Falling freight rates to hit Thoresen Thai
Thoresen Thai Agencies (TTA), Thailand's biggest dry bulk carrier group, said yesterday that a sharp drop in freight rates in the wake of the global credit crunch will hit its results in the next two years.
Shipping rates have plunged to a six-year low as cargos are stranded by tighter trade finance and the global economic slowdown curbs demand for raw materials, managing director Chandchutha Chandratat said in an interview.
'Traders are finding it hard to get letters of credit that guarantee payments for goods, while banks are wary of financing commodities and shipping transactions,' he said.
'This symptom has already been felt, and yes, this is going to hit us in 2009-2010,' he said, without giving specific forecasts.
The Baltic Dry Index, a gauge of shipping costs for commodities, fell 5.8 per cent to 925 on Wednesday, down 92 per cent from its peak in May at 11,793.
'The rate is really, really low now. We're getting very close to the bottom,' he said, adding that he hoped to see a short-term bounce early next year.
TTA reported a net profit of 4.97 billion baht (S$216.4 million) on revenues of 21.3 billion baht last year.
'2008 will be the year that we break all our records in terms of both profit and sales,' he said of the full-year results due to be released on Nov 28.
Mr Chandchutha did not give a specific forecast, but 11 analysts polled by Reuters Estimates expect the company to post a 57 per cent rise in 2008 net profit to 7.8 billion baht.
Revenues were seen up nearly 42 per cent to 30.2 billion baht.
The company's 10 billion baht in cash and its low debt would help it to weather the financial storm, he said.
To help offset the impact of a slowing world economy, the firm planned to look at investments in energy and infrastructure businesses, he said, without giving details.
TTA already owns 55 per cent of Singapore-listed engineering firm Mermaid Maritime .
Some shippers have declared bankruptcy, while others are looking at mothballing ships and cutting jobs if the slowdown in global trade gets worse.
Singapore's Neptune Orient Lines, whose APL unit is the world's seventh-largest container line, reported on Wednesday an 82 per cent plunge in third-quarter net profit and said that it expected an operating loss in the fourth quarter.
The Singaporean firm has said that it would reduce capacity on its Asia-Europe and Transpacific routes by 25 per cent and 20 per cent respectively.
TTA had no plans to cut capacity yet, 'but we won't make any investments for at least 3-6 months', Mr Chandchutha said.
TTA shares, down nearly 80 per cent this year after hitting a peak of 56 baht in May, jumped 8.6 per cent to end at 10.70 baht yesterday.
The overall Thai market was up more than 5 per cent as the index tracked gains on other regional bourses after the US Federal Reserve cut interest rates to combat the effects of the credit crisis and looming recession.
Thanachart Securities, which has a sell recommendation on the stock, has said that the shipping industry is showing signs of oversupply next year as the dry bulk boom fades away.
While some companies have taken advantage of the stock slump to buyback their shares, Mr Chandchutha said he that had no such plans. 'Buying back shares hasn't really stopped foreign funds from selling,' he said.
Shipping rates have plunged to a six-year low as cargos are stranded by tighter trade finance and the global economic slowdown curbs demand for raw materials, managing director Chandchutha Chandratat said in an interview.
'Traders are finding it hard to get letters of credit that guarantee payments for goods, while banks are wary of financing commodities and shipping transactions,' he said.
'This symptom has already been felt, and yes, this is going to hit us in 2009-2010,' he said, without giving specific forecasts.
The Baltic Dry Index, a gauge of shipping costs for commodities, fell 5.8 per cent to 925 on Wednesday, down 92 per cent from its peak in May at 11,793.
'The rate is really, really low now. We're getting very close to the bottom,' he said, adding that he hoped to see a short-term bounce early next year.
TTA reported a net profit of 4.97 billion baht (S$216.4 million) on revenues of 21.3 billion baht last year.
'2008 will be the year that we break all our records in terms of both profit and sales,' he said of the full-year results due to be released on Nov 28.
Mr Chandchutha did not give a specific forecast, but 11 analysts polled by Reuters Estimates expect the company to post a 57 per cent rise in 2008 net profit to 7.8 billion baht.
Revenues were seen up nearly 42 per cent to 30.2 billion baht.
The company's 10 billion baht in cash and its low debt would help it to weather the financial storm, he said.
To help offset the impact of a slowing world economy, the firm planned to look at investments in energy and infrastructure businesses, he said, without giving details.
TTA already owns 55 per cent of Singapore-listed engineering firm Mermaid Maritime .
Some shippers have declared bankruptcy, while others are looking at mothballing ships and cutting jobs if the slowdown in global trade gets worse.
Singapore's Neptune Orient Lines, whose APL unit is the world's seventh-largest container line, reported on Wednesday an 82 per cent plunge in third-quarter net profit and said that it expected an operating loss in the fourth quarter.
The Singaporean firm has said that it would reduce capacity on its Asia-Europe and Transpacific routes by 25 per cent and 20 per cent respectively.
TTA had no plans to cut capacity yet, 'but we won't make any investments for at least 3-6 months', Mr Chandchutha said.
TTA shares, down nearly 80 per cent this year after hitting a peak of 56 baht in May, jumped 8.6 per cent to end at 10.70 baht yesterday.
The overall Thai market was up more than 5 per cent as the index tracked gains on other regional bourses after the US Federal Reserve cut interest rates to combat the effects of the credit crisis and looming recession.
Thanachart Securities, which has a sell recommendation on the stock, has said that the shipping industry is showing signs of oversupply next year as the dry bulk boom fades away.
While some companies have taken advantage of the stock slump to buyback their shares, Mr Chandchutha said he that had no such plans. 'Buying back shares hasn't really stopped foreign funds from selling,' he said.