Wagenborg returns to profit despite loss of revenue
Royal Wagenborg has returned to profit in 2018 despite a drop in revenue related to its exit from the Caspian Sea. Improved freight rates and an increase in long term customer contracts lifted results in the shipping business, the board says.
The Dutch shipping company, which ranks 8th in the top-10 of global multipurpose carriers, recorded a total income of EUR 566.7 million, a drop of 8% in comparison to 2017 when the company earned EUR 618.7 million.
Despite the loss of revenue, Wagenborg improved its net result from a loss of EUR 8.8 million in 2017 to a profit of EUR 11.7 million last year. The improvement was driven by significantly lower financing costs, a reduction of the net debt and improved tax results, the board of directors state. The operating result (ebitda) remained stable at EUR 91.6 million.
The loss of revenue was caused by Wagenborg’s exit from the Caspian Sea, where the crash of the crude oil price has resulted in an order draught. The company had its eyes set on the development of phase 2 of the gigantic Kashagan field but with the oil price hovering around USD 60 per barrel, all investments have been postponed. In 2017, Wagenborg decided to shut down its activities in the region entirely. The board does not expect the oil and gas industry to recover anytime soon.
In the shipping business, however, the board does see clear signs of recovery with freight rates improving throughout 2018 and this trend has continued this year. The latest multipurpose shipping index of Toepfer Transport shows that average daily charter rates stand at USD 7,578 in November 2019, up from USD 7,508 in November last year.
The recovery in rates is supported by stronger demand and low newbuild activity. Wagenborg expects this trend to continue as new environmental legislation may lead to increased scrapping of old tonnage. “A large part of the European fleet is older than 25 or even 30 years. At the same time, many of these vessels are faced with necessary investments in ballast water management systems and/or scrubbers. This may result in accelerated vessel scrapping in the coming years”, the board of directors say. According to the company, Wagenborg’s own fleet is one the youngest in the global multipurpose segment with an average age of eleven years.
With its fleet of 190 ships, mostly smaller multipurpose vessels, Wagenborg serves manufacturers of paper, wood pulp, timber, steel, commodities and agricultural products. In 2019, the shipping company expanded its “already sizeable” portfolio of long term customer contracts. Wagenborg wants to build on this development going forward and reduce its exposure to the spot market, the board states.
Last year, the company acquired Finnish broker Helsinki Chartering OY to strengthen its foothold in the Baltic region, where many of its long term customers are based.