FSL Trust swings to 4Q21 net profit from year-ago loss despite revenue decline

Singapore one-dollar bill, showing Chinese junk boatsSingapore one-dollar bill, showing Chinese junk boats

First Ship Lease Trust reported Thursday it swung to a fourth quarter net income of US$88,000, from a year-earlier net loss of US$2.2 million as vessel operating expenses and depreciation declined. 

“Whilst we have seen a slight improvement in freight rates for the tanker sizes relevant to the trust towards year-end and in January 2022, the winter season has disappointed with unsatisfactory freight rates so far weighing on our results,” Roger Woods, CEO of the trust’s manager, said in the statement. 

“Yet, we were able to end the fourth quarter 2021 with a small profit, thanks to the majority of our vessels operating under fixed-rate period charters and the low leverage of our fleet,” Woods said. 

Revenue for the three months ended 31 December dropped 27.7 percent on-year to US$4.95 million, the trust said in a filing to SGX.

Vessel operating expenses fell to US$2.29 million in the fourth quarter, down around 31 percent from US$3.29 million in the year-earlier quarter, the filing said. 

Depreciation expense on vessels fell 39.6 percent on-year to US$1.17 million, while impairment on vessels declined 95 percent on-year to US$149,000, the filing said. 

Full-year loss

For the full year, FSL Trust reported a net loss of US$1.52 million, swinging from a net profit of US$6.25 million in 2020, mainly on a weak tanker market environment in 2021, impacting the vessels operating in pools and the spot market.

Revenue in 2021 fell 48.3 percent on-year to US$24.98 million, FSL Trust said.

The trust said ton-mile demand and freight rates for tankers remained weak amid reduced oil production and refinery throughput on muted global demand for oil and oil products as a result of the Covid-19 pandemic. 

The full-year distribution per unit came in at 3.5 U.S. cents, up 16.7 percent from 3.0 U.S. cents in 2020, the filing said.

Outlook

In its outlook, FSL Trust remained cautious near term on tanker market forecast amid uncertainty around the pandemic. 

“This would continue to impact essential demand factors for oil and oil products such as global aviation, as well as the timing and pace of an increase of oil production and a full market recovery to pre-pandemic levels,” FSL Trust said. 

“The supply fundamentals show positive signs for the medium- and long-term as contracting of tanker newbuildings remains subdued amid technological uncertainties surrounding environmental regulations which, in combination with the aging of the active fleet, is expected to provide supportive supply fundamentals in the medium-term,” the trust said.