AK Gupta, chairman and MD, Shipping Corporation of India (SCI) details his company’s second numbers. He is positive about the third quarter and says SCI will be able to maintain momentum.
Below is the verbatim transcript of AK Gupta's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Latha: Can you detail to us your likely performance in Q3, in the liner segment and in the bulk segment, how are things in the first 45 days of the current quarter panning out?
A: Q2 we have made a profit of Rs 18.59 crore and if you see cumulative for six months, it has been about Rs 68 crore against a loss of Rs 222 crore for the preceding year. Coming quarter, Q3, I am very positive about it because for the tanker side with the winter approaching freight rates are always good, VLCC market has been a bit better, Baltic Dry Index has been sliding since August, it touched Rs 1,400 but still it is hovering around 1,256. So things will be better in Q3. I am very upbeat about it. We should be able to maintain this momentum.
Sonia: You have seen a good improvement in your margins courtesy some operational efficiencies of the company, can you take us through how much that could help in terms of further increase in margins and what will the second half look like?
A: Our direct operating expenses have come down by almost 70 percent. There are two types of expenses, direct and indirect. I am only talking about direct operating expenses, which are operational expenses, we have been taking cost control measures, cutting down our expenses, we cannot do much about freight rates but expenses we have been focusing and let me confess, the oil prices have come down as a result our fuel prices - the bunker prices have come down.
So that has made lot of impact on our profitability. As you rightly observed, our revenues from operation, income has been almost flat, more or less comparable, but our profits have increased basically due to our expenses coming down and most of the contribution is coming from lower oil prices. Definitely we are also taking other cost cutting measures but it is a cumulative effect of cutting down expenses.
Latha: This time you got some money because you cancelled ship orders and therefore got back some money from shipyards, if that money doesn’t come next quarter, will Q3 be another quarter in the red?
A: Let us be positive. This quarter I had some interest income of about Rs 100 crore out of which about Rs 48 crore was the interest from resent contracts. In last quarter also I had some interest income like this of about Rs 83 crore. In Q3, I will not have such income but I am very positive that our operation profitability will increase and company will continue to be in black.
Sonia: you are not present in a major way in the offshore segment, only 10 percent of your revenues comes from there but you have planned some capex into that segment. Take us through how much you plan to invest, will you be adding any vessels in the offshore segment and how much could the contribution go up by in near future?
A: First of all in the offshore segment, we have been only in the low end vessels. We do not have any drilling rigs etc. We only have anchor handlers and platform supply vessels and we do have plans to enhance our offshore fleet. It is a profitable business, non-cyclic, quite steady. We have some money, which we have got from the resent contract and this money is our FPO money. We have to go back to the shareholders, we have about Rs 315 crore with us and after we get approval from the shareholders, we will invest possibly in the offshore segment or in the LPG segment. So these are the two areas where we want to expand our fleet in coming years but we need approval from the shareholders. We are going for a postal ballot soon and after that, we will take it forward.
Latha: Do you at least expect to post higher revenues in Q3 and Q4 than you did in Q1 and Q2. Q3 is looking better than Q2 for revenues?
A: Absolutely. Market has been a bit better especially on the tankers side especially again on the VLCC side. On the tanker side, it is the VLCC which matters. So VLCC freight rates have improved in Q3 and we will get the results and because of winter the oil demand always is more in Europe. So tanker demand is more, oil prices have come down so that is why lot of oil is being purchased, so things are looking up on the tanker side.
Sonia: The last time we had spoken with you, you had indicated that you are thinking about discontinuing some of your loss-making services in your liner business, any update on that?
A: We have discontinued our service to USA but our far-east service, our UK continent services, the coastal smile service if you see the liner division has made profit in this quarter -- we are critically examining each of our liner business modules and at present I see no reason to discontinue anything. They are giving us profits and I am quite sure in future also they will continue. We are monitoring them very closely. Yes, if in continuous period they are not giving us profits, we have to relook at it but at present, there are no such plans.
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