It’s well known that the current operating environment for shipping companies is not exciting. Freight rates have been weak on account of muted demand and more supply of vessels hitting the market.
Going by the fourth quarter financials, Shipping Corp. of India Ltd (SCI) seems to have had a rough time. The company reported a net loss of Rs 6 crore against a net profit of Rs 136 crore in the same period last year.
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SCI’s financials for the quarter ending March 2011 were adversely affected on account of poor performance of the liner business (bulk and container transport) and poor revenue growth in the bulk segment. The bulk segment comprises tankers (crude and product), dry bulk carriers, and gas and phosphoric acid carriers.
For the quarter, SCI’s revenue fell by 3% over the same period last year to Rs865 crore mainly due to weak charter rates. The bulk segment was affected more, and revenue from the same declined by 19% and accounted for 64% of the total revenue.
On the other hand, the liner segment posted comparatively better revenue and offset the poor revenue performance of the bulk segment to some extent.
Contribution from the liner segment in total revenue increased to 32% from 24% last year.
While revenue from the liner segment was decent, the business disappointed on profitability. The liner business posted a loss at the earnings before interest and tax (Ebit) level to the tune of Rs18 crore against a loss of Rs9 crore in the same period last year. Even so, the liner segment had performed relatively better in the first three quarters of the fiscal and posted Ebit profits in each quarter.
Poor revenue growth and higher costs, mainly bunker costs and other expenditure, have led to weak operating performance. Operating profit margin for the quarter stood at 11.6%, compared with 17% in the same period last year and 18% in the December quarter. The fourth quarter operating performance looks quite weak compared with the full year operating margin of 20%. Lastly, higher depreciation costs and interest expenses took a toll on the numbers at the net level for the quarter.
Analysts expect little improvement in the operating scenario for shipping companies, at least in the current calendar year, keeping in mind the excess supply that is expected to enter the market. Little wonder the stock has underperformed in the last one year, and, at least in the near term, that trend is unlikely to change.
Graphic by Yogesh Kumar/Mint
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