Sovcomflot has releases its condensed consolidated interim financial statements for Q1 2021.The Group’s time-charter equivalent (TCE) revenue declined by 29.4% year-on-year to $275.1 mn. EBITDA was down 46.1% to $156 mn. While performance in the industrial segment demonstrated a steady growth, conventional segment performance remained under pressure from unfavourable market conditions in the spot tanker markets, the Group said. For the 3 months ending 31 March 2021, adjusted for the impairment, net income came at $14.2 mn. A $15.9 mn impairment charge on three tankers resulted in a $1.7 mn net loss for the reporting period.
SCF Group’s industrial business portfolio comprising gas transportation (LNG and LPG vessels) and harsh environment offshore services (shuttle tankers and ice-breaking supply vessels) accounted for 66% of SCF Group’s TCE revenue in Q1 2021 and continued to provide a long-term fixed income revenue stream.
Industrial business segments contributed $182.7 mn to the Q1 2021 TCE revenue delivering 5.8% year-on-year growth and a 1.6% increase compared to Q4 2020. Gas transportation business grew with the addition of one new LNG carrier in January 2021, employed under a long-term contract with energy major Shell. In Q1 2021 NEVT increased to $151.8 mn, up 5.5% year-on-year and 7% compared to Q4 2020. The contract backlog stood $24 bn as of 31 March 2021, including contracted revenues above $ 900 for FY 2021.
SCF Group’s conventional tanker business (crude and oil products transportation business segments) contributed 33% to Q1 2021 TCE revenue. Q1 2021performance of the conventional tanker business remained under pressure in a low spot rates market environment, which resulted in a revenue decline to $90.1 mn (55.4% down year-on-year and 5.5% down compared to Q4 2020) reflecting not only the continued negative impact of the Covid-19 pandemic on tanker freight market dynamics but also the strong base effect of Q1 2020 numbers. Q1 2021 NEVT in the conventional tanker business reached $39.4 mn with the NEVT margin of 44% comparable to the Q4 2020 level.
SCF Group continued to grow its long-term industrial business portfolio, with a focus on implementation of the most advanced green technologies. Over the course of Q1 2021, SCF added one vessel to its fleet –t he LNG carrier “SCF Timmerman” – and operated a fleet of 4 5industrial vessels as of 31 March 2021.
In January 2021, SCF and Total concluded a long-term time charter agreement for a newbuilding 174,000-cbm Atlanticmax LNG carrier with options for up to two further vessels. Delivery of the vessel is scheduled for Q3 2023.
As at 31 March 2021, the contract backlog reached $24 bn. The industrial segment contract backlog for 2021 stood at over $900 mn.
The COVID-19 pandemic continued to impact negatively upon seaborne demand for crude oil and oil products over Q1 2021 and the conventional tanker freight market experienced continued weakness as a result. Whilst seasonal factors brought temporary relief to the Aframax sector over March,in particular, it was insufficient to balance the loss of demand for oil and oil products resulting from governmental restrictions imposed to counter the global pandemic. The tanker newbuilding order book stays at a 30 year low and with the shipyards almost full until 2024 with orders for other types of vessels, the company stated.
SCF’s management remains optimistic that there is now a reduced likelihood that further tanker supply will be available to meet the recovery in tanker freight markets, once industrial production normalises and standard travel practices resume as the pandemic related restrictions ease.
Commenting on Q1 2021 results, Igor Tonkovidov, President and Chief Executive Officer of PAO Sovcomflot, said: “Despite historically low spot charter rates in the reporting period, Sovcomflot managed to generate strong operational profitability with EBITDA margin in excess of 55% thanks to the diversified nature of our business with more than half of our revenue coming from long-term fixed-rate contracts”.
Nikolay Kolesnikov, Executive Vice President and Chief Financial Officer of PAO Sovcomflot added: “Following our credit ratings upgrade to investment grade level by S&P Global and Fitch, in April 2021, we successfully accomplishment an issue of new USD 430 million unsecured 7-year Eurobonds to finance the buyback of bonds with a 2023 maturity, thus smoothing out the debt repayment profile. Solid demand from Russian and international investors allowed us to fix the coupon on the new bonds at a historically low level for SCF’s unsecured debt. This is the second capital markets transaction executed by Sovcomflot within the past seven months, following the IPO of Sovcomflot’s shares on the Moscow Exchange in October 2020.The Company is well capitalized and has ample liquidity to weather the headwinds in the conventional tanker markets and pursue new projects.”