Global Oceanic Carriers

Source: Stock Market Digital

Date :27/09/2007 11:28:46

Under new management

After embarking on a corporate restructuring programme in 2006, GO Carriers has dramatically improved its performance and efficiency. CFO Christina Anagnostara tells us about the new strategy

Written by James Hurley & Produced by Kiron Chavda

Global Oceanic Carriers Plc (GO Carriers) is an owner and operator of dry bulk carriers, providing worldwide seaborne transportation of products including iron ore, coal, grain, bauxite, phosphate, fertilisers and steel.

An efficient and effective low cost operating platform is provided via GO Carrier’s affiliate company, Antares Shipmanagement which provides full technical and commercial management of its fleet. Antares is a well established ship management company whose offices are administered by a team of 18 on shore based professionals located in Glyfada Greece.

A year of transition

In what the CEO called “a transition year”, revenue from operations for the year to May 31, 2007 was $27.1 million, up from $20.9 million in 2006. The current financial strength of GO Carriers comes after some major restructuring that was preceded by a challenging period for the company. Following a sharp decline in the dry bulk market, charter rates were adversely affected. The company’s intention to acquire four new dry bulk carriers in 2005 was thwarted due to the depressed market conditions and low charter rates which would only justify three vessels. The cancellation of the fourth vessel impacted severely on the profit for the period and heralded a decline that lasted until early summer 2006.

Since May 2005, the company has undergone some dramatic changes, particularly to its shareholder base, Board and management. Following a decline in the company’s share price, many of the institutional holders sold their participation. This was largely due to the company’s unsuccessful attempts to refinance the debt facilities and the interim results, both of which impacted upon the company’s share price.

In June 2006, Nicolas Pappadakis was appointed non-executive Chairman of the Company, Michael Tartsinis became Chief Executive Officer, and Antonios Nikolaou was appointed executive Director.

The new Board established a strategy and set out a series of strategic aims and objectives under the policy of restructuring for 2007, identifying four specific areas of the company to reform: namely, improving the effectiveness and efficiency of its operations, expanding and renewing its fleet, enhancing its financial disclosure and investor relations, and following corporate governance best practices.

Christina Anagnostara, Chief Financial Officer says that the restructuring that the company has gone through has seen a dramatic improvement in the performance of GO Carriers. “Since the management team took over took in June 2006, we embarked on a complete corporate restructuring programme aimed at improving the sector differentiation of the operations. We expanded our fleet and improved disclosure and investor relations and the whole of our corporate governance practices,” she explains.

Delivery

To deliver its objectives, GO Carriers focuses on mid-aged dry bulk vessels where it can maximise ROI and profitability. This is implemented through timely acquisitions of strongly profitable, middle-aged (between ten and 15 years old) dry bulk vessels. Secondly, the company seeks sustainable and predictable cash flows through extended periods of employment and long term charter coverage by the acquisition of vessels with attractive charters attached, or vessels that can attract charter immediately upon delivery.

A further objective of the company was to reduce its operating and administrative costs. The new, cost efficient operation is managed by GO Carriers affiliate company, Antares Shipmanagement who now operate the fleet at vastly improved rates. “We reduced management expenses because the precious management had too many high expenses in relation to the size of the company,” says Anagnostara.

In addition to the corporate restructuring program, the company has recently successfully expanded its fleet following the initiation of a fleet expansion and renewal program - one of the strategic aims set out for 2007 by the new management team. And in order to develop new business opportunities, the company established a chartering subsidiary aimed at optimising fleet chartering while also creating a new profit centre for GO Carrier's business activities. “We have already entered agreements to purchase additional vessels that will be delivered within the coming months and we have also established an in house chartering company that can take better advantage of the chartering activities and reduce internal costs,” she says.

Today, both the new shareholders and board work closely together in the business developments, this has resulted in a period of stability for the company. “Our entire operating base is already employed on a six month period for 2008. We’re following the strategy. We want to grow the company through the acquisition of vessels and we’re securing the long term future of the company. Financial growth will be funded by a mixture of new equity and debt,” she explains.

Looking ahead, the company aims to continue its expansion and expects a strong dry bulk market to remain encouraging. “Market conditions are strong and I think they can stay like this because of the sustainable demand for commodities. China is very strong and we expect that to continue to drive the market because of the demand for infrastructure development. We also see demand from the economically developed countries of South East Asia (Japan, Korea and Taiwan) and the developing economies of India and Indonesia.” The market is further enhanced by growing demand among the developed economies in Europe and the United States.

“On the supply side, the deliveries of new buildings are expected to be firm for 2007 and 2008 and equally strong for 2008 onwards. However, we believe that the demand side will be increased enough at least for the rest of 2007 and 2008 to absorb any prospective delivery of new vessels,” says Anagnostara

“We intend to take advantage of the current strong market environment and to proceed with our fleet expansion plans, financing them in an appropriate manner,” says Anagnostara.

Control environment

An area that is of particular strategic importance to the company is the control environment which the company considers as the foundation for all other components of internal control. The company believes that the ability of its employees is a result of the management’s philosophy and operation style, coupled with appropriate recruitment and training.

The Company has an organisation structure which is tailored to its size; the company delegates internal control into four reporting lines responsible for control activities, information and communication, monitoring and risk assessment.

GO Carriers has also established monitoring mechanisms for its ongoing business activities; these include supervisory activities which personnel take part in. Risk assessment practices are integral to the company - risk taking is paramount to the business, and the company uses a risk assessment mechanism to identify such risks and to assess their potential impact.

The corporate restructuring and new strategy has left the company in a strong position to put its objectives into practice, to achieve a leading position in the shipping market and to provide a sound base for providing customers and counterparts with a first class service.

“We believe that our strategy of pursuing further fleet expansion through the acquisition of mid-aged vessels, for which we seek long term period charters, can be optimally executed in the current strong freight rate environment,” concludes Anagnostara. “This will enable us to maximize return on investment and generate strong and predictable cash flows.”

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