As various factors hit shipping, PSL doubts it will reach growth target

Precious Shipping (PSL), a dry-cargo shipping firm, now doubts it will manage its revenue-growth target of 10 per cent above the industry norm.

It hopes the shipping sector will recover between now and early next year. Major factors are demands for shipping of minerals, especially coal, and agricultural goods.

The company will take delivery of 24 vessels over the next two years, and is ready to lower debts during the sluggish market to boost its financial strength.

PSL managing director Khalid Moinuddin Hashim said freight revenue this year would likely miss its target of at least 10 per cent above the industry growth projection. In any case, this depends on the overall industry’s outlook.

The company believes the sector will pick up this quarter and next if the shipping of coal and agricultural crops reverts to normal. In the third quarter, shipments of agricultural goods were not normal as South American farmers hoarded produce to push up prices, coupled exchange-rate risks.

Also affecting the sector in the third quarter was a decline in coal shipments from Brazil to China, after the latter used more hydropower in the first half of the year thanks to abundant rain, coupled with mining protests in many Brazilian cities last quarter.

The situation should improve this quarter of this year as the mining protests are resolved. China is also expected to revert to more use of coal, which will need to rely on shipping services, while South American farmers should begin to export their crops again as they cannot hoard them for too long as the quality will deteriorate.

PSL will take delivery of 17 vessels next year and another seven in 2016. Meanwhile, the company plans to sell 21 older vessels over the next two years. If things proceed as planned, the average age of the vessels should fall to 3.5 years, from 9.45 years as of the end of the third quarter, Hashim said.

The vessels’ lower average age and larger size is one way of dealing with the sluggish market in the short term, as this will mean the company has better-quality assets than its rivals, he added.

The purchase of 24 vessels will mean a total expenditure of US$656 million (about Bt21.5 billion), which will come from the cash flow from the company’s operations and loans (70 per cent).
Source: Nation Multi Media