Fesco revenues not to rise for four years

A new report on the prospects of Far Eastern Shipping Co (Fesco), Russia's number-three shipping company, warns that revenues from shipping operations will drop this year to $436M, down 18% on last year, and will not recover their 2006 level for another four years. Fesco, which is controlled by Sergei Generalov, sold its Pacific cross-trade lines to Hamburg Sud in 2006. But according to the latest analysis by Eduard Faritov, a shipping analyst for Renaissance Capital in Moscow, a shift in Fesco's shipping strategy to the Baltic and to Russian cargoes in the Far East will not improve the bottom-line: "We forecast zero-to-negative profitability in the shipping sector in 2007 and 2008." Last month's acquisition of Vladivostok Sea port will take three years to complete; $90M is to be paid this month for 48% of the port company shares, and another $90M for the remainder before the end of 2010. But port revenue is forecast to range narrowly between $70M and $110M in that interval; with profits of $50-70M annually. Generalov's big gamble to convert Fesco into a multimodal transport operator runs the risk that a fall in freight rates would hurt both Fesco's fleet and rail operations simultaneously, Faritov reports. He also warns that foreign truck carriers and the domestic state-owned railways system also threaten the profitability of Fesco's container and rail divisions.