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. Last Updated: 07/27/2016

Far Eastern Posts Gain On Foreign Contracts

Russia's biggest shipping company, Far Eastern Shipping, said Friday that preliminary figures showed net profits doubled for 1998 as the Vladivostok-based giant made gains on the falling ruble.

Net profits totaled 117.4 million rubles, twice as much as in 1997, while hard currency earnings exceeded $160 million, Far Eastern Shipping said.

A whopping 5.5 million tons of the 5.9 million tons shipped last year were made under contracts with foreign companies. Officials said domestic contracts were unprofitable because billings were rarely paid.

Figures for the 1997 volume were not available, but 1998 turnover was sharply lower than the 16 million tons Rinaco Plus estimates was handled in 1994.

Far Eastern Shipping officials said more detailed information on the company's operations, revenues and profits will be available after a shareholders meeting scheduled for mid-April.

The boost in profits is not linked purely to the ruble, which fell drastically after Aug. 17, said Viktor Zhukov, the company's Moscow-based general manager for general affairs.

Other officials close to the company were more sanguine.

"I can't say that Far Eastern Shipping is doing great, I can only say that this shipping company has more or less kept itself in one piece after everything went sour here during perestroika," said Anatoly Goldobenko, first vice president of the Russian Shipowners Union.

One big advantage the company has in the crisis is that it remains able to secure foreign loans to build new ships, he said.

The company has a fleet of 98 ships, 11 of which are partially mortgaged to Western banks in return for the loans used to build them.

According to the shipowners union, Russian companies are supposed to replace ships that are more than 20 years old. But that rule has been difficult to follow since the shippers cannot secure foreign loans. Western banks refuse to accept Russian ships as collateral.

Far Eastern Shipping, however, is able to use its ships as collateral because they fly under a foreign flag, being registered with the company's foreign branches.

Loans are being provided for up to six years with about 8 percent interest, Goldobenko said.

Far Eastern Shipping has an extensive network of affiliates in the United States, Hong Kong, Australia and New Zealand. Founded in 1880 as Dobroflot, it was privatized in 1993. Now, the state controls 19.8 percent of its stock while about 34 percent is owned by foreign companies such as Crawford Holdings Ltd. (16 percent) and Credit Suisse First Boston (15.8 percent), Interfax said.

Vladimir Sarychev, assistant to Russia's First Deputy Transportation Minister Alexander Lugovets, said Far Eastern is the largest Russian shipping company among the 10 remaining after the collapse of the Soviet Union.

The former leader, the St. Petersburg-based Baltic Shipping Co., is now a bare-bones operation and another former giant, the Yakutia-based Arctic Shipping, is on the verge of bankruptcy, he said.