PAO Sovcomflot (SCF Group, the Company; MOEX: FLOT), a global leader in marine energy transportation services, releases its Condensed Consolidated Interim Financial Statements for the period ending 31 March 2021.
- For 3 months ending 31 March 2021, SCF Group’s time-charter equivalent (TCE) revenue declined by 29.4 percent year on year to USD 275.1 million. EBITDA was down 46.1 percent to USD 156.0 million. While performance in the industrial segment demonstrated steady growth, conventional segment performance remained under pressure from unfavorable market conditions in the spot tanker markets.
- For 3 months ending 31 March 2021, adjusted for the impairment, net income came at USD 14.2 million. A USD 15.9 million impairment charge on three tankers resulted in a USD 1.7 million 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 TCE revenue in Q1 2021 and continued to provide a long-term fixed-income revenue stream.
- Industrial business segments contributed USD 182.7 million to Q1 2021 TCE revenue, delivering 5.8 percent YoY growth and a 1.6 percent increase compared to Q4 2020. The 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 USD 151.8 million, up 5.5 percent YoY and 7.0 percent compared to Q4 2020.
- The contract backlog(i) stood at USD 24 billion as of 31 March 2021, including contracted revenues above USD 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 2021 performance of the conventional tanker business remained under pressure in a low spot rates market environment, which resulted in a revenue decline to USD 90.1 million (55.4 percent down YoY and 5.5 percent 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 conventional tanker business reached USD 39.4 million with the NEVT margin of 44 percent compared to the Q4 2020 level.
SCF Group continued to grow its long-term industrial business portfolio, with a focus on the implementation of the most advanced green technologies. Over the course of Q1 2021, SCF added one vessel to its fleet – the LNG carrier SCF Timmerman – and operated a fleet of 45 industrial vessels as of 31 March 2021.
As at 31 March 2021, the contract backlog reached USD 24 billion. The industrial segment contract backlog for 2021 stood at over USD 900 million.
SCF Group continues to focus on the development of its liquefied gas transportation services. In January 2021, SCF and Total concluded a long-term time charter agreement for a new building 174,000-cbm Atlanticmax LNG carrier with options for up to two further vessels. Delivery of the vessel is scheduled for Q3 2023.
In January-February 2021, SCF’s ice-breaking LNG carrier Christophe de Margerie completed a round voyage between Sabetta (Russia) and Jiangsu (China) across the Northern Sea Route (NSR). For the first time in history, a large-capacity cargo vessel crossed the eastern sector of the Arctic in February (transit navigation along this segment traditionally ends in November and resumes again only in July).
CONVENTIONAL TANKER BUSINESS
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. 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 normalizes and standard travel practices resume as the pandemic-related restrictions ease.
CAPITAL AND FINANCING
CREDIT RATING UPGRADES
On 12 April 2021 Sovcomflot’s credit ratings were upgraded to investment grade level by Fitch (BBB-/stable) and by S&P Global (BBB-/stable).
SCF SUCCESSFULLY COMPLETED A EUROBOND ISSUE
On 26 April 2021 PAO Sovcomflot completed a USD 430 million 7-year unsecured Reg S/144A Eurobond issue with a coupon of 3.85%.
SCF has utilized the proceeds to fund a concurrent capped tender offer for the Company’s outstanding Eurobonds maturing in 2023. The deal is debt neutral for SCF Group, whilst allowing it to smooth out and extend its debt repayment profile.
SCF Board of Directors recommended its Annual General Meeting of Shareholders (AGM) to pay dividends on ordinary registered shares of PAO Sovcomflot, based on the results of 2020, in the total amount of 15.8 billion rubles, which is 6.67 rubles per share.
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 an 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.”
“SCF’s strategy with its focus on industrial contracts, which we continue to implement using green technologies and advanced marine engineering solutions, was a clear success, as our contract backlog stands at more than USD 900 million for the year 2021 and more than USD 24 billion in total. It makes us confident in our ability to continue generating solid cash flows and deliver further growth in our high margin industrial business segments.”
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