Thorco Projects’ asset-light strategy pays off amidst corona crisis
Thorco Projects’ asset-light strategy is paying off. Since the start of the new strategy in 2016, the company has been steadily increasing its sales and profit and so far, the coronavirus has not caused any major problems yet. “Our half-year result for 2020 will be the same as our full-year result of 2019”, CEO Thomas Mikkelsen tells PCJ.
The Danish project carrier recorded sales of 145 million dollars in 2019, which is an increase of 4.5% compared to the year before. The company’s operating profit increased by 18% to 1.7 million dollars but the net profit decreased from 3.4 to 2.2 million dollars as a result of a one-off gain in 2018.
“In 2018, we recorded an extraordinary income as a result of a settlement deal we made on a contract”, explains Mikkelsen. “If we deduct that amount, the net profit would be in line with 2019.”
This year, the company expects to maintain its outlook and profitability. According to Mikkelsen, the interim results will already be on par with 2019’s full-year result.
“Despite the Covid-19 pandemic, we are doing pretty well. We have positioned ourselves very good with the right exposure in the market. We feel pretty well adjusted to the situation”, Mikkelsen says.
Asked if the company is relying on long-term contracts to maintain its outlook, Mikkelsen says this is not the case. “In general, it has not been easy to fix longer contracts. Our advantage is our asset-light strategy of which the benefits are really starting to kick in. There’s still cargo around, and the fact that we do not have long-term commitments on the vessels make it possible to maintain our profitability”, the CEO explains.
That does not mean it’s all plain sailing for Thorco Projects which states that in general, the market conditions remained very difficult in 2019. Next to its asset-light strategy, the company has strongly focussed on parcelling capabilities and customized solutions to grow its profit.
The decision to transform Thorco into an asset-light shipping company was taken in 2016 following the purchase of expensive loss-making vessels which have been weighing heavily on the company for years. To get the carrier back on track, the loss-making vessels were placed in the companies Thorco Shipping and Sofia Shipping which both have lost significant amounts of money while attempting to sell the vessels.
In its new strategy, Thorco Projects charter vessels on short term lease and maintains a fleet of around 60 vessels at all times.