Financial Services, Latvia, Markets and Companies, Transport

The group's management attributed the loss to revaluation loss recognized in respect to the value of the Latvijas Kugnieciba fleet in the amount of USD 18.26 mln and the negative impact of the USD/EURO exchange rate in the amount of USD 3.67 mln.

Total revenues increased reaching USD 74.33 mln thanks to higher earnings from existing time charter.

The group's management has reviewed the current methodology for determining the value of the fleet and, to ensure full transparency with investors and stakeholders, has decided to determine the value of the fleet on the balance sheet using the "lower" of fair (market) value or the "value in use" methodology applied over fifteen years useful life. The previous methodology allowed the higher of the two valuations to be used for financial reporting. Given the deterioration in asset values the fair (market) value has been applied for this reporting period and it is anticipated that this valuation will also be applied in the near term given the negative outlook for shipping.

As anticipated throughout the third quarter and thus far in the fourth quarter, the tanker industry has continued to experience a steady erosion in earnings, asset values and for other publicly quoted tanker companies, a significant decrease in shareholder value; this weaker sentiment is particularly evident by the third-quarter spot rates achieved by the Latvijas Kugnieciba Group’s fleet which were well below breakeven; this trend has continued into he fourth quarter, the shipping group's management said.

The world MR tanker fleet will grow by 6.2% in 2016 with 78 Medium range tankers delivered up to end September with a further 22 to be delivered in the fourth quarter. In 2017, a further 55 Medium range tankers will be delivered resulting in a further 2.6% year-on-year growth in the Medium range tanker fleet. Without stronger economic growth, the main driver of shipping rates, this increase in the size of the fleet will continue to have a negative impact on ship-owners earnings.

The Latvijas Kugnieciba Group's earnings for the third quarter reflect the fact that a large portion of the fleet was on time charter and have been protected from the severity of the downturn in earnings and these contracts will continue to afford some protection throughout the balance of the year. Looking forward to 2017, the Latvijas Kugnieciba Group will have a much smaller proportion of the fleet with time charter coverage at previously agreed healthy levels and so given current analysis will likely be exposed to lower earnings, the managemet said in the report to the stock exchange.

In the first nine months of 2015, the Latvijas Kugnieciba Group sustained a EUR 452,000 loss on a turnover of EUR 61.709 mln.

Latvijas Kugnieciba provides shipping services in all seas and oceans of the world, trains and recruits crews, as well as provides technical ship management to its own and ships owned by other companies. Latvijas Kugnieciba is quoted on the Main List of the Nasdaq Riga stock exchange. Its key shareholder is the Latvian holding company Ventspils Nafta.