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India: Shipping companies hit hard by high interest rates

Shipping companies have reported a poor second quarter on the back of a drastic fall in charter rates and high interest charges and bunker cost. While leading private players – Great Eastern Shipping Company (GE Shipping) and Mercator Lines, net profit fell 84-87 per cent, country’s largest company Shipping Corporation of India (SCI) has plunged deep into red.

The state-run SCI reported a Rs 140.60 crore loss compared with a Rs 250 crore profit same quarter last year. GE Shipping profits fell 84 per cent to Rs 27.31 crore, while Mercator Lines profits fell 87 per cent to Rs 6.68 crore during the quarter.
Bidyut Kumar Mondal, director finance of SCI, told Financial Chronicle that the higher cost of bunker oil and depreciation of Indian currency were aided by the overall economic gloom. “The depreciation of rupee against dollar has lead to a notional loss of Rs 126 crore this quarter. Otherwise our actual loss would not have been more than 14 crore.”
“I think overall the market would continue to be same during the third quarter as well since I do not see any change in the freight rates for the bulk and the linear segment, which constitute the majority of our revenues,” Mondal said.
The bunker cost was higher during the quarter as bunker oil prices rose more than 49 per cent also the quantity of oil used was higher since voyage charter was more than time charter during the period, he said.
Mumbai-based Mercator, formerly Mercator Lines, saw a saving grace in the coal mining and trading business which contributed around Rs 435 crore to the overall revenues where shipping division contributed Rs 295.83 crore down from Rs 357.03 crore same quarter last year.
On Tuesday, Mercator’s shares plunged as much as 7 per cent, touching the monthly low of Rs 22 before closing down 1.48 per cent at Rs 23.30 a piece.
On Tuesday, SCI shares were down 6.06 per cent to Rs 62.80 on BSE. It was the 52-week low for SCI exactly a year back the stock touched a 52-week high of Rs 179.90 on November 15, 2010. The stock fell around 4 per cent on Monday.
GE Shipping, which sees maximum revenues coming from the tanker and the bulk divisions, said that the tanker market remained under pressure due to subdued driving season in US and uncertain macroeconomic environment in the oil exporting countries.

Date: November 17, 2011                                                             Source: My Digital Fc


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