Emirates Ship Investment Company (Eships), a chemical and dry bulk tanking firm based in Abu Dhabi, posted a loss of Dh92.2 million (US$25.1m) last year mainly from using financial instruments in an attempt to protect itself against volatile interest rates.
Revenues for the year declined slightly as demand for shipping slowed with the global downturn, but the company still generated positive cash flow. The loss came about from an unexpected steep decline in interest rates, which caused large losses on derivatives.
The use of interest rate swaps was a common hedging tactic for shipping firms servicing long-term debt on their vessels, said Richard Coxall, the chief financial officer at Eships.
“These are not speculative, but a conservative protection against variable interest rates,” he said. “However, interest rates plummeted by year-end.”
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