Despite outperforming the market on time charter equivalent earnings and costs, 2018 was a financially challenging year for Maersk Product Tankers, facing the lowest spot market rates seen in a decade. A strong balance sheet and significant investments build a solid foundation for the future.
“In 2018, we continued the work to create sustainable, long-term profitable growth for Maersk Product Tankers under the ownership of A.P.Møller Holding A/S and Mitsui & Co Ltd. We invested in the future of the business, especially in areas that will strengthen us commercially and operationally, while focusing on safety and keeping vessels’ daily running costs at competitive levels,” says Christian M. Ingerslev, CEO at Maersk Product Tankers.
While revenue in 2018 increased to USD 647.0 million (USD 621.1 million), the company recorded a loss before tax of USD 35.0 million and a negative free cash flow of USD 27.7 million. The results were affected by the low spot market rates, but the company outperformed the market quarter on quarter, realising a decline in time charter equivalent of 2.7% from 2017 compared to a decline in the market of 14.5%.
“Of course, we are not satisfied with the results. Having said that, we are among the industry leaders on performance and costs, despite the tough market conditions. We achieved this through our partnership with Maersk Tankers, taking advantage of its strong trading capabilities, data insights and new digital solutions, in which the company has invested substantially over recent years. We are confident we are on the right track for the future,” says Ingerslev.
Maintaining a competitive fleet
Maersk Product Tankers invested significantly in optimising the fleet during the year, ensuring a competitive fleet that is sufficiently flexible to meet customers’ trading needs. In 2018, the company took delivery of four MR newbuildings, bringing the total fleet to 81 vessels.
In a market where prices were at a low point in their cycle, capital commitments reached USD 384.4 million. In 2018 alone, the company invested USD 146.7 million. Taking advantage of a market with attractive asset prices, the Board of Directors approved the order of six LR2 newbuildings. Maersk Product Tankers continues to have an option to order four more LR2 vessels; the decision on which will be made in 2019.
“We are prepared to take advantage of market opportunities that arise, retaining a market-leading position and remaining a vessel owner of choice among customers. This is possible due to a strong balance sheet which enables us to secure a competitive, high-quality fleet that is able to meet customer demand for global transportation of cargoes in a safe, efficient and reliable manner,” says Ingerslev.
Positioned for the future
Maersk Product Tankers remains positive about the mid- and long-term prospects for the tanker industry, and is well positioned to exploit the opportunities that will emerge.
On the demand side, trade is expected to increase sharply, driven by the advent of the new IMO 2020 sulphur regulations. With slowing vessel supply growth and vessel demand expected to rise, product tanker freight rates are projected to increase, starting at the end of 2019. Maersk Product Tankers’ result for 2019 is expected to improve due to higher freight rates and lower vessel operating costs.