J Lauritzen unveils strategy review after refinance boost

Chief executive Mads Peter Zacho says process will see Danish owner decide where it should allocate its available resources

J Lauritzen is conducting a “classic strategic review” having completed a refinancing package with the support of its sole shareholder.

Last month, the Lauritzen Foundation agreed to inject $80m into the company as part of a deal that saw loan repayments cut over the next four years and a bond repaid in full.

J Lauritzen chief executive Mads Peter Zacho tells TradeWinds that the company is now discussing how to develop the business and how resources should be allocated.

“It’s a classical strategic review where we can figure out how we can best use our available resources,” he said. “It’s all about running the business, improving, tweaking and making sure we play in the part of the field where we have the best competences and best customer relations.”

Zacho says the owner is not planning a big announcement once the priorities have been set.

“Strategy is not something you do once a year," he said. "It is something that is ongoing and it is something we will continue to work on."

While Zacho says it is a fair assumption that the new strategy will involve both the bulker and gas markers, he is not willing to discuss details further.

“Dry cargo and gas tankers are both areas where we have a lot of competence and a deep level of experience,” he said. “It would be natural that these are the areas where we are going to focus and even develop further. I think we have a good platform to build on.”

Improvements in the dry cargo and gas markets have helped J Lauritzen cut its first-quarter operating loss.

The Danish shipowner booked a core operating deficit of $7.4m in the opening three months of the year, better than the $17.2m red figure in the same three months of 2016.

Zacho says the dry cargo market was stronger in the first quarter but that has to be measured against a background where the start of 2016 was “extraordinarily weak by any context”.

“You could say it’s a step in the right direction but there is still some way to go before you can say that we have a profitable dry cargo market,” he said.

Healthy demand

J Lauritzen is cautiously optimistic on the bulker market, which climbed in the quarter despite the arrival of more than 150 newbuildings, a figure which easily outflanks the 60 or so older ships that were scrapped.

“It has been great to see the market absorb such a large number of vessel deliveries and still be able to push up the rates," Zacho said. "That is sign of health on the demand side. We can see the global economy is going OK — not fantastic growth but pretty robust.

“China is a very important player in the dry bulk market and whether you can say the demand growth we have seen in the first months of this year will continue, we just don’t know.

“I think there are a number of uncertainties here — but there are reasons to be reasonably optimistic.”