Shipping companies continue to face rough weather

Posted by Seafarer

February 5, 2010

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The rough weather faced by the shipping industry in terms of earnings continued in the third quarter with major shipping firms reporting sharply lower profits and, in some cases, net losses during the quarter. This is despite the fact that the freight market, both in the dry and tanker segments, picked up some traction during the quarter, compared with the previous two quarters of the fiscal.

“We have posted the lowest profit in six years. We have seen a huge drop in rates from corresponding quarter of last year. Tanker market was strong last year but has turned weak now,” said the Great Eastern Shipping Chief Financial Officer, Mr G. Shivakumar, during an earnings conference call.

Lowest net in 6 years Earnings from crude carriers and product carriers have slipped 70 per cent, he added.
Great Eastern Shipping, the largest fleet owner in the private sector, has posted a 67per cent dip in its net that stood at Rs 94.3 crore (Rs 294 crore), while total income slipped 29 per cent to Rs 706 crore from Rs 994 crore. Shipping Corporation of India also saw a 53 per cent dip in its net that stood at Rs 87.44 crore (Rs 185.43 crore). The state-owned company’s income from operations came down to Rs 845.43 crore from Rs 1,113.13 crore.

Varun Shipping drifted into the negative territory, by posting a net loss of Rs 1.38 crore compared with a net profit of Rs 51.11 crore in the same quarter previous fiscal. Its revenues plummeted to Rs 239 crore from Rs 269.66 crore in the year-ago period.

Great Offshore’s net slid to Rs 49.54 crore during the quarter compared with Rs 57.72 crore in the year-ago quarter, although its total operating income went up marginally to Rs 699 crore (Rs 681 crore).

Gain for Essar Shipping However, Essar Shipping Ports and Logistics registered a 68 per cent rise in net profit to Rs 21.8 crore from Rs 13.03 crore, which was mainly helped by long-term contracts of their ships and strong contribution from ports and oil-fields business.

Helped by increased Chinese and Indian imports, the Baltic Dry Index, which measures the cost of shipping key commodities, saw some significant increase in November to touch an average of 3,941, maintaining an average of over 3, 500 in December, from the level of 2,700 in the first quarter of the current fiscal.

VLCC rates Tanker owners faced one of the worst quarters during the July-September 2009 period, when the VLCC rates sank to a bare $5,120 a day in July 2009 and $3,212 in September. Things only started to brighten in the third quarter of the fiscal, when the rates gained some traction to touch $12,260 a day in October and $15,640 in November. As the winter deepened, prompting some countries to buy more oil for heating, the VLCC rate crossed the $27,000 mark from December 15, 2009.

The market may not face a significant pick-up in the coming quarters. “There may not be a dramatic upturn in freight rates but the market will be more steady and, importantly, more predictable in the coming year. This is more because of the surplus tonnage that is coming into the market. We forecast a real upturn from 2011 onwards,” says the Director and CFO of Essar Shipping Ports & Logistics Ltd, Mr Ashok.

Source : The Hindu Business Line

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