GEM expects profit to touch $100m

The Dubai-based company has adopted an aggressive expansion plan since it was established four years ago and hopes the growth of its double-hull tanker fleet will enable it to radically boost revenues in 2008.

“The expansion programme is in line with our five-year business strategy, which is aimed at generating more revenue for the company,” the company’s CEO Ahmed Hareb Al Falahi told Emirates Business. “We have achieved significant growth in the past four years and we expect our profits to reach $100m this year.”

GEM’s fleet has grown from two vessels to the current 11 double-hull tankers. The total will rise to 19 when the company takes delivery of eight more tankers.

Early this year GEM awarded a Dh585m contract to South Korea’s Samsung Heavy Industries Company for the supply of its first two Aframax tankers. With a capacity of 114,700 DWT each, they will be the largest in the fleet and their delivery in 2011 will increase the total number to 21 vessels.

“We anticipate a brighter tanker market and the best investment at the moment is to enhance fleet capacity,” said Al Falahi.

Nine of the 11 vessels carry clean petroleum products, which generate higher returns than chemicals.

GEM had paid-up capital of Dh475m from its four shareholders at its inception and this amount has been exhausted as the company has grown. The company is relying on its returns as well as loans from banks to help finance its expansion programme and cater for other financial requirements.

Each of the operational and new-build vessels has its own loan facility. The loans are divided among Emirates Bank, Mashreq Bank, Abu Dhabi Commercial Bank and First Gulf Bank.

However, Al Falahi did not rule out the possibility of the company launching an initial public offering in the coming years to help fund expansion.

“The shareholders have already deliberated on the possibility on an initial public offering but have not considered it an urgent requirement. If it is to happen it might be some time in 2010 or slightly later.”

Al Falahi said the current and the immediate future expansion programmes could be financed by the company’s financial sources, but added that if other plans were taken up in the future that required further financing then an initial public offering was a probable option.

“The shareholders are committed to the company and have deep enough pockets to provide the required financing at the moment,” Al Falahi added.

GEM’s shareholders are Emirates National Oil Company (Enoc) with 35 per cent stake, Abu Dhabi-based International Petroleum Investment Company with 30 per cent, Oman Oil Company with 30 per cent and Thales, a French logistics company with five per cent.

The company’s Dh4.2 billion asset value is expected to increase to about Dh4.7bn by 2011 when the two Aframaxes are delivered.

While the future of the tanker market appears generally bright, Al Falahi is worried that the current slowdown in the United States economy might have an impact this year.

“If the slowdown in the US economy persists for another five months, it will definitely be felt across the tanker market, but the effects might not be so big,” he said.

Al Falahi sees stiff competition in the regional tanker industry this year as new players enter the market and more vessels are delivered.