Frontline is looking to grow further through “acquisition and consolidation”, its board has revealed after the listed VLCC and Suezmax operator swung back into profit.
Part of John Fredriksen’s business empire, Frontline had announced on 2 July its agreement to merge with Frontline 2012 to form an entity controlling about 90 vessels, including 25 VLCCs, 17 Suezmax tankers, 16 MR product tankers, and 10 LR2 Aframax tankers.
“The board believes the combined companies will be well positioned to grow through acquisition and consolidation opportunities,” said the company’s board.
Erik Nikolai Stavseth and Kurt Waldeland, shipping analysts at Arctic in Oslo, said in a market commentary emailed to IHS Maritime that the statement suggests the announced merger is part of a broader strategy.
“Our interpretation of this statement is that FRO/FRNT [Frontline/ Frontline 2012] is just the start of something bigger – but the company will likely have to wait to move on opportunities and hence could be limiting news flow in the near-term,” they said.
Frontline posted a profit in both the second quarter and first half of 2015, reversing shortfalls in the same periods of last year.
The company’s second-quarter net profit of USD17.4 million reversed a loss of USD78.2 million in the same period last year, while revenue for the quarter climbed to USD134.8 million, up from USD118.9 million.
First-half profit totalled USD48.4 million, reversing a loss of USD90.3 million, although revenue over the six months dipped to USD279.1 million, down from USD288.9 million
Despite the slowdown in the market in recent weeks, the board said it hopes the combined companies will be in a position to start paying quarterly dividends as soon as the merger is completed.