2012 to be a very difficult year for shipping sector: SCI

14904 Investors following Shipping Corp. Share this News with them.

0

Like this story, share it with millions of investors on M3

2012 to be a very difficult year for shipping sector: SCI

In an interview to CNBC-TV18, S Hajra, chairman and managing director of Shipping Corporation says, 2012 is going to be a very difficult year for shipping. "I don’t think the situation will improve till maybe middle of 2013 or thereabout," he adds.

Post your opinion here

 

0

Tweet

Share on Tumblr

Excerpts from Reporter's Diary on CNBC-TV18 Watch the full show » ALSO READ See latest News about Shipping Corp See previous management interviews See what other Experts & Brokerages are saying about Shipping Corp Shipping Corp BSE | NSE 30/05/12 Are Mutual Funds betting on Shipping Corp?

Shipping Corporation of India came out with its Q3 results. The company's profit has declined to Rs 74 crore as against the Rs 123 crore clocked in the corresponding quarter last year.

In an interview to CNBC-TV18, S Hajra, chairman and managing director of Shipping Corporation says, 2012 is going to be a very difficult year for shipping. "I don't think the situation will improve till maybe middle of 2013 or thereabout," he adds.

Below is the transcript of his interview on CNBC-TV. Also watch the accompanying video.

Q: Could you take us through the average charters rates in the Q3? What's your outlook going ahead?

A: As far as going forward is concerned, unfortunately the entire 2012 is going to be a very difficult year for shipping sector. There is excess of tonnage. There is economic crisis in Eurozone, even US economy not doing well and China is somewhat slowing down. Demand is growing, but it is growing at a much lower rate than that of supply. 2012 also there is going to be a plenty of deliveries. So, I don't think the situation will improve till maybe middle of 2013 or thereabout.

Q: In such an operating environment, what kind of margins are you looking at? Also, your maintenance expenses have been higher probably due to an aging fleet. What percentage of overall expenses were your maintenance expenses?

A: Maintenance expenses have not been higher because of the age profile. Maintenance expense, in shipping, we have a mandatory requirement of getting our vessels dry-docked once every two-and-a-half years. Actually, it is two in every five years. So, there are sometimes years when more number of vessels get dry-docked like the current year. There are years when less number of vessels get dry-docked. So, the maintenance expenditure has not gone up. Maintenance expenditure, quarter to quarter or year-on-year, it goes up only because obviously the number of vessels being dry-docked in a quarter or in a year is not uniform.

As per our accounting policy, this is not traded over five years. Otherwise, it would have been much more uniformed. Our policy is that whichever year the dry-docking takes place the entire expenses is accounted in that particular year. So, there are certain variations in that regards. But otherwise maintenance expenses have not gone up.

What has gone up? The bunker cost has increase by nearly Rs 200 crore. The bunker prices, on basis of corresponding quarter to quarter, have gone up by more than 25%. Bunker cost even in corresponding year, in 2010 was high enough, but now it is even much higher, 2011-2012. The bunker prices are still going up. Presently, the bunker prices are hovering between somewhere at USD 680 or thereabout in Rotterdam, somewhat USD 730 in Singapore. So, bunker cost is an element, which is really causing concern to all the ship owners all over the world.

There have been some foreign currency losses also due to foreign currency loan as per AS 16, AS 11. We have to take a hit on the profit and loss also for the outstanding loans. It's not as if we are required to pay that as cash, but on the books this has to be accounted for us for the accounting standard. So, that itself is about Rs 80 crore.

Q: You said you could take a hit because of forex. What kind of an impact are you factoring in?

A: Under this particular quarter about Rs 80 crore has been booked for that. Going forward, there has been slight improvement in the Indian rupee situation. So, hopefully this will not be a major factor going forward. But it all depends on the dollar-rupee parity which I cannot really predict with any certainty. But as we have seen the rupee situation has slightly improved in the recent past.

Q: Any gain from sale of ships in the third quarter that you would like to talk about?

A: Major factor, which has contributed to this profit, we have had as much as Rs 175 crore coming out of sale of ships as against only about Rs 57 crore in the corresponding quarter last year. So, that has been the major factor. ut for that ofcourse there would not have been any profit.