Revenues for the year declined slightly as demand for shipping slowed with the global downturn.
Abu Dhabi owned shipper posts derivatives loss
Emirates Ship Investment Company (Eships), a chemical and dry bulk tanking firm based in Abu Dhabi, posted a loss of Dh92.2 million (US$25.1m) last year mainly from using financial instruments in an attempt to protect itself against volatile interest rates. Revenues for the year declined slightly as demand for shipping slowed with the global downturn, but the company still generated positive cash flow. The loss came about from an unexpected steep decline in interest rates, which caused large losses on derivatives. The use of interest rate swaps was a common hedging tactic for shipping firms servicing long-term debt on their vessels, said Richard Coxall, the chief financial officer at Eships. "These are not speculative, but a conservative protection against variable interest rates," he said. "However, interest rates plummeted by year-end." Beppe Gallo, a derivatives and commodities broker at Freight Investor Solutions, said: "These swaps are very common and shippers, or any company involved with trading commodities, has to do it." Eships controls 12 vessels - 10 small chemical product tankers and two bulk carriers. The losses were unrealised paper losses and did not reflect any deep declines in operational performance, said Mr Coxall. "The company was very much cash positive on an operating level," he said. The results were published in a bond prospectus by one of its major shareholders, Mubadala Development, an investment arm of the Government. In March, Mubadala and Abu Dhabi Investment Company, another government entity, both increased their shareholding from 33 per cent stakes to 50 per cent after acquiring the shares of the Oman and Emirates Investment Holding. Mubadala said it purchased the 17 per cent stake in Eships for Dh28.3m, giving the company an overall valuation of Dh166m. Laurent Depolla, the executive director of Mubadala's services unit, said it raised its stake in Eships as part of its long-term focus on companies that supported the emirate's services sector, including regional transport and logistics. The annual results show Eships earned Dh297.4m in revenues last year through its long-term contracts with regional industrial players such as Louis Dreyfus, Aluminium Bahrain and Emirates Steel Industries, as well as oil majors such as Total and Statoil. By contrast, in 2007 Eships earned Dh360.3m in revenues and reaped Dh75.5m in profits. The company's investment programme was small last year compared with other Gulf-based shipping companies, many of which placed billion-dollar orders for new vessels. However, Eships took a more conservative approach and placed $175m worth of orders for a converted transshipment vessel and small liquefied petroleum gas tankers. email@example.com