Mumbai: Varun Shipping Co Ltd plans to raise its exposure in the offshore segment as it buys new vessels in FY10 and scouts out for bouyant markets across the globe, a top official said on Thursday.
“We want to increase business opportunities in offshore. Our capex for 2009-10 will also go into this segment. There is still tremendous opportunity,” managing director Yuddhishthir Khatau told a news conference on Thursday.
The company has a capital expenditure plan of $80-$100 million for FY10, he added.
“We had a capex of $400 million last year. We are cutting it down this year. We will buy in the second-hand market. There is no point doing capex at the cost of margins,” he told reporters after the conference.
Varun Shipping has five anchor handling tug supply vessels, used for towing drilling vessels and moving anchors, out of which three are deployed in the North Sea.
The company is looking at putting these vessels in Africa, Gulf of Mexico, Brazil and Krishna Godavari basin in India as rates in the North Sea have slipped, Khatau said.
Average day rates for anchor handling tugs in the North Sea have fallen about 70% to £15,000 this year from 2008, Khatau said.
“I don’t see a recovery going back to the previous periods but I definitely believe in a slow and steady recovery,” he said.
Varun Shipping posted a 51% rise in FY09 net profit while freight and charter hire income rose 7.5% to Rs915 crore, sending its shares up nearly 9%.
It had a profit of Rs280.2 million on sale of vessels and other assets. It sold two small offshore supply vessels in March, a product tanker and an ageing gas carrier during the year.
However, the company expects to take a hit on profit margins in the near-term as it entered into fresh contracts at lower rates.
“It’s been a challenging year. Specially April and May. Banks are looking at renegotiation, charterers are looking at renegotiation. Utilisation rates have also fallen because of the downturn,” Khatau told reporters.
Shares in the firm ended up 3% at Rs58.95, off a day’s high of Rs62.25 , in a weak Mumbai market.