“The demand is not strong enough and everybody (shipping firms) is fighting for the cargo,” group financial controller Richard Ling told StarBiz when asked on the market outlook for the shipping industry.
It was reported that the Baltic Dry Index (BDI), which measures charter rates across dry bulk ship sizes and routes, recovered from its low of 290 points on Feb 2 to hit 429 points on March 31. The index further recovered to more than 500 points late last week but was still below 2015’s average of 718.
Syscorp, which operates a fleet of nearly 290 vessels, including those deployed in Middle East operations, transports mainly timber products to the Far East region. Last year, the group shipped some 580,000 cu m of timber products, which was down by 20% from 2014.
The group does not ship other dry bulk commodities like iron ore, coal or grains. Miri-based Syscorp’s key shipping business is in containerised cargo and crude palm oil (CPO).
Ling considers CPO shipments to be more profitable than dry bulk transportation. The group operates three CPO tankers, servicing the Malaysia, Indonesia and China routes.
On container shipping, he said the business was still tough going as freight rates had remained stagnant. Stiff competition for cargo has continued to put pressure on the rates.
A market leader in container transportation in Malaysia, Syscorp laid off three container vessels after ceasing the unprofitable regional operations more than a year ago, and shifted its focus to domestic routes. The group owns and operates a fleet of 14 container ships plying Sarawak, Sabah and Peninsular Malaysia ports and coastal towns.
For the financial year ended June 30, 2015 (FY15), Syscorp group transported 108,218 twenty-foot equivalent units or TEUs, which was a 13% increase from 95,456 TEUs in FY14.
Asked if the implementation of the Pan Borneo Highway project would benefit local shipping firms in terms of the shipment of road construction materials, Ling said this had yet to materialise as some of these materials were currently transported by road.
So far, four of the 13 work packages of the highway project have been awarded. The Sarawak portion of the project is estimated to cost RM16bil, of which a significant chunk is reported to be on the cost of road construction materials.
KUCHING: Shin Yang Shipping Corp Bhd (Syscorp) has shifted the focus of its container shipping business to domestic routes as the industry is shrouded with continued uncertainty.
Group financial controller Richard Ling said Syscorp currently operated a fleet of 14 container vessels with about 95% of them deployed on routes within Malaysia.
“A majority of these container ships ply Sarawak, Sabah and Peninsular Malaysia ports,” he told StarBiz. The group laid off three container vessels after ceasing the unprofitable regional operations more than a year ago.
For the financial year ended June 30, 2015 (FY15), Syscorp recorded a sharp increase in earnings from domestic and coastal shipping activities as the segment’s profit jumped to RM31.9mil from RM13.1mil in FY14. The group’s container vessels transported 108,218 TEUs (twenty-foot equivalent units) against 95,456 TEUs in FY14 or up by 13%. Its 13 twin decker cargo vessels shipped some 580,000 cu m of timber products to the Far East regions in FY15.
Syscorp and some other shipping firms have reportedly benefitted from the recent withdrawal of container shipping by Hubline Bhd. As a key player in domestic and intra-Asean routes, Hubline ceased container shipping operations all together in September, last year to stop the heavy losses it had incurred in recent years due to overcapacity and depressed freight rate due to stiff competition for cargo.
According to Ling, domestic container shipping operation remains “very competitive” with reduced demand and this has squeezed the profit margins of shippers. Syscorp is a market leader in container transportation in Malaysia.
Syscorp forsees sea transportation of road construction materials for the Pan Borneo Highway project as potential new cargo in the next few years. Two of the project’s work packages are under implementation and 10 other work packages for the multi-billion ringgit projects are expected to be awarded in stages.
Miri-based Syscorp, which operates a fleet of nearly 290 vessels, including those deployed in Middle-East operations, is also involved in the shipment of crude palm oil (CPO) from Malaysia and Indonesia to China.
The group has three CPO tankers in service and a set of CPO barges currently on time charter to an Indonesian vendor through the company’s joint-venture associate firm PT Baruna Adiprasetye’s flag ship.
Ling said the charter rate for CPO transportation had dropped in tandem with the fall in the prices of marine fuel oil used by the tankers, container ships and other larger vessels, adding: “CPO tankers are now operating on smaller margins.” According to the company, international dry bulk shipping has been hard hit due to plunging rates in line with the slump in commodities’ prices.
