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Weak tanker transportation in the second h[ds_preview]alf of 2016 let Concordia Maritime’s Q4 profit decrease to 34.3 mill. SEK compared to 49.4 mill. in the last quarter of 2015. Reasons were to high inventory levels for both crude oil and oil products and extensive ship deliveries.

Result after tax for the quarter was 34.3 (49.4) mill. SEK. Two sale and leaseback transactions were completed during the quarter, generating a profit of SEK 54.8 mill. SEK and increasing cash and cash equivalents by 318 mill. SEK. The decline compared with Q4 2015 is largely due to lower income as a result of a generally weaker market.

Result after tax for the full year 2016 was 69.5 (173.9) mill. SEK. There were a number of one-time events in 2016 that generated a positive result on a net basis, but despite this, the weak market in the second half of the year brought a decline in result after tax compared with 2015.

CEO Kim Ullman Concordia Maritime)
CEO Kim Ullman (Photo: Concordia Maritime)

Niche trades, ship sales and other non-recurring income brought a relatively strong result for the full year, Cocordia stated. The company reported a profit before tax of 56.9 (174.3) mill. SEK for the year. EBITDA was 319.9 (423.8) mill. SEK, corresponding to 37.4 (50.3) mill. $. Result before tax for the fourth quarter amounted to 33.5 (49.8) mill. SEK. EBITDA was 108.4 (117.3) mill. SEK, corresponding to 12.2 (13.9) mill. $.

»The year started well, with a generally strong first and second quarter, but the markets for tanker transportation began to weaken in the third quarter due to high inventory levels for both crude oil and oil products and extensive ship deliveries«, CEO Kim Ullman stated.

A seasonal market upturn towards the end of the fourth quarter was not enough to compensate for the weak summer and autumn, resulting in average freight rates being considerably lower than in the previous year.

According to Concordia the deployment of P-MAX vessels contributed to its income being higher than the market average in the MR segment in every quarter of 2016. »On an annual basis, we exceeded the market by about 35 %«, Ullman said.

In view of the expected market situation, Concordia decided to charter out several vessels on longer contracts in 2016 year, because income levels for these contracts have been higher than the rates on the spot market. The company entered into sale and leaseback agreements for »Stena Image« and »Stena Supreme« during the quarter. The vessels will be chartered back on a bareboat basis, with annual repurchase options starting in years four and three respectively.

The transactions are said to produce a significant positive cash effect and an improved equity ratio. »The transactions have opened the door to new forms of financing, while also representing an effective way of preparing ourselves for a subdued market situation. They also create the scope for us to take advantage of good business opportunities that will arise in such a market«, Ullman explained.

Looking ahead, Ullman believes that the high inventory levels will continue to have a dampening effect on the overall market development in 2017. At the same time, he expects the current slump in ship orders to contribute to a better balance in the market.