Two sales, a debt-free vessel and all liabilities repaid
The third quarter of 2023 and the weeks that followed have been a clear reminder of the troubled times we live in. A tense geopolitical situation, with rapidly escalating conflicts and tragic acts of terrorism, can have a major impact on society, the economy and trade.
SHIPPING IS ONE OF THE INDUSTRIES, most quickly affected by drastic changes in the world around us. War can bring sanctions and changed trade patterns, while changing oil prices are fully correlated with ship fuel prices and pandemics lead to delays to crew changes and entry into port. The weather phenomenon also plays a role. For example, at the time of writing, unusually low water in the Panama Canal is causing weeks-long queues to pass through.
So how can you prepare for changes like these? Well obviously, you can’t fully prepare for them. But for a shipowner, it’s about trying to read the big, long-term trends and combining that with facts about the order book, price levels and earnings. You also need to have the capacity and ability to act on the “black swans” that can quickly trigger a major change in the freight market. The biggest swings in the freight market in recent years have been initiated by pandemics (Covid), wars and political decisions that in many cases came as a surprise to most people.
The longer-term consequences of the heightened geopolitical uncertainty include a marked increase in the focus on national and regional energy security. This, in turn, will have knock-on effects on shipping, partly in terms of changed cargo flows and partly in the form of increased demand for more niche vessels.
Sales and deliveries
In the third quarter, we continued to capitalise on the record-high market with successful sales and deliveries of the two product tankers Stena Premium (2011) and Stena Progress (2009). The sales were motivated by the historically high vessel values we have seen since Q2 2022 and the existing five-year charters to Stena Bulk that the vessels have been on since Q3 2021. Given the strong vessel market and the age of the vessels, we came to the conclusion that we would get a better return by selling the vessels than keeping them. The medium-term charter contract on which Stena Bulk employed the vessels to the end customer has also been significantly below current market levels and would only have generated very limited profit-sharing over and above the agreed base rate of USD 15,500 per day and vessel during the next few years.
We also took into account the fact that future changes in IMO regulations may require further investments in the P-MAX vessels, which would have been easier to justify economically if they had been less old.
In the case of both sales, the buyer took over responsibility for an existing sub-charter which could not be broken and runs until the end of 2024. This fact is reflected in the price.
Despite a lower price than if the vessels had been sold charter-free, we are convinced that it was the right decision for the Company to take advantage of current market levels and pay off all debt.
Result
After two successful sales, liquidity increased by a total of SEK 75.2 million in the quarter. Result after tax for the quarter amounted to SEK –20.5 (–22.8) million, which was mainly a consequence of the sale of Stena Premium and Stena Progress and existing charters. Result after tax for the first nine months of 2023 was SEK 19.5 (–17.6) million.
In line with the fleet reduction, we started to trim the Group’s administrative costs.
One vessel left in the fleet
After the deliveries of Stena Premium and Stena Progress – in Uruguay and Trinidad – Concordia Maritime now has one remaining vessel in the fleet: Stena Polaris, built in 2010. The vessel has been valued at USD 29.1 million by three independent ship brokers (as of 30 September). However, this is on a charter-free basis, which is not the case. Given the contract on which the vessel is currently sailing (bareboat charter, with the charterer responsible for crew and operation), the price of a sale today, which would require a novation of the existing charter to the buyer, would be lower. Broker estimates during October are in the range of USD 19.5 million to USD 24.5 million.
Future and opportunities
We continue to work on laying the foundations for the next phase in Concordia Maritime’s history. We can see that the Company is now completely debt-free (apart from normal operating liabilities). The balance sheet includes a vessel with no associated loans, built in 2010, with a carrying amount of SEK 215.4 million. The Company also has available liquid funds of SEK 243.4 million. In total, this corresponds to SEK 458.8 million. Equity per share amounted to SEK 9.43 (7.12) at the end of the quarter. The Company is also one of only three listed shipping companies in Sweden and the only shipping company on the Stockholm Stock Exchange. The combination of the Company’s assets, a 135-year history and a good reputation provides a good basis for future initiatives.
A number of projects and concrete transactions with various counterparties have been worked on during the year, particularly in the segments mentioned above: offshore wind, dry cargo carriers and intermediate product tankers. All of them show exciting development, with the green transition driving innovation and change. We and the Board have evaluated several business openings. The work continues and the Company has high hopes for the future, but without being under time pressure to conclude a deal quickly. As all our shareholders are aware, shipping is a cyclical sector in which timing is of key importance.
Gothenburg, November 2023,
Erik Lewenhaupt, CEO
