Vedomosti: “Frank’s five-year plan”
Become one of the world's three largest tanker companies and double its earnings – that is what Sovkomflot plans to achieve in the next five years. And next year, the company intends to go public.
Sovkomflot has more than tripled its fleet (147 ships and a total deadweight of over 10 million tons) and has been ranked among the world's five largest tanker companies over the past five years, the company's Director General Sergei Frank reported to Prime Minister Vladimir Putin. The company's financial performance has also improved: according to its presentation to the premier, Sovkomflot's receipts totaled $393 million in 2004 and are estimated at $1.23 billion in 2009, which is 24.5% more against 2008. The earnings before interest, tax and depreciation (EBITDA) are expected to rise by 150% to $572 million, and its dividends are estimated to grow from 70 million to 1 billion roubles.
The company plans to go further: Sergei Frank said that it "was determined to become one of the world's three largest tanker companies" and to double its main showings. Receipts are expected to grow by 150% and the EIBTDA to reach $1.2 billion. The company plans to become the largest sea carrier for Russia's energy resources industry, with a market share of 30% to 35%. A company manager said that it currently holds 15% to 20%. The Japanese Nippon Yusen KK (NYK) reported in early 2009 that Fredriksen Group—with 16.9 million tons of tanker deadweight—was the world's leading tanker company, followed by Mitsui with 14 million tons, and NYK itself with 10.9 million tons. Sovkomflot was ranked sixth with a deadweight of 8.7 million.
Yelena Sakhnova, analyst at VTB-Capital, believes that yesterday's meeting between Vladimir Putin and Sergei Frank meant that the company was preparing for an IPO. Judging by its performance and plans, the shipping company, which has been scheduled for privatization but has not been crossed out from the strategic enterprises' list yet, was rather likely to issue less than 25% of its shares in 2010. The analyst adds that Sovkomflot is one of the few transportation companies that were almost unaffected by the financial downturn, since 65% of its fleet operates under mid- and long-term contracts. Yelena Sakhnova estimates the company at $5 billion, which approximately equals NYK's capitalization.
Vladimir Putin and Sergei Frank did not discuss the IPO, the prime minister's spokesman Dmitry Peskov said. However, government officials already know the IPO details. A source in the Regional Development Ministry said that 25% minus one share were to be sold. However, this information has not been confirmed and the company refuses to comment on it. The official added that the issue would include both shares from the Federal Agency for State Property Management and new ones. Yelena Sakhnova said the rate was usually 50/50. Sovkomflot needs funds to strengthen its fleet – the company has ordered 15 ships, including shuttle tankers, supply ships, and others, for sea shelf projects. Ship building is highly capital intensive – the company's presentation says it needed an additional equity of $500 million in order to carry out its expansion. Its investment program for the next five years totals $5.5 billion with 40% to be spent on off-shore oil and gas production.
Yelena Sakhnova believes that Sovkomflot should schedule its IPO for the second half of 2010 when the market is more likely to stabilise. The main difficulty is that, on one hand, there are too many ships in the market and, on the other hand, the cargo traffic is in decline, which has a negative effect on freight tariffs. The expert believes that freight will remain 30% to 35% cheaper than it was in 2008 up until at least 2011. "2010 and 2011 will be tough for tanker carriers," Sergei Frank admitted in his conversation with Vladimir Putin.
Yelena Sakhnova is nevertheless convinced that Sovkomflot's securities will be in demand. Investors are ready to buy the assets due to the company's record of financial stability.
By Maxim Vasilyev, Anastasia Dagayeva
