The consolidated performance results of the public joint stock company Latvijas kuģniecība (Latvian Shipping Company-LASCO) Group achieved during the first half of 2009 confirm the Group’s competitiveness in the international shipping environment. Regardless of the low market activity and the dramatic decline of the freight rates in the shipping markets consequently affecting the performance of JSC Latvijas kuģniecība, too, the net profit of JSC Latvijas kuģniecība Group reached USD 9.3 million in the first half of 2009 due to efficient cost optimization, and turnover in the amount of USD 104.6 million.

“JSC Latvijas kuģniecība Group being a strong and financially healthy player in the world shipping markets carries out thorough analysis of the changes caused by the economic decline in the shipping market in order to identify opportunities that could be used for strengthening the Group and its market share during the economic recovery period. The long-term experience in the shipping markets, strong customer base, good reputation and efficient Group’s performance will serve as the key pre-requisites for JSC Latvijas kuģniecība growth in the years to come,” points out Māris Gailis, Chairman of JSC Latvijas kuģniecība Supervisory Council.

Despite of the global economical crisis influencing directly the demand for oil product shipments, during the report period JSC Latvijas kuģniecība Group managed to secure successful core business - vessel operating profit growth by 10 per cent compared to the first half of 2008. In the first six months this year the Group succeeded at reducing its liabilities by USD 50.8 million. On June 30, 2009, the return on the invested equity (ROE) was 9 per cent and annual profit on one JSC Latvijas kuģniecība share was USD 0.26.

All the JSC Latvijas kuģniecība shares are traded publicly and are included in NASDAQ OMX Riga Official List. With the prevailing negative macro-economic tendencies in the Baltic stock markets during the first half of 2009 JSC Latvijas kuģniecība share value has dropped from LVL 0.66 at the beginning of the year to LVL 0.46 at the end of the period. During the report period JSC Latvijas kuģniecība shares have been among the most actively traded ones -  there have been 735 transactions with 1.6 million shares in the amount of LVL 721.0 thousand. Still these liquidity indicators are considered low and do not reflect the real value of the shares.

The ongoing fleet renewal is still one of the JSC Latvijas kuģniecība Group’s priorities and since the end of 2005 the average age of the fleet has been reduced nearly by half  from 17.5 years to 7.9 years today, the total tonnage growing from 1.01 million tons to 1.26 million tons.

At the end of the first half of 2009 the fleet of JSC Latvijas kuģniecība consisted of 30 tankers, including three vessels chartered in from other shipowners, two LPG carriers and one dry cargo ship. Vessel operating profit in the first six months of 2009 was USD 37.4 million being 10 per cent or USD 3.3 million better than during the respective period a year ago. The result was attained due to effective assessment of costs’ efficiency and economy.

“In general JSC Latvijas kuģniecība Group’s fleet performance is considerably affected by the world economic situation that influences the demand for oil products to great extent. Towards the end the report period there were observed promising tendencies of the economic development in some countries and the news that the economies of Germany, France and Japan are getting out of the recession could be perceived as a positive signal for shipping business also. Most probably the recovery from the recession albeit slow and with some offset in time will be observed in shipping markets with some offset in time and the first indicators of this recovery could be expected within the next year,” considers Imants Sarmulis, Chairman of JSC Latvijas kuģniecība Management Board.  

Reflecting the overall situation in the shipping markets in the first half of 2009 the net voyage result of JSC Latvijas kuģniecība Group was slightly behind the indicator of the year before and reached USD 96.3 million. The achieved result is rated positively and the long term development strategy of JSC Latvijas kuģniecība focused on the growth of a medium range tanker fleet has ensured good core business results compared of other players in the market. Comparatively successful business of JSC Latvijas kuģniecība Group is also supported by the Group’s traditionally strong customer base developed over the years.

Both the LPG carriers of JSC Latvijas kuģniecība Group’s fleet Kurzeme and Vidzeme have been chartered out during the first half of 2009. Their profit indicators are positive.

The only dry cargo vessel of the JSC Latvijas kuģniecība Group’s fleet Telo was operating on time charter basis in accordance with the agreement signed before.

During the first half of 2009 Latvijas kuģniecība Group continued to dispose of its elderly tonnage and in the prevailing decline of the global economy the Group managed to sign with success a number of contracts for the vessels’ sale. 

Observing on regular bases the development of the economic processes and timely anticipating the radical fluctuations in the shipping markets JSC Latvijas kuģniecība took adequate actions in the given situation thoroughly revising and cutting its costs and making safe long-term investments promoting further development of the Group and reducing its business risks at the same time. During the report period the Group’s daughter company LASCO Investment Ltd. had accomplished an asset purchase transaction and worked out the Group’s real estate development strategy for the next five years. There are three main targets set in the strategy: maximum return on investment, maximum added value and selling the investment with the highest profit possible when the situation becomes stable in the real estate market. Keeping in mind that the real estate investment portfolio is comprised of a different type of properties there will be differentiated development model applied to each of them aimed at increasing the value of the particular property. In order to run its real estate investments effectively there was a new entity formed LASCO Housing Service established within the Group; some functions are out-sourced. 

The Group’s equity value at the end of the period was USD 555.2 million being USD 13.1 million higher than at the beginning of the year and it represented 50 per cent of the Group’s assets. The liabilities had reduced by USD 50.8 million or 8 per cent since the beginning of the year and their proportion was 50 per cent of the Groups’ assets. JSC Latvijas kuģniecība Group’s assets were USD 1 112.5 million at the end of the first half of 2009.

Over the following six months of this financial year the performance of JSC Latvijas kuģniecība Group will be influenced by the unstable situation in the world economy and financial markets, therefore JSC Latvijas kuģniecība will execute prudent and well-considered Group’s financial and operational performance continuing thorough assessment of all the Group’s costs and highly efficient employment of the internal and external resources.

In order to secure competitiveness of JSC Latvijas kuģniecība Group’s tanker fleet in the world shipping markets the fleet renewal will be continued and disposal of the elderly tonnage at maximum profit will be exercised in order to keep its medium range tanker tonnage and its growth in future.

Considering the diversified investments of JSC Latvijas kuģniecība in both good  quality cash-flow generating objects and objects with significant development capacity JSC Latvijas kuģniecība will engage actively in the management of the real estate objects purchased thereby increasing profitability and value of the investments that will serve the interests of all the shareholders.

 More detailed information:
Marita Ozolina-Tumanovska
Head of PR Department
Phone: +371 67020120, 29287169
E-mail : marita.ozolina@lscgroup.lv