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Fredriksen's bulk carrier Golden Ocean in giant deficit

Norwegian Golden Ocean made big impairments in the fourth quarter and booked a giant deficit for 2014. The weak market could send less robust dry bulk players tumbling down, and open up for consolidation possibilities, according to the carrier.

- Photo: Golden Ocean

John Fredriksen's dry bulk carrier Golden Ocean has been hit hard by the weak market in the past year.

Golden Ocean noted a deficit of USD 135.6 million in 2014, compared to a profit of USD 84.4 million in the previous year. Revenue for the year came to USD 253.4 million, a drop from USD 308.9 million in 2013, according to the company's unaudited annual report, released Friday.

The carrier lost USD 135 million in the final quarter, compared to positive results of USD 18.1 million in the same period in the previous year.

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The great decline is especially due to an impairment of USD 183 million in total, on owned and leased vessels.

The company is working on a merger with the dry bulk carrier Knightsbridge, also owned by John Fredriksen. The merger of the two carriers, which will continue under the name Golden Ocean Group Limited, is expected to be finally approved at separate general assemblies on the 26th of March this year.

Knightsbridge achieved net results of USD 16 million in 2014, compared to a loss of USD 3.9 million in the previous year.

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Golden Ocean, along with the rest of the dry bulk industry, has been struggling with an extremely weak market in 2014 - a market, which has continued into 2015, and in the worst case scenario could force smaller dry bulk players to shut down business. On the other hand, this would open up for certain opportunities for more robust market players, according to the carrier.

Need for consolidation

"The market so far in the first quarter has been disappointing and this will affect the earnings for the first quarter. Future earnings will continue to correlate with the spot market as long as the majority of our vessels are employed in the spot market. Should the weak market continue this will force changes on the industry, some participants will disappear, and it will open for consolidation and for those that have stamina to stand through this period there will be opportunities," says Golden Ocean in the annual report.

This development was recently illustrated by the bankruptcy of Danish bulk carrier Copenship in the beginning of February.

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Golden Ocean announced back in October 2014, as mentioned above, that the company plans to merge with Knightsbridge, and in February the carrier formed a large Capesize collaboration with four other dry bulk players. In relation to the big cooperation, Golden Ocean CEO Herman Billung pointed to consolidation as a key factor:

"We've been working on this for some time. The industry is so incredibly fragmented, the entire dry bulk industry, so we believe it makes sense to secure a degree of consolidation. One can merge some companies or find a cooperative platform aimed at achieving a more uniform voice," he said in an interview with ShippingWatch.

The carrier expects to see more vessels scrapped, more orders delayed, more blank sailings as well as more orders converted, as has been seen among others at Scorpio Bulkers, which has converted a number of Capesize newbuildings into product tankers. This development will contribute to creating better market conditions in the future, says Golden Ocean in the report.

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