Mercator Lines may face a cash flow crunch as operating expenses soar and freight rates remain weak, Seatrade Asia online reports. The India-based dry bulk shipping firm said the upcoming dry docking of some of its vessels and higher than expected operating expenses may put pressure on its cash flows and earnings. Furthermore, asset values continue to remain low.
“Continuance of this trend may require the company to furnish additional asset security or cash top-ups to honor its loan covenants, which may strain the company's cash flows,” Mercator said.
The BDI continues to remain low due to immense oversupply of vessels, and any standstill in the current rates or further fall in spot rates will “continue to negatively impact the company's earnings from vessels exposed to the spot market.”
The Singapore-listed firm managed to hold up a third quarter net profit despite a 76.5% year-on-year plunge due to the very difficult dry bulk market.
Mercator posted third quarter net profit of $1.2m, down from $5.1m in the same period of last year.
Profits have decreased due to “lower spot rates, renewal of contracts at lower rates and an increase in operating expenses”, the company said.
Revenue dropped by 10.9% to $36.1m compared to $40.5m in the corresponding period of 2010.
“Continuance of this trend may require the company to furnish additional asset security or cash top-ups to honor its loan covenants, which may strain the company's cash flows,” Mercator said.
The BDI continues to remain low due to immense oversupply of vessels, and any standstill in the current rates or further fall in spot rates will “continue to negatively impact the company's earnings from vessels exposed to the spot market.”
The Singapore-listed firm managed to hold up a third quarter net profit despite a 76.5% year-on-year plunge due to the very difficult dry bulk market.
Mercator posted third quarter net profit of $1.2m, down from $5.1m in the same period of last year.
Profits have decreased due to “lower spot rates, renewal of contracts at lower rates and an increase in operating expenses”, the company said.
Revenue dropped by 10.9% to $36.1m compared to $40.5m in the corresponding period of 2010.