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MIF Reports Sharply Higher Profits In First Quarter
MIF operates a fleet of sixteen tankers (including one chartered-in Aframax) comprising 1,420,000 DWT with an average tonnage age of approximately eight years - much younger than the world's tanker tonnage. The fleet was unchanged during the past year but a very strong charter market raised revenues by $7.28 million or some 40%. Operating and general expenses rose $0.96 million largely reflecting the amortization of dry-docking expenses ($0.77 million due to pending special surveys). Normal expenses remained under effective cost containment management rising $0.19 million or 2.7%. Including the special expenses, income from operations rose $6.32 million or 58.4%. Net interest expense declined $0.59 million after applying the unrealized profit on valuation of swap contracts at 31 March 2001, in the amount of $0.97 million per International Accounting Standards for trading positions. Depreciation charges rose $0.10 million. Net income was $7.87 million or $6.80 million higher than the first quarter of 2000.
The economic outlook for 2001 remains mixed. The U.S. and Japan continue to flirt with modest recession which would have a significant impact on emerging economies. However, both have initiated fiscal and monetary policies designed to stimulate capital investment and consumer spending. Meanwhile Europe appears to remain on a course of modest growth. Petroleum demand is tempered by the slower pace of economic growth and the pressure of relative high prices. Recent forecasts suggest oil consumption growth approaching 1.5% versus the earlier expectations of 2.0% growth. The tanker industry appears well positioned. Modest capacity expansion should restrict the impact on supply/demand balance. The recent moderation in charterhire rates reflects normal seasonal adjustments. The generally healthy environment for modern well managed tonnage should be sustainable.
Industry operating margins will come under pressure from higher insurance rates, high bunker prices, rising general expenses, and a potentially softer dollar. Interest rates may be at or near the bottom. Nevertheless, the tanker industry should enjoy a further period of above average profitability.
Our views regarding MIF's prospects for 2001 are unchanged from those expressed in late February, namely that full year revenues will equal or exceed those of 2000 and that normal operating and overhead costs will be at the levels of last year.
Management and the Board of Directors of MIF are optimistic about the prospects for the industry and the company. MIF has ordered an additional newbuilding, the fifth sister of a series of 107,000 DWT Aframaxes built by Imabari for delivery in 2002. It also has on order three newbuilding Suezmaxes to be delivered next year. These additions will expand the fleet to 20 vessels with DWT of over two million and an average tonnage age of less than six years. MIF planned to complement its strong organic growth through alliances or mergers supported by an incremental equity later this year.