Concordia
Concordia Maritime - Recovery in sight (ABG Sundal Collier)
2019-04-25 19:33
Q1 EBITDA of SEK 82m
IMO 2020 – hedged but with fewer vessels
Minor estimate changes and IFRS effects
Q1 EBITDA of SEK 82mQ1 EBITDA came in at SEK 82m vs. ABGSCe at SEK 74m, with the beat driven by stronger than expected product tanker spot rates of USD 17.8kpd (vs. ABGSCe at USD 16kpd) and Suezmax rates of USD 27.3kpd (vs. ABGSCe at USD 25kpd). Both rates were stronger than in previous years, with product tanker rates up 40% y-o-y and 30% q-o-q and Suezmax rates up 95% y-o-y and 6% q-o-q. Q2’19 bookings are relatively strong for the product tankers, with 32% booked at USD 18.5kpd (vs. USD 11.8kpd QTD), whilst the Suezmax bookings are also good, with 31% booked at USD 17.5kpd (vs. USD 14.7kpd QTD). The latter is below the Suezmaxes’ CBE of USD 25kpd, but we expect there to be a substantial upswing later this year, which should see rates rise above this level.
IMO 2020 – hedged but with fewer vessels
The company sold its speculative position in a 2020 MGO-HSFO spread due to oil price volatility. However, this is not its only hedge as it has bought positions for MGO. Therefore, it is not fully exposed to bunker cost fluctuations in 2020. Whilst we expect the regulation to boost product tanker trade, the company has not renewed any of the five remaining 50% charter MR tankers it has for 2020, with most of the contracts being terminated before our anticipated Q4 upswing. As such, the company will only have 10 product tankers in 2020, which, unless new ships are contracted, will leave the fleet with less earnings capacity.
Minor estimate changes and IFRS effects
With the beginning of 2019, IFRS 16 accounting rules have been applied, which have resulted in an increase of the balance sheet of SEK 810m (USD 91m), predominantly due to two leases. Regarding rate estimates, with Concordia having beaten the MR index in successive quarters, we slightly increase our 2019 product tanker rate estimate from USD 16.5kpd to USD 18kpd, which helps to offset some higher than expected costs i
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