Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Market / Mark-to-market/  GE Shipping sailing in rough seas with offshore support
BackBack

GE Shipping sailing in rough seas with offshore support

With the shipping business in turbulent seas, GE Shipping has managed to post profits mainly due to offshore business

The freight rates are not expected to improve in a hurry from a near-to-medium term perspective, which would keep sentiment muted for the shipping sector. Photo: AFPPremium
The freight rates are not expected to improve in a hurry from a near-to-medium term perspective, which would keep sentiment muted for the shipping sector. Photo: AFP

Some things don’t change. Take for instance the trend in the financial performance of two major Indian shipping companies—Shipping Corp. of India (SCI) and Great Eastern Shipping Co. Ltd (GE Shipping). In the previous two fiscal years, SCI posted losses at the net level, while GE Shipping posted profits. In the first half of this fiscal year, the pattern continued. For the half year ended September, SCI reported a loss of 222 crore and GE Shipping a net profit of 405.61 crore.

It’s well-known the shipping business is in turbulent seas, as freight rates are under pressure due to global oversupply of ships. GE Shipping, though, has been performing well for a solid reason—its offshore business. For GE Shipping, contribution from its offshore business to its total earnings before interest and tax (Ebit) increased to about 65% in FY13 from half in FY12. In the half year ended September, too, the offshore business accounted for 65% of the total Ebit. GE Shipping derives its remaining revenue from the shipping business.

On the other hand, SCI’s major segments—liner and bulk—have been a problem area for some time now. The liner segment includes container transport and bulk comprises tankers (both crude and product), dry bulk carriers, gas carriers and phosphoric acid carriers. In FY13 and the half year ended September, both the segments posted losses at the Ebit level. Higher depreciation costs and interest expenses also affected SCI’s overall profitability this year.

What’s worse is that outlook for SCI isn’t good. “SCI, on account of poor earnings due to weak charter rates coupled with incessant capex and escalating finance cost, is expected to extend its losses in FY14 and FY15," says a note from ICICI Securities Ltd. Anyhow, the SCI stock’s sharp underperformance in the last three years reflects the concerns of weak fundamentals.

The GE Shipping stock has fared much better. Sure, the offshore business is expected to come to GE Shipping’s rescue in the coming days as well, but then the GE Shipping stock has already appreciated by 31.5% so far in this fiscal year, suggesting that most of the positives are factored in at the current levels. And then, freight rates are not expected to improve in a hurry from a near-to-medium term perspective, which would keep sentiments muted for the sector.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

ABOUT THE AUTHOR
Pallavi Pengonda
Pallavi is a deputy editor at Mint and heads the Mark to Market team. This column covers wide-ranging topics related to the stock markets, offering an in-depth analysis of financial reports of companies. She writes and edits across verticals, covering the breadth of the Indian stock market. Pallavi has done her master of management studies, specializing in finance.
Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 21 Nov 2013, 02:22 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App