OREANDA-NEWS. March 26, 2010. The public stock company Latvijas kugnieciba (Latvian Shipping Company –LASACO) has issued a consolidated and unaudited report about 2009, showing that the strategy of modernising operations and the fleet has allowed the company to reduce the average age of its ships from 17.5 to 8.2 years at the end of last year.  This has allowed the concern to maintain stable positions among the largest worldwide companies in the medium-sized tanker segment. In terms of oil product transport, it is still among the leading companies in that sector in Northern Europe.  During the reporting period and despite the distinctly tense situation in shipping markets, the Latvian Shipping Company concern managed to ensure positive results from the shipping segment – USD 9.3 million.  Because of the modernisation of the fleet and the financing of various investments, however, the concern finished the reporting period with a loss of USD 20.2 million.

“During the course of 2009, the Latvian Shipping Company continued a consistent programme of change at the company, seeking to ensure that the company is a flexible participant in the global logistics market, complete with effective governance, a modern fleet, considered investments and targeted marketing.  A global economic crisis often is the best time for corporate changes.  As the economic situation recovers, there will be new market opportunities for those players who have been able to change,” says Latvian Shipping Company council chairman Maris Gailis.

Intensive changes have allowed the Latvian Shipping Company to reduce the average age of its ships from 17.5 years to 8.2 years over the five years leading up to the end of the reporting period.  Six old ships were scrapped last year.  Over the next several years, these will be replaced with four new tankers that are to be received in 2011 and 2012.

During the reporting period, the company reduced administrative costs by 46% -- to USD 18.7 million last year, as opposed to USD 34.6 million in 2008.  Operating costs for ships declined by USD 43.3 million (USD 82.8 million in the reporting period and USD 126.1 million a year before).  Financial costs in the shipping segment declined by USD 6.7 million.  The company’s overall liabilities have declined by USD 56 million or 9% since the beginning of 2009, and the liabilities at this time are equal to 51% of the concern’s assets.

“These are fundamentally important and successful steps toward ensuring in the long term that as the economic crisis comes to an end, the Latvian Shipping Company will be able to demonstrate a new level of energy in winning ever more powerful positions in the market for medium-sized tankers.  As economic growth recovers, we will have the newest fleet, the most effective governance system, and a very promising structure of assets,” says Maris Gailis.

The global recession inevitably led to a drop in shipping revenue – down by 22% or USD 55.9 million during the reporting period in comparison to 2008.  Low shipping rates and a slowdown in the global shipping business have had a fundamental influence on the operating revenue of ships – down by USD 26 million (41%) in the reporting period than in the previous year.  Because of this, the modernisation of the fleet, and the various investments that were made, the Latvian Shipping Company ended the reporting period with a loss of USD 20.2 million.  The annual report has not been audited yet, however, and work will continue to see whether the assessed value of the company’s assets should be higher or lower in comparison to the previous year’s indicators.

2009 was marked by a particular slowdown in the market for ships charters, and rates in this area collapsed to the lowest level in the last five years.  Logically, this affected the operating indicators of the Latvian Shipping Company fleet.  Far-sighted policies and effective reductions in ship maintenance and administrative costs, however, allowed the concern to ensure positive operations during the reporting period, with profits from the shipping segment reaching a level of USD 9.3 million.

The value of the Latvian Shipping Company’s equity at the end of the reporting period was 524.5 million, or 49% of all assets.  The total value of the company’s assets at the end of 2009 was USD 1.0767 billion.