Shipper says forward contracts will stabilise future earnings Niche specialist Pacific Basin Shipping will aim to sign forward contracts to cover 60 per cent of its available fleet capacity next year as it looks to secure a stable revenue stream in the potentially volatile bulk shipping market. The carrier, whose fleet of mostly 50 smaller handysize vessels transport raw materials such as lumber, iron ore and coal to some of the more remote ports in the Asia-Pacific region, is 80 per cent booked for the second half of this year. 'If we get a lot of demand for longer-term cover from our clients, it is incumbent upon us to be responsive to that,' chief executive Mark Harris said yesterday. 'We have a lot of spending power in place. If the spot market strengthens, we should be able to take advantage of that by adding tonnage.' Pacific Basin, which boasts blue-chip commodities firms such as BHP Billiton, Weyerhaeuser and Rio Tinto as clients, saw interim earnings almost double to US$85.5 million, aided by strong demand for bulk shipping services, some new accounting standards and vessel disposals. Underlying earnings rose 57.3 per cent to US$68.6 million after subtracting a US$4.7 million one-off gain from new accounting and US$12.2 million profit from a sale and charter scheme for part of its fleet. 'We have embarked on a sale and charter-back programme because it allows us to release capital into the business for further expansion,' Mr Harris said. 'We can achieve this without reducing our fleet or cutting back the capacity we have for our clients. They have improved our balance sheet. We now have a spending power of more than US$300 million.' The company, which sold and chartered back eight vessels in the first half, is committed to US$90 million in capital expenditure to 2007. The board recommended an interim dividend of 30 cents per share yesterday. 'The final dividend will be not less than another 30 cents,' Mr Harris said. Pacific Basin's sales grew a comparative 133.9 per cent to US$191.11 million in the six months to June after expanding its fleet by 78 per cent, to 6,750 revenue days. However, it appeared to have backed off from the relatively aggressive expansion plans it had for its handysize fleet just last year when chairman Chris Buttery said in September Pacific Basin would be comfortable with a fleet of '60 to 80 vessels in two or three years'. It has taken a more defensive position in the second half by committing 80 per cent of its fleet to forward contracts. And, while it still has eyes for expansion, it will not come at any cost. 'The asset prices have not come down as the [freight] rates have fallen, which at present makes them appear quite expensive relative to what they can earn,' Mr Harris said.