Financial Services, Latvia, Markets and Companies, Port, Transport

In terms of US dollars, total revenue increased to USD 100.029 mln, up 7.7% y-o-y, and loss increased 3.5 times to USD 25.001 mln.

Turnover of Latvijas Kugnieciba company last year reached EUR 2.822 mln, down 5.4 % from 2015, and the company’s profit reached EUR 696,247, down 31.6 % from 2015.

The concern reported that the group’s loss was mainly attributable to the steady erosion in the value of the LASCO Group’s fleet throughout 2016 in the amount of USD 24.1 mln. The balance of the net loss in USD report was influenced by changes in USD/EUR exchange rate.

"Notwithstanding the negative financial result of the Group there was an increase in its operating profit before interest, tax, depreciation and amortisation (EBITDA) in the amount of USD 49.8 mln due to slightly higher average TCE (time charter equivalent earnings) achieved in the reporting year as well as an increase in revenue from technical management services to third parties and rent revenue from the groups real estate portfolio," the concern’s management said in its report.

The concern’s total revenue increased due to slightly higher earnings from existing time charters negotiated during the stronger shipping cycle in mid-2015 and as a consequence of more vessels trading on the spot market where revenue includes the purchase of bunkers, port expenses and commissions i.e. costs incurred by owners which nevertheless resulted in an overall increase in operational revenues of USD 3.1 mln. The balance of the increase in revenue related to the increase in technical management activities and rent from the Groups real estate portfolio. During 2016 the Group entered into various transactions with related parties (entities under joint control of the shareholder) which enabled the Group to generate USD 33.5 mln equal to 33% of its total revenues.

At the same time, administrative costs have continued to decrease and were USD 5.7 mln for the reporting period down from USD 7.2 mln in 2015 predominantly due to lower legal costs. Administrative costs are also gradually reducing due to the liquidation and restructuring of subsidiaries in Latvia and foreign jurisdictions. During 2O16, 25 companies in foreign jurisdictions were dissolved, including those which were involved in settlement agreements concluded in July 2015. In Latvia, the reorganisation of NAFTA Invest, Skonto Nafta and real estate companies LASCO Nekustamie Ipasumi, Darijumu Centrs Daugava and Rigas Licis was carried out by incorporating them into the parent company LASCO lnvestment. Subsidiary LSC IT was established in November 2016 to provide a more cost efficient IT service within the Group.

The LASCO Group continues the disposal of non-core assets to help meet its financial obligations and maintain its focus on its core shipping business. The sale of real estate property Lejastiezumi was carried out in 2016, Several speculative offers have been received for the other properties within the property portfolio. The real estate market remains depressed with little liquidity which suggests that the disposal of the remaining real estate assets could take time. However the company's management is actively working with potential buyers from several countries and would hope to conclude further disposals throughout 2017.

As at the December 31, 2016, the total value of the Group’s assets was USD 355.9 mln, down 14.8 % from a year ago, as already highlighted the decrease was predominantly due to depreciation and the revaluation of the fleet. The continued deterioration in earnings experienced by ship-owners in the tanker segment throughout 2016 has had a negative impact on current re-sale values which the management board could not ignore. As a consequence, LASCO Group’s management was obliged to review the current methodology for determining the value of the fleet. The Group’s fleet fair (market) value as at December 31, 2016, was USD 266.5 mln.

„Looking forward to 2017 the key objective will be to focus on trying to achieve sufficient earnings to service the Group's opex/capex costs without any further deterioration in the cash position of the Group. On a more cautious note the Group was unable to raise sufficient support from its shareholders to improve the equity of the Company, that may have enabled the Group to modernise the existing fleet which now has an average age of ten years. At this present time there are insufficient funds within the Group to expand the fleet and we are acutely aware that shipping is an asset with a finite life span," the company’s management said.

In 2015, LASCO group generated EUR 83.492 mln in turnover and sustained loss worth EUR 5.8 mln.

LASCO 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.

LASCO is quoted on the Main List of the Nasdaq Riga stock exchange.