Jinhui Holdings and its dry cargo subsidiary Jinhui Shipping and Transportation warned yesterday that their first-quarter net profits would be significantly worse than in the first quarter last year.
Jinhui Shipping, which is 54.77 per cent owned by Jinhui Holdings, saw its share price slump by 12 per cent in morning trade when the Oslo-listed firm announced the profit warning to the Oslo Bors yesterday morning. Jinhui Holdings issued a similar profit warning just before the Hong Kong stock exchange closed yesterday, but the firm's stock price ended the day unchanged.
Jinhui Shipping reported a net profit of US$35.67 million in the first three months of last year, slightly higher than the first quarter of 2010.
But chairman Ng Siu-fai said the company expected 'to record a significant decline in its consolidated net profit' between January and March this year.
He added that as the Jinhui Holdings results were largely attributable to those from Jinhui Shipping, group revenue and profit 'were expected to be substantially worse' in the first quarter this year than a year earlier.
This came after Jinhui Shipping had to 'enter into some loss-making charter contracts in early 2012' as ships finished existing charters.
Ng added that the supply of new tonnage entering the market outpaced cargo demand in recent months, depressing charter rates. This was particularly severe for larger ships including 180,000 deadweight tonne (dwt) Capesize vessels. The firm has about 40 ships in its fleet, including 33 Supramax vessels of about 56,000 dwt and two Capesize ships.
British shipbroker Clarkson said average earnings for Supramax and Capesize vessels were almost US$15,000 per day in early January. But these rates had slumped to US$10,000 per day for a Supramax ship and US$3,000 per day for a Capesize vessel by early February.
Clarkson figures show 107 dry cargo ships totalling 10 million dwt had been added to the global fleet in the same period.