JSC Latvijas kuģniecība (Latvian Shipping Company – LASCO) Group’s unaudited consolidated financial report for 2008 proves that the correctly chosen strategy for operational performance and the sale of the elderly fleet tonnage has allowed to benefit from the market situation and attain positive fleet performance result in the amount of USD 63,4 million in 12 months of 2008 and an excellent profit from the sale of the vessels of USD 45,2 million.

Throughout the year 2008 LASCO Group has been proceeding with the implementation of its strategic goal set – increasing the Group’s value securing its place among the ten leading shipowners in the world in medium range tanker segment. In 12 months of 2008 LASCO Group has worked with net profit in the amount of USD 58,7 million. The profit earned in 2008 is USD 8,3 million or 12 per cent lower compared to 2007 revealing general unfavourable market tendencies during the report period and at the end of it in particular.

LASCO Group’s assets have increased by USD 293,1  million reaching USD 1150,2 million on December 31, 2008. This is the first time in LASCO history when the Group’s assets have exceeded one billion USD.  The significant increase is mainly attributed to the delivery of new vessels along with the purchase of assets in alternative non-shipping related investment sectors - acquiring exclusive real estate objects, as well as shares in media and publishing companies.

“Having assessed LASCO development perspectives, situation in the international shipping market and considering the amount of accumulated financial resources our objective is to diversify company’s potential financial risks to maximum extent. In accordance with the forecasts of shipping experts the shipping industry may remain stagnant for the next few years,” underlines Imants Sarmulis, chairman of LASCO Management Board.

Over the 12 month period of 2008 all the fleet sectors have worked with profit their vessel operating profit reaching USD 63,4 million.

However, caused by the external factors leading to the biggest downturn in all industry segments world wide during the final quarter of 2008 including decline of oil price, the above mentioned result is USD 6,4 million or 9 per cent lower compared to the respective period a year before.

LASCO Tanker fleet has brought the biggest contribution to the fleet performance result, or 81 per cent of the total, impact of the LPG fleet has augmented slightly and reached 16 per cent, the share of the Reefer fleet is 2 per cent, but the revenues from the dry cargo vessel represent a little more than 1 per cent of the total LASCO Group vessel performance result.

During the report period 90 per cent of all the tankers in LASCO tanker fleet have been chartered out, whereas those operating on the voyage charter basis have been working in the Baltic, Northern European, Black Sea, Mediterranean, trans Atlantic, as well as the Middle and the Far East markets in dark and light oil product shipments. Tanker voyage charter rates have slightly increased at the beginning of the 2008 reaching their highest level in the middle of the year, but already in the first half of July the rates started to fall and experienced particularly heavy drop during the final quarter of the report period. One could observe shortage of cargoes and overall passivity in the market that is unusual for the season. Consequently, the unfavourable tendencies intensified also in time charter markets.

Both the LPG carriers of the LASCO fleet continued to operate within the ScandiGas pool over the twelve months period of 2008. The revenues from both the LPG carriers have been USD 2,8 million higher than the respective indicator a year before.

In 2008 the sale of the old reefer fleet tonnage has been finalized. The revenues from the transaction are foreseen for investment into four medium range tanker newbuildings.

During the report period the dry cargo vessel of the LASCO fleet continued to work in accordance with the time charter agreement signed earlier showing moderate, but stable   performance result at the level of the previous year.

LASCO has gained new energy by implementation of its fleet modernization programme – within its framework over a three year there have been 14 vessel newbuildings received ordered from 3.Maj shipyard in Croatia and Hyundai Mipo Dockyard Co., Ltd in Korea. The accomplishment of the tanker fleet renewal programme has resulted in reduction of the average age of the LASCO fleet from 17,5 years of age at the end of 2005 to 9,7 years at the end of 2008. This is an important signal to all the business partners demonstrating focused development and increase of the service quality standards of LASCO Group. Implementation of the above mentioned programme has brought positive impact on the LASCO fleet total tonnage rising from 1,01 million DWT to 1,29 DWT. 

“Last year’s performance results have proved again that LASCO is able to attain significant business success even in unfavourable conditions. Moreover the company has continued steadily its fleet renewal programme, carried out structural changes and invested in non-shipping related assets in order to diversify eventual financial risks. Over a period of only three years we have managed to reduce nearly by half the age of the fleet

and today we can take pride in the average age of the vessels of around 9 years. Our new fleet ensures LASCO a place among the world’s leading shipping companies not only by the number of vessels but also by their modern technologies. I am confident that with the recovery of the global economic situation the renewed LASCO will announce itself with new power. All the prerequisites are there”, points out  Maris Gailis, chairman of LASCO Supervisory Board.
 
In addition to the fleet renewal programme project mentioned above there are four medium range 52 000 DWT tankers being built at “Hyundai Mipo Dockyard Co., Ltd” in Korea in accordance with the tanker fleet development scenario foreseen in LASCO Operational Strategy for the period till year 2015.

Throughout 2009 JSC Latvijas kuģniecība will continue to operate in difficult external situation affected both by unstable situation in the world financial markets as well as slow down of world’s economic development. In accordance with the forecasts of leading shipping experts the shipping industry may face considerable stagnation in the forthcoming years therefore the main focus is on commercial and financial risk management.

At the prevailing complicated economical situation in the global markets LASCO pays much attention and will continue to focus on securing the maximum performance of the internal structure of the company and assessment of all the costs by keeping the resources that are needed objectively.

Even though due to the unfavourable global processes the planned activities of LASCO may not bring increase of the Group’s revenues and profit in short term, the management of LASCO is facing future perspectives with sound optimism. The new fleet in combination with the experience gained over tens of years announces LASCO with a new power to the world market.