Fitch tunes up Sovcomflot



Fitch has flipped to a more positive stance on OAO Sovcomflot following a tanker market recovery and stronger than expected results for the shipowner this year.

Sovcomflot has the world's largest tanker fleet. The credit agency upgraded its outlook on the world’s largest tanker owner from negative to stable with the only slight cloud on the horizon uncertainty about the timing of its initial public offering (IPO).

Fitch explains the revision comes following a strong performance from the shipowner in the first nine months of this year, mainly thanks to a better tanker market. Just a few days ago Sovcomflot reported net profit of $45.5m in the third quarter to 30 September, up from $9.2m in the same quarter of 2013.

The agency also says the owner’s results from 2014 through to 2017 are now likely to be better than previously believed.

Sovcomflot has been an IPO candidate for many years and Fitch says the timing on the listing remains uncertain despite the industry upturn. Fitch says Sovcomflot is likely to retain a high level of investment it its fleet, with plans to add 10 vessels, including VLCCs and LNG carriers, between 2015 and 2017.

“As a result of the intensive capex programme, we forecast that Sovcomflot will remain free cash flow negative over 2014-2017, despite rather solid operating cash flow generation,” its report said.