net profit in the latest period of $5.8 million, compared with a 2nd quarter loss of $16.4 million.

There was a slight decline in Sovcomflot’s crude oil business this year compared to last, from 42% to 40% of TCE. Offsetting that has been a 2 percentage point pickup in the fleet offshore business to 23.2%. Petroleum product tankers and gas transportation are stable at 25% and 5%, respectively.

Debt is now $27 million above its June 30 level at $1.994 billion, and according to chief financial officer, Nikolai Kolesnikov (image right), “the Group is on track to secure post-delivery debt financing for its remaining vessels under construction.”

The company cautions that in London where it has lost an 8-year litigation against former chief executives Dmitry Skarga and Tagir Izmailov, “it is possible that the Group will face further liabilities.” Former chartering partner Yury Nikitin is suing Sovcomflot for recovery of $184.1 million. Nikitin’s lawyer Mike Lax said today’s financial report reference, though ambiguously worded, “is the first time Sovcomflot has acknowledged its potential liability for freezing Mr Nikitin’s assets for so many years.” In its financial report for 2012 [2], Sovcomflot had dismissed the Nikitin claim as “without merit, the claimed amount is speculative, and the likelihood of this claim being successful is remote…Accordingly, no provision has been made.”

This week in London also, the company paid £4.45 million ($7.1 million), half the court-ordered costs for Skarga. One of chief executive Sergei Frank’s charges against his predecessor’s management of the company between 2000 and 2004 was that Skarga had been too conservative in locking in long-term charter rates for the tanker fleet. This week in a company release [3] Frank (image left) said: “Sovcomflot’s business model remains robust. Our conservative chartering policy, with 65 per cent of vessels engaged in long-term employment and industrial projects, continues to serve the company well.”