While Great Eastern Shipping Co. Ltd (GE Shipping) managed to report a net profit in the March quarter, Shipping Corporation of India Ltd (SCI) had no such luck. GE Shipping’s overall numbers have been cushioned by its offshore business, which compensates for the underperformance of the company’s shipping business. An excess supply of ships has put pressure on freight rates.

However, for SCI, both the major segments—liner (break bulk and container transport) and bulk are under pressure. The bulk business comprises tankers (both crude and product), dry bulk carriers, gas carriers and phosphoric acid carriers. The liner and bulk business accounted for 89% of the company’s total revenue in the March quarter and declined by 15% on a year-on-year basis.

SCI derives its remaining revenue share of business from the “others" segment, which includes offshore vessels, passenger vessels and services and ships managed on behalf of other organizations. As a result, total operating revenue declined 12% for the March quarter over the same period last year to 974 crore. For the March quarter, both the liner and bulk businesses posted losses at the earnings before interest and tax (Ebit) level.

On an overall basis, SCI posted an operating loss for the March quarter. The company had to make a provision worth around 95 crore, after adjusting for which, the performance looks satisfactory. Still, higher depreciation and interest expenses adversely impacted the performance at the net profit level. Accordingly, SCI reported a net loss of 281 crore against a loss of 356 crore in the year ago.

The SCI stock has underperformed the S&P BSE 500 index of BSE since the beginning of this calendar year. Given the weak fundamentals, there is little to suggest a change in trend as far as the stock performance is concerned. On the one hand, the operational environment continues to be tough, while on the other hand, higher interest and depreciation are expected to take a toll on the earnings. Analysts expect the company to continue to report losses for some more time. For FY13, SCI reported a net loss of 114 crore.

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