MSI recently completed a strategy review for a Middle Eastern tanker operator whose Board of Directors required a review of its operations to help the business benefit from changing market conditions.
The Board sought independent financial advice with an assessment of the financial performance of the business, current and forecast market conditions, commentary on the organisational structure and valuation work on the strategic options available.
Working together with an international accountancy firm, MSI performed the following tasks as part of a four-stage work plan:
Product and Chemical Tanker Market Overview: a review of global demand and supply factors in the product tanker market including forecast demand, supply and utilisation rates. The scope included market review including size, segmentation, trends and growth metrics.
Base Case Evaluation: an analysis of the client’s base case financial model for its existing fleet together with a financial analysis of the expected returns generated from changes to the fleet composition (for example: the effect of replacing LR1 tankers with LR2s). The work also included benchmarking the client’s fleet composition and financial results to leading competitors in the product tanker market.
Existing Strategy: a review, challenge and assessment of management’s business plan with an examination of fleet composition, staffing and organisational structure, identification of key risks and issues and an assessment of the Group’s working capital and funding position.
Future Strategy: develop recommendations for the future strategy of the business including advice on the chartering strategy, advice on the balance of long range and short range tankers, detailed analysis of financial returns, M&A options and group valuations in a range of scenarios.
In particular, the market review included forecasts for the following KPIs: global macroeconomic outlook, shipping market by sector, oil consumption by region, refinery capacity by region, regional product imports and exports, shipbuilding capacity and the outlook for the chemical tanker market. These KPIs were included in our sensitivity analysis.
The team prepared a detailed market review which comprised a single report addressing all parts of the scope as described above. In particular, the report combined a market review of both the product and chemical tanker markets, forecasts for time charter equivalent rates in the client’s vessel size categories, strategic options for the Board to consider and supporting rationale together with a valuation and returns analysis.
The report was issued in draft stages to the Board over the duration of the project and we provided a facility for comment and feedback from the management team. The final report was presented to the Board of Directors together with the conclusions of our work.
To learn how MSI’s Consultancy Services can help your business understand and profit from market dynamics in shipping, offshore and shipbuilding, please get in touch.
