QUOTE AND NEWS
The Hindu Business Line  Jul 24  Comment 
GMR Energy Gujarat Solar Power Plant, Patan, a subsidiary of GMR Group, has been awarded the Integrated Management System (IMS) certification for effectively managing quality, environment and occu...
The Hindu Business Line  Jul 13  Comment 
GMR Hyderabad International Airport Ltd has been declared as the winner of ‘Golden Peacock Environment Management Award (GPEMA)’ for the year 2015 for achievements in the field of environment mana...
The Times of India  Jul 13  Comment 
GMR-Megawide is in race to acquire operations of five airports worth USD 2.4 billion in Philippines under PPP model.
The Times of India  Jun 30  Comment 
The Delhi high court on Monday cleared the way for scrapping the contract for country’s largest highway project.
The Times of India  Jun 30  Comment 
Infra player GMR Megawide Cebu Airport Corp (GMCAC), a joint venture between GMR Infrastructure and Megawide Construction Corp of Philippines, on Monday announced that it has conducted the groundbreaking ceremony for the construction of Terminal 2...
The Hindu Business Line  Jun 29  Comment 
GMR Megawide Cebu Airport Corp (GMCAC), a joint venture between GMR Infrastructure and Megawide Construction Corp of Philippines, today broke ground for the construction of Mactan-Cebu Internation...
The Economic Times  Jun 25  Comment 
Most infra companies have been able to restructure their debts to a certain extent, which is why we are seeing a bounce in infra stocks, says Baliga.
The Hindu Business Line  Jun 17  Comment 
GMR Airport Developers Ltd (GADL), a subsidiary of GMR Infrastructure Ltd, has signed a Memorandum of Understanding (MoU) with Oman Airport Management Company (OAMC) for providing training and con...
The Hindu Business Line  Jun 11  Comment 
The Ministry of Civil Aviation has directed Airport Economic Regulatory Authority to adopt a hybrid till with 30 per cent cross subsidisation for the determination of tariff for GMR Hyderabad Inte...
The Times of India  Jun 2  Comment 
Infrastructure giant GMR Infrastructure on Monday slipped deep into losses for the year ended March 31, 2015, with a net loss of Rs 2,733 crore in FY15 as against a net profit of Rs 10 crore in FY14.




 
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General Maritime Corporation (NYSE: GMR) is a tanker company that ships crude oil and petroleum products. The company has fewer ships than many of its competitors, but attempts to offset this disadvantage by focusing exclusively on the mid-size (80,000-200,000 deadweight tonnes) tanker market. Its singular focus on one market segment allows it to compete more effectively with larger companies-- most of which operate in several markets-- in terms of scale. For instance, GMR had 31 mid-size tankers in its operating fleet at the end of February, 2010.[1] Although Overseas Shipholding Group, the company's primary competitor, has 4 times as many ships, it only fewer midsized tankers.

The number of tankers and the overall tonnage available to transport crude oil has grown faster than world oil demand. Rates for an Aframax tanker, a common type of mid-sized tanker, decline significantly when there is an oversupply of ships. GMR, which generates approximately 75% of its revenues from short-term or spot contracts, is significantly affected when this occurs.

Company Overview

The company has been able to modernize its fleet since 2005 by aggressively selling its non-double-hull vessels. Single-hulled tankers are not as safe and will be phased out by 2026, in accordance with the 1973 International Convention for the Prevention of Pollution from Ships. Since then, the company's safety record has been a strong selling point to potential charterers.[2]

GMR's fleet of double hulled ships is well suited to do business in the Atlantic Basin because of the stricter environmental regulations. As a result, the company transports a lot of oil to the United States, the world's leading importer of crude oil. .[3]

Business Financials

In 2009, total revenues for GMR were $350 million, an increase from the previous year's revenues of $326 million.[4] However, its net income actually declined between 2008 and 2009. In 2009, GMR posted a net loss of $12 million, compared to its net income of $30 million in 2008.[4] This loss was largely due to an impairment charge on its goodwill of $40 million in 2009.

Trends and Forces

Exchange rates mean higher expenses and lower real revenue

Because the functional currency of the international tanker industry is the U.S. Dollar, the depreciation of the dollar means less real revenue for GMR. Moreover, GMR's revenues and operating costs are in U.S. Dollars, while some operating expenses and overhead costs are in other currencies like the British Pound, Japanese Yen, Singapore Dollar, Australian Dollar, and Norwegian Kroners. To combat the weakening dollar, the company has in the past entered into forward contracts to acquire Euros for Dollars[5], but this practice has proven unsustainable in the face of a consistently changing rates.

World tanker supply is growing faster than tanker demand

Too many tankers mean that GMR will have to lower its charter rates. While GMR hedges against such risks by employing many of its ships on long-term, fixed-rate charters, it nevertheless earns most of its revenues from spot market charters whose rates have historically been tied to the supply and demand balance for carrying capacity.[6]

On the other hand, GMR may also be poised to take advantage of a shift in the supply-demand balance for tankers. The company has many fewer ships than its competitors[7] and also has one of the lowest fleet carrying capacities among the large tanker companies (see below). Since tanker values drop in periods of oversupply, GMR could benefit from the opportunity to buy tankers cheaply.

Competitors

Some of GMR's major competitors include:

  • Frontline, a crude oil shipping company that operates 83 vessels worldwide and has a total tonnage of approximately 19.35 million dwt.[8][9].
  • Overseas Shipholding Group, a U.S. based tanker company that transports crude oil, petroleum product, and liquefied natural gas internationally. Domestically, they also operate a U.S. Flagged fleet[10][11].
  • Teekay Corporation provides international transportation for crude oil and petroleum products, and operates approximately evenly in the charter and spot markets. They have a total capacity of 4.2 million dwt[12][13].
  • Tsakos Energy Navigation is a Bermuda-based tanker company that maintains a fleet that is diverse and largely capable of traveling through icy waters.[14]

General Maritime Corporation pursues a strategy of utilizing only mid-size Aframax and Suezmax vessels while other competitors focus on larger carriers (like FRO) or a mixture of carriers (like OSG or TNP). While they are a smaller tanker company, they thrive on the relationships they've built with their customers.

  1. GMR 10-K 2009 Item 1 Pg. 2
  2. GMR Business Strategy
  3. GMR Tanker Industry Overview
  4. 4.0 4.1 GMR 10-K 2009 Item 6 Pg. 35
  5. GMR 2006 Annual Report, Page 38
  6. MarketWatch article on Oil-Tanker stocks
  7. Google Finance: GMR Overview
  8. FRO 2006 10-K, page 26
  9. Frontline website
  10. OSG 2006 10-K, Page 9
  11. Overseas Shipholding Group Inc
  12. TK 2006 10-K, Page 17
  13. Teekay Corporation
  14. Tsakos Energy Navigation Ltd
  15. Tidewater Inc website
  16. Horizon Lines Inc website
  17. Aegean Marine Petroleum Network Inc website
  18. Alexander & Baldwin Inc website
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