GE Shipping Q1 cons net slips; rates under pressure

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GE Shipping Q1 cons net slips; rates under pressure

Great Eastern Shipping Co Ltd on Friday reported a marginal decline in June quarter consolidated net profit and said weak freight rates were likely to continue for some more time.

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Great Eastern Shipping Co Ltd on Friday reported a marginal decline in June quarter consolidated net profit and said weak freight rates were likely to continue for some more time.

The company posted a quarterly profit of Rs 162 crore compared with Rs 171 crore a year. Total income rose to Rs 728 crore from Rs 688 crore.

The company's shares which dropped more than 8% on Friday, were trading down 6.9% at Rs 247 rupees in a weak Mumbai market at 12:42 pm.

GE Shipping said rates in both the tanker as well as dry bulk markers were under pressure.

"The ongoing Libyan tension has materially tightened the crude supply market and with no signs of cease fire, the situation seems grim adding pressure on the existing weak freight rates," the company said in a statement.

On back of huge fleet additions, dry bulk freight rates are also likely to remain volatile, the company said.

"Even if positive factors like port congestions, slippages in deliveries and substantial increase in scrapping activities are witnessed, the sheer volume additions in the new supply are keeping the freight rates depressed."

GE Shipping has a total capex commitment of about USD 55 million to expand capacity, of which USD 33 million has already been advanced to the yards as stage payments it said. The company, which has a total fleet of 35 vessels, plans to add one dry bulk carrier this year.

The company has a revenue visibility of about Rs 396 crore for the balance of 2011/12. It said crude and product tankers are covered about 55 and 60% of operating days. Dry bulk vessels are covered about 42%.

The firm has said it is cutting exposure to the shipping business by selling three large vessels. It will instead focus on the offshore business run by its subsidiary Greatship India.

Greatship along with other units has a capex commitment of USD 450 million in the offshore segment for an orderbook of seven vessels over the next two financial years. The offshore unit has a much higher revenue visibility of Rs 604 crore for the remaining year.