Great Eastern Shipping Co. Ltd, India’s biggest
private ocean carrier, said it may consider selling more older ships on its
fleet after second-quarter profit plunged 84% from a year earlier as excess
supply of vessels crimped rents.
“We would be happy to sell older ships, where the
cost of holding on to them is pretty high in terms of the higher cost to be
incurred on maintenance,” G. Shivakumar, chief financial officer of Great
Eastern, told analysts on Monday in a conference call. He, however, said that
it was not a good time to sell younger ships because of depressed asset values.
Great Eastern’s net profit, including that at its
units, fell to Rs.27.31 crore in the three months ended 30 September from
Rs.168.65 crore a year earlier, the company said in a statement. Revenue rose
3.3% to Rs.678.76 crore.
“Freight rates have been affected by the over
supply of ships rather than lack of demand,” said Nikhil Jain, an assistant
research manager at Drewry Maritime Services Pvt. Ltd. “It’s going to take some
time to get the balance right for demand and supply. We expect the rates to
hover at this level for at least next 6 months.”
The company said profit was also hit by depreciation
of the rupee against the dollar. The company, including its units, reported a
foreign exchange loss of Rs.20.42 crore in the September quarter compared with
a loss of Rs.4.6 crore in the year earlier.
Great Eastern currently owns a fleet of 35 ships
including 25 tankers and 10 dry bulk carriers while its offshore oilfield
services unit Greatship (India
The company sold 7 vessels, including 6
tankers and 1 dry bulk carrier, in the year ended 31 March for dismantling.
Since April this year, it has sold 2 more tankers for scrapping.
In addition, it has committed to sell the three oil
supertankers it had ordered from South Korea
Shivakumar said that a turnaround in the
shipping industry would depend largely on dismantling of younger ships for
scrap. “If the bad rates continue for another year or so, it will lead to a
wholesale scrapping of sub-20-year-old oil tankers and bulk carriers. This will
reduce the structural oversupply in the market and lead to a turnaround,” he
said.
Last week, Greatship Global Offshore Services Pte
Ltd, the Singapore unit of
Greatship (India
The two ships were ordered in 2007 and were slated
for delivery in 2010. “We thought it was better to cancel the contract as we
were not able to ascertain whether the ships would be delivered within a
reasonable time-frame,” Shivakumar said, adding that Great Eastern was working
with Mazagon Dock to get a fix on the delivery date for the second vessel.
“We expect a lot more stress in the shipping market
in the coming months,” Shivakumar said.
On Monday, Great Eastern Shipping stock fell 2.6%
to end trading at Rs.223 on the Bombay Stock Exchange, while the benchmark
Sensex dropped 0.43%.
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