Bahri posts highest Q2 results in its history

Bahri, the world’s largest owner and operator of very large crude oil carriers (VLCCs), recorded a surge of 1,569% in its net profit for the second quarter of 2020, reaching SAR 760.61 million ($ 202.7 million).

Total revenue came in at SAR 3.53 billion, up 145% from SAR 1.44 billion recorded in the corresponding period a year ago. Accordingly, Q2 2020 results are the ever highest in the history of Bahri.

The company posted a 425% increase in net profit for the first six months of 2020 after zakat and tax.

The net profit reached SAR 1.18 billion ($314.6 million), as compared to SAR 224.9 million reported during the same period in 2019.

Total revenue for the January-June period rose to SAR 5.61 billion, marking a 78% jump year-on-year.

“The outstanding financial results we delivered in the second quarter of 2020 reflect the significant improvement in our operational profitability. We have started the year on solid footing, and this momentum has been supported by our strong business retention and expansion program,” Abdullah Aldubaikhi, CEO of Bahri, said commenting on the figures.

The increase in net profit was largely ascribed to the higher sales growth achieved across various business units.

“As we enter the second half of our fiscal year, we are poised to grow our revenues exponentially and expect to continue generating positive earnings, with our financial position remaining robust into the rest of 2020 and beyond, ” Aldubaikhi added.

To remind, Bahri reported a major increase in earnings for the first quarter driven by a rise in freight rates and strong demand for oil transportation which pushed the number of voyages during the quarter.

The spike in rates came on the back of Bahri’s major fixing binge of very large crude carriers in March, which spurred daily tanker rates and boosted demand for tankers.

The fixtures followed UAE’s announcement to raise crude output to 4.0 million b/d from 3.2 million b/d in February, with an objective to boost capacity to 5.0 million barrels.

Bahri reportedly hired up to 25 tankers on subject, a rare move from the VLCC owner which has not been that active on the spot market.

The fixing spree saw rates skyrocket from $30K to $299K per day as charterers scrambled to secure floating storage for excess crude. The VLCC market volatility resulted in some tankers securing a head-spinning $410K fixture.

Geopolitics has always played a major role in the tanker shipping industry, often undermining the impact of supply and demand balance on companies’ earnings.

Nevertheless, annual oil demand is expected to plunge this year due to the impact of the coronavirus on various sectors.

In June 2020, the International Energy Agency (IEA) forecast that oil demand for the full year of 2020 would decline by 8.1 million barrels per day.

Estimates show that demand would be impaired in the coming months, with rates likely to move downwards as volatility, which has kept rates elevated, eases down.

Once the dust settles, the market will have to come to terms with the vessel oversupply which has been one of the key factors resulting in poor market fundamentals.