Pacific Basin mulls selling assets
Pacific Basin Shipping is putting a 'For Sale' sign on its non-core shipping operations to focus on profitable dry bulk and towage businesses, senior executives said yesterday.
The potential disposals include its loss-making roll-on/roll-off (ro-ro) ferry operation in Europe, port investments in China and Canada and shareholdings in public companies, said chairman David Turnbull, adding that the exits would come when the time was right.
Turnbull said the six ro-ro ferries were 'non-core', but added: 'To exit now when the market is at the bottom seems crazy.'
Pacific Basin ordered and acquired the ships at a cost of US$549 million when it entered the ro-ro market in early 2008 to diversify into other shipping sectors.
At the time, owing to the age of the global fleet, fuel efficiency concerns and bright prospects in Europe and other areas, it was thought there would be a shift to move trucks by sea. But policy changes in Europe, a lack of truck demand between the United States and Mexico and the global financial crisis stifled the short-haul sea ferry sector.
Pacific Basin's first ferry arrived in September 2009, but it delayed delivery of the other ships. It took an US$80 million impairment on the vessels last year to reflect the poor conditions in the ro-ro ferry market. Four of the vessels are on charter in Europe, although leases on three ships expire this year.
Chief financial officer and executive director Andrew Broomhead yesterday said the ro-ro business 'continues to be a major challenge' after making a US$10.6 million net loss last year. As of April 16, the six vessels have been leased for only 36 per cent of an available 2,180 days this year, at an average daily rate of US$19,380.
Broomhead said the challenge was 'to find employment in the European market' for the unchartered ships. This comes as most European ro-ro operators have excess capacity and the order book for large ro-ro vessels is equivalent to 21 per cent of the existing fleet.
Pacific Basin's main port investment is a 45 per cent interest in Longtan Tianyu terminal in Nanjing on the east coast which was acquired in 2007 for US$16 million through associate company Asia Pacific Maritime and Infrastructure.
The Nanjing operation is included in Pacific Basin's other operations which posted a US$2.68 million net loss last year on revenue of US$915,000.
Turnbull said 'getting rid of non-core businesses gives us cash back', which would be put into the core shipping operations. Pacific Basin's dry bulk business made a net profit of US$81.4 million last year, while PB Towage in Australia contributed US$15.2 million in net profit.
A rebound in charter rates since the middle of February was only temporary, Broomhead said.
He added that 17.5 per cent of dry bulk orders would be delivered by December. This was likely to far outstrip the growth in cargo demand which rose 9.6 per cent last year and 13.8 per cent in 2010.