Sovcomflot received almost $300 million in profit

Russia’s largest shipping company, Sovcomflot, received $285.9 million in net profit under IFRS in the first quarter, the company’s press service reported on May 26. Over the same period last year, it received a loss of $90.8 million. The company’s revenue for the first three months of 2023 more than doubled compared to the same period in 2022 and amounted to $626.9 million, EBITDA – 2.4 times to $452.5 million. Last year was also successful for the company: revenue grew by 31% to $1.44 billion, net profit – almost 11 times and amounted to $385.2 million.

“In the reporting period, the company maintained a positive trend in revenue and profitability, which was due both to the high performance of the conventional tanker fleet against the backdrop of continued positive market conditions, and the stable performance of the portfolio of long-term contracts in the industrial segment of the business,” the company said in a statement.

Sovcomflot did not provide additional comments on the reasons for the improvement in financial results.

Teekay, one of the world’s largest tanker companies, said in a presentation on the results of the first three months of 2023 that January-March spot freight rates “became a record for this time of year”, they remained stable as of the beginning of the second quarter. The world market leader in sea transportation of energy carriers predicts the excess of demand for tankers over replenishment of the fleet in the medium term, which will support high spot rates.

Another major player in the oil shipping market, Malaysian MISC, in its report for the first quarter of this year, indicates that freight rates “remained stable despite the seasonal decline in demand.” “The outlook for the transportation market remains positive as the recent shift in trade structure will support demand and fears of a potential disruption in Russian oil supplies have eased,” the company said in a statement. MISC does not exclude a slight slowdown in average rates for tanker transportation due to restrictions on oil production by countries that have joined the OPEC + agreement, which can “reduce energy supply in the short term.”

Director of the consulting company “Gekon” Mikhail Grigoriev notes that the reason for the increase in freight rates was a change in logistics. As Vedomosti wrote, after the embargo on Russian oil supplies to the EU and the maximum (ceiling) prices for oil and oil products, Russian oil companies began to redirect export flows to Asia, where China and India became the largest buyers.

The growth in the volume of deliveries from Russia to Asia led to an increase in the transport shoulder: the duration of a round trip from Murmansk to the port of Rotterdam was 13 days, and to India – 70, to China – 122 days. “Significant volumes of deliveries have switched to maritime transport. The leverage has increased, the vessels are less technologically idle,” he explains. Until the end of this year, he said, there are no fundamental reasons for lowering freight rates.

Mikhail Burmistrov, General Director of Infoline-analytics, noted that the sale of a significant part of the obsolete fleet, which made it possible to reduce the cost of its maintenance and depreciation, became an important factor in improving the efficiency of the shipping company’s business. “The demand for a fleet that can transport Russian raw materials has grown significantly. Therefore, the situation will be very favorable for Sovcomflot until the end of the year,” he believes.

At the same time, the fleet replenishment program, according to the expert, should be brought “in line with demand.” Burmistrov draws attention to the fact that the market has a significant shortage of both large-capacity ice-class tankers for the Northern Sea Route, and the fleet for the export of Russian oil and oil products in general.