Energy, EU – Baltic States, Latvia, Transport

The accumulated result for the nine months of 2014 was positively affected by income from a partial settlement in respect of the Antonio Gramsi Corporation court case in the High Court in London in the amount of USD 20.05 million, sale of real estate property located on Jekaba Street in Riga, and revaluation of the investment in the medical clinic Via Una Ltd.

However, vessel impairments in the amount of USD 32.25 million, losses from the sale of the vessel “Riga” in the amount of USD 0.3 million USD as well as a re-evaluation of the investment in joint-stock Latvijas Naftas tranzits in the amount of USD 8.34 million has negatively impacted the Group's results. The Group suffered a loss of USD 24.64 million in the same period last year.

As of the September 30, LK's fleet consists of sixteen modern tankers with the average age of 7 years. The total income from the fleet for the nine months of 2014 was USD 69.36 million, however the fleet’s net voyage was USD 57.99 million. The vessel operating profit for the nine months of 2014, after depreciation and dry-dock amortization, was USD 20.66 million, a result comparable to that achieved in the previous period (USD 21.38 million).

At the end of the reporting period 88% (fourteen vessels) of the LK fleet were employed on period business. The average employment period for the portion of the fleet on time charter plus bareboat charter was approximately ten months, while excluding the bareboat charters (twelve vessels) – eight months.

At the end of the third quarter the LSC Group cash position had improved and the Group had cash and short term deposits with maturity up to twelve months in the amount of USD 40.29 million. As of 30th September, the total value of LSC Group assets was USD 470.31 million, however the total equity value of the Group was USD 201.88 million.

LSC management points out that the first nine months of 2014 has been disappointing for the products tanker market. However, as previously stated, having the vast majority of the LSC fleet on time charter has enabled the LSC Group to maintain a steady income stream.

The IEA (International Energy Agency) which advises industrialized nations on oil policies continues to trim its projection for growth in global demand for oil for the balance of 2014 and beyond citing weaker than expected demand. The recent sharp drop in the price of crude oil is also indicative of this decrease in global demand. In the medium to long term this could have a negative impact on both earnings and fleet values, the company points out.

Meantime, in spite of this negative outlook, Q4 has proved to be much more encouraging for the products tanker market than was expected with ship owners experiencing better than expected earnings. It is to be hoped that this trend continues for the balance of 2014 and beyond.

Latvian Shipping Company is among the biggest vessel owners in the segment of medium and handy size tankers and takes leading positions in terms of the transported amount of petroleum products among similar companies in Northern Europe. The company owns 16 modern vessels employing more than 700 professional and high-skilled seamen from Latvia. The average age of the LK fleet is 7 years. All of the vessels have received ISM (International Safety Management) certificates.