GE Shipping cuts shipping exposure; to focus on offshore

Great Eastern Shipping Co is planning to redeploy cash from its shipping business, where it is cutting exposure by selling three large vessels, and focus on offshore segments, a senior official said.

The company will instead expand its offshore business run by its subsidiary Greatship India, Chief Financial Officer G Shivakumar told a conference call.
GE Shipping has entered into a contract to sell three VLCCs (very-large crude carriers) on order.
"It is a part of redeploying cash elsewhere. We have in the first quarter of this calendar year committed to investment in two jack up rigs," Shivakumar said.
"Therefore we thought we should derisk in some other area. The outlook for drilling units is currently looking that much better than the outlook for, say, crude carriers," he said.
The firm has a capex commitment of USD 450 million in the offshore segment for an orderbook of seven vessels over the next two financial years.
In its shipping business it has lined up a much lower capex of USD 96 million to acquire two vessels this year.
Late last Friday, the firm had reported a 93% drop in consolidated March quarter earnings as freight rates remained under pressure throughout the quarter.
The quarter ended March included an impairment loss of Rs 85.7 crore as the agreed sale price for the VLCCs was lower than that of the contracted purchase price. Shivakumar declined to disclose more financial details.
"Muted demand from the western countries, unwinding of floating storages and steady supply of new vessels kept tanker freight rates under pressure throughout the quarter," GE Shipping said in a statement.
Oversupply of vessels as well as increasing fuel costs reduced the effective day rates.
GE Shipping has pegged its revenue visibility for the balance part of 2011/12 at Rs 4.2 crore. Revenue visibility for its offshore unit is much higher at Rs 7.7 crore.
GE Shipping shares closed down 4.71% at Rs 271.3 in a Mumbai market that ended up 0.05%.