GE Shipping Q1 net drops, outlook seen weak

GE Shipping Q1 net drops, outlook seen weak

Mumbai: Great Eastern Shipping Co Ltd on Friday reported a two-third fall in April-June net profit on a steep fall in freight rates and lower gains from sale of ships, officials said.

The shipping services provider reported a standalone net profit of Rs1.26 billion, down from Rs3.88 billion last year, beating the Rs183.5 million estimate in a Reuters poll of analysts.

“Our results reflect the circumstances under which we are operating," chief financial officer G Shivakumar said at an earnings conference call after the results.

“The dramatic change in the global economy over the last twelve months has started taking its toll on our results."

Income from freight and charter hire fell by a third in the quarter to Rs4.68 from 7 billion last year.

Average spot rates were down between 65-75% in various segments of dry bulk and tankers during the quarter, Shivakumar said, adding GE Shipping was not as affected as some of its vessels were contracted at higher rates.

An Aframax ship, a smaller-sized tanker, earns around $15,000 per day on an average now, compared with $45,000-$50,000 a year ago.

The firm, which has a market capitalisation of $797 million, has a liquidity of more than $500 million while its debt was 0.15 times the equity, Shivakumar said.

Weak Outlook

GE Shipping, which has some vessels coming up for contract reewals in the coming months, expects the outlook to “remain tight," managing director Bharat Sheth said on the same call.

Poor shipping rates because of a slump in trade demand after major economies slipped into recession will keep the outlook weak, he added.

About 55% of the firm’s revenue days are contracted while it is “very reluctant" to fix assets for the remainder 45% due to poor rates across all segments.

In view of the weak outlook, the firm, this week, cancelled a new building order for a dry bulk carrier. It did not provide any details, though.

“There will be a time when our vessels will be operating at lower the operational costs. The crude as well as petroleum freight rates are trading at below operating costs," Sheth said.

Shares in the firm ended up 1.9% at Rs257.4 in a strong Mumbai market, which closed at its best in 13 months.