Russian owner's finance head Nikolai Kolesnikov tells TradeWinds why the company is not getting carried away after huge first-half profit
Russia's Sovcomflot (SCF Group) will continue on its "conservative" vessel chartering path despite dazzling profits in booming spot tanker markets.
Nikolai Kolesnikov, chief financial officer of the state tanker and LNG carrier owner, told TradeWinds it was business as usual for the company.
"Steady as we go, we are on track," he said. "We are by far exceeding budgetary targets. We are living through very special circumstances — no news is good news.
"This pandemic is something extraordinary."
Kolesnikov stressed the importance of stable, visible revenue.
"We are quite a conservative business," he said. "At each point in time, our exposure to the spot market does not account for more than 20% or 30% of the total revenue.
"We position ourselves as an industrial enterprise, a service provider to the global energy business."
Fixing at a premium
Instead of pouring ships into the spot market when fixing activity spiked, the shipowner took advantage of strong rates to add period cover.
"We've tried to use the spike in the market to put some of our spot trading tankers on fixed-term business — even better to do so at these premium rates," Kolesnikov said.
He added that the company is more interested in long-term sustainability, rather than "trying to second guess the market and catch the spikes".
But Kolesnikov still praised a "phenomenal" performance from its conventional tankers, helped by the "disruptors" that boosted demand for vessels.
This, he said, "had a very major impact on the bottom line".
Net earnings in the six months to 30 June were $226.4m, up from $91m in 2019.
SCF's 146 vessels brought in revenue of $951.3m, which was an increase from $794.1m in the year before.
Kolesnikov called the tanker spikes in the second quarter — they approached historic highs seen in 2004 and 2008 — "quite extraordinary and quite illogical".
But with demand being hit by ongoing economic depression, Kolesnikov said: "We are obviously realistic about the outlook for the rest of the year.
"We are observing a seasonal slowdown through the summer months. We just need to get through these summer doldrums.
"Our anticipation is that as the economies reopen and restart, there will be a natural increase in the consumption of energy, moving into the autumn and winter seasons.
"There will be a very natural need for the movement of hydrocarbons, and this has been our bread and butter."
Kolesnikov told TradeWinds: "We'll be able to counter some of the disruption of demand caused by the pandemic."
Vessels were stuck
Sovcomflot was not immune from global lockdowns, despite having many of its crews working in remote Arctic locations within Russia.
"We had a couple of vessels stuck during their special drydocks," Kolesnikov said.
"The yards had to discontinue work for the next few weeks. I think we have managed to deal with all these issues and the industry has more or less worked out crew changes."
But the company has still racked up Ebitda over the past 12 months of more than $1bn.
"Ebitda — that is as good as it gets," Kolesnikov said.
"But, more importantly, the bulk of Ebitda is very sustainable based on long-term fixed-rate employment at pretty good margins."
Kolesnikov said: "We'll carry on as before, but we'll welcome the upturn in the markets — this is the optionality that our business model offers.
"Hopefully the pandemic situation is getting under control and countries are getting back to normal."