Pacific Basin Issues Profit Warning
Dry bulk shipowner Pacific Basin Shipping announced a total of US$132 million (HK$1 billion) impairment charges on chartered-in vessel contracts and bunker fuel swaps.
The Hong Kong-listed company informed the stock exchange that it took US$101 million provisions mainly for a pool of long-term vessel charters it entered in 2010. The reason cited is the weak shipping market performance and oil prices which sank to a 5-1/2 year low.
Pacific Basin, one of the world’s biggest carriers of dry bulk commodities, said in a statement: "The significant drop in global fuel prices caused a reduction in the carrying value for the bunker swap contracts at the end of December 2014 and an estimated non-cash charge of approximately US$31 million is expected to be recorded in the Group's consolidated income statement for the Year."
“The board also wishes to draw the attention of the company’s shareholders and potential investors to the announcements relating to the impairment of the group’s towage assets and the loss on the disposal of the group’s harbour towage business,” says the statement.
The company also said that its ultimate profitability should be unchanged as it will make up the shortfall through the procurement of cheaper bunkers.
The dry bulk market continues to be weak. Despite reduced global dry bulk net fleet growth in 2014, the market has yet to fully absorb the supply overhang following the 2010 to 2012 newbuilding boom. Demand weakened in the second half of 2014 due primarily to decreasing coal imports to China and the continued Indonesian unprocessed minerals export ban.