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Shipmakers eye 2009 for cues on orders, revenue

Shipmakers eye 2009 for cues on orders, revenue
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First Published: Fri, Jan 02 2009. 12 37 PM IST

Updated: Fri, Jan 02 2009. 12 37 PM IST
Mumbai: Indian shipmakers may maintain profit growth in 2009/10 but order flows will deteriorate further as shipping services firms, stung by a credit crisis and plunging sea rates, put expansion plans on hold and cancel orders.
ABG Shipyard, India’s largest private listed shipbuilder, received its last order in June worth Rs5.85 billion. Rival Bharati Shipyard, which has an order book of Rs48 billion, is mostly executing old orders.
“In terms of financials, they are not going to be impacted as they already have booked orders till 2010/11,” said Anand Sharma, a Mumbai-based independent shipping consultant.
“So, if in 2009 there are no fresh orders, it will give them an indication that worse is around (the corner). In such a situation, 2010 calendar year could be bad financially,” he added.
State-run Shipping Corporation of India has postponed its Rs50 billion expansion plans by at least six months while Essar Shipping Ports & Logistics recently cancelled orders for three vessels.
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Shipping firms overseas are also going slow on expansion, making it tougher for shipyards to survive, analysts said.
Industry estimates show around 30% of the orders for dry bulk carrier ships globally could be cancelled because of lack of finance and a drop in charter rates since September.
The Baltic freight index, barometers of global trade demand, slumped 92% in 2008, on a global financial crisis, falling commodity prices and slowing economic growth, closing the year at 774 points, a level last seen in 1987.
Trade volumes of iron ore, coal, grains, fertilizers, cement and oil - drivers of freight boom - are also shrinking on fears of recession and access to export finance.
“All they (Indian shipyards) need to ensure now is that their orders do not get cancelled. If fresh orders are not coming in, it is still okay,” said an analyst with a foreign brokerage who didn’t want to be named.
However, ship builders in India are hopeful they can face the challenge.
“We are on a sound footing. We have not faced any cancellations yet. We are more focussed on executing our orders,” Dhananjay Datar, chief operating officer, ABG Shipyard, told Reuters over the telephone.
“Everything now depends on how the global financial markets pan out. If it brings any new surprises, I don’t know,” he said, adding the company expects to grow at around 30 percent in FY10.
In the year-ended March 2008, ABG’s net profit grew 38% to Rs1.6 billion on net sales of 9.7 billion.
Bharati Shipyard, which clocked 47% growth in profit last year, expects to maintain a 35% to 40% growth rate, a senior official requesting anonymity, told Reuters.
The company earns 70% of its revenue from offshore supply vessels, which has not seen a slowdown yet, analysts said.
Shares in ABG have lost nearly half its value in 2008, underperforming the CNX Midcap index’s 28 percent fall. Bharati Shipyard tanked 80% in the period.
“There is a concern, of course. But the impact is not significant. Whoever has the requirement will have to place orders. Negotiations are going on. Fresh orders will be there,” the Bharati official said.
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First Published: Fri, Jan 02 2009. 12 37 PM IST