Dry-bulk carrier sees strong revenue growth

PUBLISHED : Monday, 09 August, 2010, 12:00am
UPDATED : Monday, 09 August, 2010, 12:00am

The growing commodities trade and improving economic climate have helped leading dry-bulk carrier Pacific Basin Shipping post strong revenues for the first half of the year. Pacific Basin announced revenues of US$616.5 million for the six months ending on June 30, up from US$425.9 million in the same period last year.

The company announced an underlying profit of US$65.6 million, compared with US$56.8 million during the same period last year, mainly due to growth in global industrial production and mainland commodities imports.

'Overall, we are happy with the underlying profit,' says Andrew Broomhead, chief financial officer and company secretary of Pacific Basin.

However, the group's net profit dropped about 31 per cent to US$51.9 million, compared with US$74.8 million in the same period last year. Broomhead says this was mainly due to non-cash derivative expenses, primarily because of a fall in fuel prices.

The company's board declared an interim dividend of 5 HK cents per share, representing a payout ratio of 24 per cent at the interim.

Pacific Basin Shipping is an owner and operator of modern handysize and handymax dry-bulk vessels, and a global provider of diversified shipping services.

The company, listed and based in Hong Kong, operates in three main maritime segments under the banners of Pacific Basin Dry Bulk, PB Energy & Infrastructure Services, and PB RoRo.

It has a fleet of 171 vessels, including new orders, directly servicing blue-chip industrial customers around the world. The fleet comprises 125 dry-bulk vessels, 39 tugs and barges, one bunker tanker and six RoRos.

The shipping firm's basic earnings per share is 21 HK cents, return on average equity 7 per cent and return on average assets 4 per cent.

On the company's second-half outlook, Broomhead is neutral. He says Pacific Basin expects a reversal of recent weaknesses since June to be driven by a seasonal demand rebound, and resumption of buying and restocking on the mainland later in the year. This should result in a second half that would be, on balance, somewhat weaker than the first half.

He says that Pacific Basin's strategic goals remain unchanged as it seeks to expand further in the dry-bulk fleet business, a programme which the company embarked on last December. Since that time the firm has purchased nine dry-bulk vessels and chartered (on a long-term basis) another five.

According to Pacific Basin, handysize and handymax bulk carriers enjoyed a much improved half year, outperforming other dry-bulk segments relative to the preceding six months.

Average handysize spot rates for the six months more than doubled year-on-year, and increased 39 per cent compared with the second half of last year.

The company says commodity transport demand, especially for handysize and handymax capacity, generally kept pace with significant dry-bulk fleet growth in the first half of this year.

Growth in world industrial production and restocking continued to strengthen. On the mainland, commodities imports and domestic bulk transport increased, and reduced efficiency of global fleet utilisation contributed to the firm's freight business.

However, the dry-bulk market has fallen significantly since late May, primarily because of seasonally reduced activity, compounded by a fall in mainland commodities imports resulting from reduced government-backed stimulus commitments, measures taken to cool the mainland property market (the largest user of steel on the mainland), and tighter margins for steel producers.

Broomhead believes the market will improve later in the year in response to a rebound in seasonal demand, and buying and restocking will resume on the mainland, an important market for Pacific Basin, along with Australia and the United States.