Frontline fell deeper into the red than analysts had anticipated in the third quarter with its net loss resulting in no dividends for investors in the tanker owner.
Oslo and New York-listed Frontline pointed to the worst tanker market in four years and increased waiting time due to its refusal to take unacceptable rates offered by charterers in the period.
“The impact of the significant fleet growth over the last two years was felt across the industry and is reflected in our results for the third quarter,” said chief executive Robert Hvide Macleod.
“During this time, we showed commercial discipline by not accepting unreasonably low offers from charterers. This resulted in extended waiting time, particularly on our VLCC's, and impacted our average TCE earnings.”
Frontline recorded a loss of $25m in the quarter, beyond the $21m loss consensus among analysts.
Its operating numbers also fell short of the numbers chartered by analysts with adjusted core operating profit of $29m compared to the $37m forecast.
Supply growth masks strong demand
Frontline says the current crude tanker market does not reflect the underlying strong demand, largely due to growth of the global fleet during the past two years.
However, it notes one fifth of the global fleet is nearing scrapping age and older ships are not competitive in the market.
“Frontline has a positive long-term view of the market,” its quarterly report said.
“We believe we are at the bottom of the cycle, and this is reflected in rates and asset prices.
“There will surely be challenges as well as opportunities, and we will continue to execute our strategy of fleet growth and renewal.”
Younger and bigger fleet
Frontline has been busy renewing its fleet with new tonnage while disposing of older tankers.
The report notes that since the start of 2016 the company has added 2.5 million deadweight of capacity on the water while cutting the average age of the steel from 8.1 years to 5.4 years.
“We expect to generate substantial returns to our shareholders in a strong tanker market and healthy returns in a more muted market,” it said.
“The company has a long track record of doing so, and it seeks to carry on that tradition as it increases its leadership role in the market.”
DHT selldown
Frontline has been selling off shares in rival DHT Holdings after an aborted takeover attempt of its near neighbour in Oslo.
Frontline held 10,891,009 DHT shares back in January but had sold down to below 5% at the end of the second quarter.
By the end of the third quarter Frontline had sold 5.9 million DHT shares for $25.9m in total.
It has booked a profit of $1.2m on the stock and collected dividends of $1.5m, according to figures in the report.
While Frontline does not say how much it holds in DHT today, the disclosed infomation suggests any remaining stake would be below 1%.
