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Essar Shipping registers 27% rise in Q3

Essar Shipping registers 27% rise in Q3
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First Published: Wed, Feb 02 2011. 06 16 PM IST
Updated: Wed, Feb 02 2011. 06 16 PM IST
Mumbai: Essar Shipping Ports & Logistics, the second largest private sector port operator in India, reported a 27% rise in October-December net profit, supported by its ports business that swung to profit.
Throughput at its ports during the quarter was nearly 10 million tonnes as against 7.85 million tons a year ago, the company said in a statement.
The commissioning of a 30-million-tonne all-weather deep draft in Hazira, Gujarat, also helped the port business post a profit of Rs109.3 million compared with a Rs79.4 million loss a year ago.
The company’s profit during the quarter came in at Rs276.4 million and revenue at Rs8.34 billion, up 2.7% on year.
Ports traffic is expected to triple by 2020 to 2,495 million tonnes. Investments worth Rs2.7 trillion are expected during the decade to boost ports capacity, according to estimates released by the Shipping Ministry.
“Essar port is focused on contributing to this development of port infrastructure in India,” said Rajiv Agarwal, managing director and chief executive.
The company plans to pump in Rs87.89 billion in its ports business to double capacity by FY13, it had said in October last year.
Essar Shipping, which is demerging its shipping, logistics and oilfields businesses from its ports business, expects to list the new entity in April.
Post the demerger, which will simplify Essar Shipping’s business structure and unlock value, the company will be renamed Essar Ports and will continue to be listed.
The demerged entity will be called Essar Shipping which will be listed on the stock exchanges by April, Agarwal said.
Bullish on dry bulk
Agarwal said the global slowdown in dry bulk rates was unlikely to impact its shipping operations as the company has long-term charters, thereby insulating freight rates.
Dry bulk freight globally is on a downward trend due to an oversupply of ships and also as coal buyers struggle with high prices and thin margins and hold off booking cargoes.
“On the dry bulk side, globally the situation is different, but in India, the outlook is extremely bullish; be it imported coal, power plants coming in, or increase in capacity of steel plants the dry bulk business in India is expected to grow exponentially,” he said.
Dry bulk contributes 60-65% of the company’s shipping business revenue. 80-90% of its overall shipping contracts is on long term charters, which insulates it from the volatility of the spot market, he said.
Essar Shipping has said it plans to invest about $600 million to buy new vessels by FY13.
It has tied up capex for existing expansion projects in ports, shipping and oilfield businesses and does not need to tap the capital markets in the short term.
However, the promoters will need to dilute stake to 75% from their current holding of about 84% over the next two years, to meet rules set by the Indian capital market regulator, Agarwal said.
He also said the company plans to dry dock just one vessel for the quarter ended March.
Essar Shipping shares ended up 0.36% at Rs98.1 in a firm Mumbai market.
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First Published: Wed, Feb 02 2011. 06 16 PM IST