Stock - Gulf Navigation
Gulf Navigation management confirmed that refinancing the vessels is one way to address the accumulated losses, while more flexible contracts is another step. Image Credit: Supplied

Dubai: Dubai-based fleet operator Gulf Navigation slipped back into profitability in 2021, recording Dh60 million in net profit against losses of Dh285 million a year ago. Changes to the company’s operating model and a focus on profit-generating services helped turn the tide for the company.

In addition, the emphasis on flexible contracts with clients and exits from unprofitable lines helped with the bottom-line. But the company will have to deal with accumulated losses of Dh668.90 million, representing 65.6 per cent of the capital.

Stock - Gulf Navigation
Image Credit: Supplied

This was a result of the write-off from the sinking of a GL-1 vessel last year, and lower revenues after the COVID-19 on the global shipping and logistics industry.

In a statement, the management said that focus now will be on ‘stabilising the vessels’ performance’ by overcoming the challenges from the pandemic. In particular, the group is negotiating a refinance for the vessels at a lower rate.

See new funds
Gulf Navigation has started the process to issue mandatory convertible bonds for a maximum of Dh150 million after necessary approvals from the regulator and shareholders. The updates on the issue will be presented at the next annual general assembly this month. This will see the company convert part of the debt into shares, thus increasing the paid-up capital and reducing the ratio of accumulated losses to the capital below 50 per cent.

Debt restructure

Loans worth more than Dh300 million were restructured and refinanced under flexible terms last year, which will “support the company's financial and operational performance for the coming years”.

“The company's success in the debt restructuring process reflects the banks' confidence in the company's assets and its management that is determined to continue on the path of ‘corrective approach’,” said Sheikh Theyab bin Tahnoon bin Mohammad Al Nahyan, Chairman. “The focus during the next few years will be on enhancing revenues and improving profit margins through effective fleet management, stabilizing the performance of the vessels and chartering them to reliable customers on a long-term basis, which will pave the way for the company to expand, grow and increase its maritime fleet.

The company is currently enjoying a stability phase supported by the cost control measures pursued by the company's management and the continued focus on the strategy of growth and expansion.”

- Sheikh Theyab bin Tahnoon bin Mohammad Al Nahyan, Chairman of Gulf Navigation

Revenue drop

The pandemic enforced challenges saw revenues drop to Dh122 million from Dh143 million, while group-wide assets were at Dh834 million and down from Dh862 million. So, reporting a net profit would represent some relief from a difficult year. “Despite the continuing challenges resulting from the Covid-19 pandemic regionally, Gulf Navigation was able to achieve remarkable growth in various areas of its business, driven essentially by the support of the UAE government and its efforts to lift the economy and help it recover, which in turn enabled us to achieve such results,” said the Chairman.

Rebuild for the future
To diversify its operational base, Gulf Navigation’s options include new investments in petrochemical and dry bulk carriers. This will raise the chances of the operator entering new markets and expanding its customer base.

The company is also planning regional and global strategic partnerships, which will provide its services in the field of ship owning and management, maritime services, shipping agency, ship maintenance and building. “This will contribute to realizing the company’s vision to diversify its portfolio, expand its assets, provide added value to shareholders and introduce integrated quality maritime services,” it said in a statement.