Supply glut weighs on Precious revenue
Revenue at Precious Shipping Plc, Thailand’s second largest dry-bulk carrier, has plunged sharply this year because of an expected drop in time charter rates in line with the dry-bulk supply glut, says managing director Khalid Hashim. “This year’s time charter rates are expected to reach US$12,500 (414,874 baht) per day per ship on average, a drop from $13,459 in 2009. This is due to both the glut of ship supply in the overall market and also the reduction of our fleet,” said Mr Hashim.
He said that although there was high demand for commodities from China because of its heavy stimulus spending, the supply of ships was rising much faster than the demand.
Assuming a 50% slide in new ship deliveries in 2010, he said the new supply in the world market would still show a double-digit percentage increase.
“Supply looks extremely aggressive and there are new ships coming in [in the world market],” he said. However, the company has guaranteed revenue of an average of $62 million per year from forward cash.
“We have already fixed a lot of service rates on the spot market for long-term contracts,” he said. Long-term contracts account for 63% of PSL’s current shipping capacity.
The company owned a fleet of 44 ships last year and sold 25 of them under its fleet rejuvenation plan of replacing ageing ships, leaving it with 19.
Two brand-new ships have already been purchased, while another two valued at $45.9 million will be delivered within the second half of this year.
“So we will have 23 at the end of the year if nothing changes, and at the end of the programme by 2014 we should have 65 ships,” said Mr Hashim.
Time-charter rates next year are expected to reach $15,000, since the newer ships are contracted at a very high price, he said.
Operating expenses per ship this year will average $4,750 per day. “However, we will maintain the same percentage of dividends as last year at 60% since we have no debt and there is still cash flow,” said Mr Hashim.
Phillip Securities estimates PSL’s operating revenue this year to total 3.71 billion baht, with profit at 1.38 billion, based on the assumption of $13,000 in average time-charter rates and $4,800 in operating costs. “The demand should be better than in 2009 . but there is still a large supply of new ships coming in with a double-digit increase,” said an analyst.
PSL reported a net profit for 2009 of 3.06 billion baht (2.93 baht a share), a decline of 38% from 4.93 billion (4.75 baht a share) in 2008.
Consolidated revenue in 2009 declined to 6.4 billion baht from 8.65 billion, the company said. Shares of PSL closed yesterday on the Stock Exchange of Thailand at 18.4 baht, up 20 satang, in trade worth 3.99 million.
Source : Bangkok Post
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