Danish bulker and LPG carrier owner J Lauritzen is receiving a helping hand from its controlling shareholder after it posted a bigger loss for 2019.
The company said the Lauritzen Foundation will pump in $20m as fresh capital to boost its finances, and the cash will be contributed before the end of June.
This is not the first time the foundation has had to pump money into the group.
In 2017, it injected $80m to help it pay a maturing bond issue.
"Although poor market conditions in both bulk and gas carrier markets impacted our result for 2019, many strategic actions were taken to strengthen our business and reduce risk for 2020 and beyond," J Lauritzen chief executive Mads Peter Zacho said.
"We now have less market exposure and we have increased our commercial flexibility. With our businesses now established as two independent organisations, we can pursue consolidation in the small gas carrier industry and further develop Lauritzen Bulkers’ digitally-driven and asset-light business model in the handysize bulk carrier market."
Markets weaker
Poor bulk markets, in particular at the beginning of the year, and a weak gas carrier market in the second half of the year, led to the group posting a net loss of $105m last year, compared to $24m in 2018.
"Overall results were disappointing," the company said.
J Lauritzen took a $44m hit related to impairments in 2019, and depreciation also rose.
Revenue was cut from $565m to $502m.
The company operated an average fleet of 104 vessels during the year. As part of the switch to an asset-light model for bulkers, it sold seven handysize ships in the final six months.
The dry cargo fleet is also being rebalanced through a reduction in long-term charter commitments.
There has been increased activity in short-term deals of up to four months.
J Lauritzen has also increased commercial flexibility, mainly by using freight forward agreements (FFAs) as a risk-mitigation tool, while redelivery of time-charter tonnage and changes to cargo cover led to a further reduction in its market exposure, the owner added.
"The increased focus on short-term trading resulted in a positive contribution of $10m to the net result," the company said.
Result to improve in 2020
Despite the current uncertainties, in particular relating to the coronavirus, J Lauritzen expects 2020's figures to improve.
"An expected moderate improvement of the gas carrier market and improved profitability in Lauritzen Bulkers due to an increased focus on low-risk, short-term trading activities, and net cost from special items in 2019 [which are not expected to be repeated in 2020], will have a positive impact on the 2020 result," the company said.
"However, the magnitude of the impact from the coronavirus is extremely difficult to predict and could potentially impact our 2020 result to a significant degree."
The group has cash of $31m and net debt totalling $294m.
The Lauritzen Foundation also owns a controlling stake in Danish ro-ro owner DFDS.
