Shipping revived thanks to ship sales

The business results of the entire shipping industry in the third quarter have not changed clearly, but thanks to the strategy of selling ships, some businesses have escaped or reduced losses.

After a long period of stagnation, the world shipping market has recovered since September. The Dry Bulk Index (BDI) reached 2,146 points on October 8, 1,263 points higher than a year ago and a sharp increase from the bottom of 650 points at the end of January 2012, according to data from the International Maritime Bureau.Bloombergsaid.

However, the recovery is mainly concentrated in the segment of large-sized ships Capesizes (ships carrying iron ore, coal, capacity over 150,000 DWT) and Panamax ships (carrying coal, grain, capacity 60,000 - 70,000 DWT, able to pass through the Panama Canal). Meanwhile, Vietnam's fleet is mainly Supramax ships with capacity from 6,500 - 56,000 DWT (carrying ore for hire) which have only recovered for a month now, so it has not had a big impact on the business situation of enterprises in the third quarter.

Baltic Dry Index (BDI) from the beginning of 2013 to present

According to the separate financial report of Vietnam Maritime Transport Joint Stock Company (Vosco - Stock code: VOS) - the largest listed maritime transport unit, the company's revenue in the third quarter of 2013 only reached 483 billion VND, down 15% compared to the same period last year. Vietnam Maritime Transport and Leasing Joint Stock Company (VST) also only reached 262 billion VND in revenue, nearly 2 billion VND lower than the same period. Vinaship Maritime Transport (VIP) earned 174 billion VND from fleet operations, equivalent to the same period last year.

Vosco's representative commented that the company's dry cargo market segment has only improved since the second half of September, causing the company's fleet revenue to have no clear change. Vosco currently has about 19 dry cargo ships with a capacity of 6,500 DWT to 56,472 DWT, belonging to the Supramax group. By September 20, the Baltic Supramax Index (BSI) indicating the charter price of this type of ship had just broken out above 1,000 points after a long period of being below this mark.

While the main business has not brought about a major breakthrough, shipping companies are facing challenges from increasingly "bloated" debts. As of September 30, 2013, Vosco had a debt of more than VND4,260 billion, 3.5 times the company's equity. VST's debt also amounted to more than VND2,410 billion, nearly 7 times the equity.Financial balance is difficult, forcing businesses to consider liquidating old ships.

Unity - one of the dry cargo ships in Vosco's fleet. Photo: Vosco

In the third quarter, Vosco sold two bulk carriers, Morning Star and Ocean Star, with an insurance company estimating the original value of the two ships at around VND245 billion. Meanwhile, VST also successfully sold the VTC Light in August, earning a profit of VND20 billion.

The VND180 billion, mainly from the sale of ships, caused VOS to go from a loss of VND33 billion to a profit of VND26.4 billion in the quarter. This is the company's first profitable quarter since the beginning of the year, helping to reduce its accumulated loss to VND190 billion. Meanwhile, VST's loss was only half that of the same period last year (loss of VND25.6 billion).

As the largest shareholder of the two above units, the "big brother" of the shipping industry, Vietnam National Shipping Lines is also rushing to sell ships. At a recent press conference of the Ministry of Transport, Deputy Minister Nguyen Hong Truong said that the Ocean Shipping Company (Vinashinlines) has sold nearly 90% of its long-term anchored ships abroad at prices 10% higher than the appraisal price given by the Ministry of Finance. Of which, New Phoenix - one of the 7 "notorious" ships of Vinashinlines was sold for more than 3.7 million USD. The sale of this ship contributed to the company paying off debts to partners, living expenses, salaries for sailors, etc.

Talking to VnExpress.net about the sale of ships by the above units, Mr. Phan Dung Khanh - Head of Investment Consulting Department, MayBank Kim Eng Securities Company said: "The company selling ships to pay off debt is the right action, but if this weakens the unit's capacity and reduces the fleet, business activities will be affected relatively negatively. In the case of enterprises selling ships to restructure, help streamline the fleet or to refurbish, buy new ships and serve production and business activities, there is a lot of potential."

Entering the last quarter of the year, Mr. Khanh predicted that maritime transport is still a very potential industry. “Especially near Tet, every country needs to consume goods, so if domestic maritime transport enterprises seize good business opportunities, 2014 could be very optimistic for them. The economy in previous years has been bad and the maritime transport sector has also been very bad, starting from this quarter and next year, companies will probably achieve better results,” he shared.

In addition to rearranging the fleet to anticipate the market recovery, a key "task" for businesses is still to reduce the number of ships they are holding. Mr. Dang Hong Truong - the person who announced the information of Vosco said that in the fourth quarter, they will liquidate some more assets to improve the overall business results of 2013. Vinaconex Transport Joint Stock Company (VCV) has just announced the sale of Vinaconex Lines with a starting price of 70 billion VND. In addition, companies must continue to restructure medium-term and long-term debts in the direction of writing off principal, extending the repayment period, exempting and reducing interest rates to stabilize finances and overcome the "extremely difficult" period.

With financial measures and taking advantage of the stable recovery of the shipping market, Vosco hopes to overcome difficulties and soon catch up with the growth momentum of the world economy, the company representative expressed.

According to vnexpress-PH