Pacific Basin eyes larger handymax sector
Bulk shipping firm Pacific Basin Shipping will start building a foothold in the larger handymax sector this year even though the management feels the dry market has entered a 'less predictable' stage as more vessels enter the trades.
Deputy chairman Richard Hext said the move into the handymax sector - vessels in the 40,000 to 50,000 deadweight-tonne range - was being driven by a portion of its client base that required the larger vessels for moving goods such as grains, cement, coke and iron ore.
'The business model we employ in handysize will be applied to the handymax sector, where we aim to build a market position,' Mr Hext said. 'But it is likely to be quite some time before we start buying vessels to support that.'
While vessel prices had come off the record highs that saw Pacific Basin scale back its fleet expansion plans last year, Mr Hext said it was still taking a wait-and-see approach towards acquisitions. 'We think the asset prices for handysize and handymax tonnage are still rather high in the aftermath of the new dry bulk companies that listed in New York last year,' he said.
One-off gains of US$23.5 million from vessel disposals last year pushed Pacific Basin's earnings up 42 per cent from the previous year, the company said yesterday. Recurring profit rose 19.3 per cent as sales grew 43.4 per cent to US$433.7 million from a restated US$302.24 million in 2004.
It will pay a final dividend of 35 HK cents per share, bringing the full-year payout to 65 cents.
Pacific Basin last year sold vessels and then leased them back on longer-term charters, a move that Mr Hext says allowed it to continue to grow capacity without having to raise new capital in a market where acquisition prices offer dubious long-term returns.
The company owned 73 per cent of its 45-vessel fleet in 2004. The owned proportion of its 50-vessel fleet fell to 34 per cent last year and it is expected to have the papers for 38.3 per cent of the 60 vessels it manages this year.
It has forward contracts to fill 61 per cent of the 14,800 revenue days generated by its handysize fleet this year at an average daily rate of US$13,500 per vessel as rates come under pressure from added capacity in the market, a drop of 26.6 per cent on last year's daily sales.
'Although down on last year's mark, it is still a very profitable average rate,' said Mr Hext, who will replace chief executive Mark Harris when he leaves the company on April 7.