Image courtesy Frontline
Oslo-listed oil tanker giant Frontline Ltd. (FRO.LN) Friday said it swung to a $35.24 million net loss in the second quarter, from a year-earlier profit of $81.31 million, due to weak demand for tankers that has continued into the third quarter.
The second-quarter result was also hit by a $9.3 million loss on the termination of the long-term contract for its Front Leader vessel and an $8.5 million loss on the termination of its long-term contract for its Front Breaker vessel. These terminations were announced earlier this year.
The losses were reduced by a $3.9 million gain on the sale of its Front Eagle tanker and a $2.0 million gain on the sale of Front Shanghai, announced in January and March.
Bermuda-based Frontline said the tanker market has been weak since the second half of 2010 and remains weak into the current quarter.
Analyst Axel Styrman at Carnegie said the figures for the second quarter were slightly weaker than expected, but that it came as no surprise that the tanker market is weak. The shares were down on the weak outlook, he said.
At 1017 GMT, shares traded 5.0% lower at NOK33.72.
“Management gave no signs of hope, no signals of an improvement,” Styrman said.
The analyst said an important piece of news in the earnings report was that the company said it would delay investments for its newbuilding program.
“This is good, it reduces the short-term risk for a rights issue,” he said.
Frontline said it expected shipbuilding investments of $79.9 million to be delayed into next year and $73.0 million to be deferred into 2013. The company said the investments are delayed because the newbuilding project has been pushed back by about four to five months.
Revenue for the second quarter declined to $219.4 million, from $356.1 million a year earlier.
-By Katarina Gustafsson, Dow Jones Newswires