“The marine fuel oil prices have fallen to between US$300 and US$320 per tonne (in tandem with the steep fall in global crude oil price to around US$30 per barrel from US$100 per barrel more than a year ago) from the peak of US$700 per tonne previously. Similarly, the price of industrial diesel used by the smaller vessels has dropped,” he added.
Ling said the lower marine fuel oil and industrial diesel prices had helped to bring down Syscorp’s operational cost, with the savings in fuel consumption translated into contribution to the group’s bottomline.
In FY15, Syscorp group’s net profit fell to RM5.2mil on revenue of RM882.9mil against RM6.2mil and RM1.14bil respectively in FY14. The company attributed the lower earnings to lacklustre international shipping sector, especially with reduced shipment volume to the Far-East regions.
Ling is hopeful that Syscorp would maintain its shipping revenue of nearly RM605mil in FY15 for the current financial year as the group had managed to sustain its income in its first quarter (July-September).
On Syscorp’s other core business in ship building, he said the sector had been adversely affected, especially in the construction of new offshore support vessels for the oil & gas industry as oil majors had drastically cut their capital expenditures on oil exploration and production activities in the wake of the depressed crude oil prices.
“Our shipyards are also constructing smaller vessels, like landing craft and tug-and-barges.We concentrate on ship repair business,” he added.
Leading Malaysian domestic shipping company Shin Yang Shipping Corp (Syscorp) has tuned inwards in the face of continued volatility in the international container shipping market, local reports said.
Syscorp has realigned its focus to domestic container shipping routes with some 95% of its 14 container ships deployed on routes within Malaysia, group financial controller Richard Ling said
.“A majority of these container ships ply Sarawak, Sabah and Peninsular Malaysia ports,” he said, adding that the group laid up three container vessels after ceasing the unprofitable regional operations more than a year ago.
However, domestic container shipping operation remains “very competitive” with reduced demand, Ling said, and this has squeezed the profit margins of shippers.
Syscorp sees some future cargo potential from the sea transportation of road construction materials for the Pan Borneo Highway project in the next few years. Two of the project’s work packages are under implementation and 10 other work packages for the multi-billion ringgit projects are expected to be awarded in stages.
Meanwhile, Syscorp’s other core business in shipbuilding, has been adversely affected, Ling said, adding that the offshore support vessels segment has been especially hard hit as oil majors had drastically cut their capital expenditure on oil exploration and production activities in the wake of the depressed crude oil prices.
“Our shipyards are also constructing smaller vessels, like landing craft and tug-and-barges. We are concentrating on ship repair business,” he added.
KUCHING: Shin Yang Shipping Corporation Bhd (Shin Yang) foresees domestic and coastal shipping as a driving growth in anticipation of the coming Pan-Borneo Highway projects as a further boost from the recent Budget 2016.
According to chairman Tan Sri Datuk Ling Chiong Ho in Shin Yang’s 2015 annual report, it was a year full of anxieties and economic uncertainties, especially with the crude oil price having plunged by more than half due to the global crude oil supply issue.
Ling noted that this was further deepened with the economic uncertainties in the US and European countries and political tensions arising in the Middle East regions.
He further noted that the international shipping market is facing a severe situation in dry bulk shipping due to plunging rates for carrying commodity products.
“Furthermore, shipbuilding the oil and gas sector was at its lower path due to downsizing or minimization of their capital expenditures toward the oil and gas industry players,” Ling said.
“We foresee domestic and coastal shipping as a driving growth in anticipation of the coming Pan-Borneo Highway projects as a further boost from the recent Budget 2016.
“In order to sustain in the shipping industry, it must be able to stand firm to its commitments and responsibilities.”
For the year ended June 30, 2015 (FY15), Shin Yang had registered a gross profit and net profit after tax of RM79.1 million and RM5.2 million respectively with an earnings per share of 0.43 sen per share as compared to 0.61 sen per share in the previous year.
Ling noted that the decrease in earnings was due to the lack lustre international shipping sector especially with the lower shipment volume to the Far East regions.
He said that the shipbuilding activities showed a sustainable margin with 19 completed vessels successfully delivered to the owners from the oil and gas sector and resource based sectors, while domestic and coastal shipping also showed a much improved segment profit of RM31.9 million as compared to RM13.1 million in 2014.
Despite the economic challenges faced by many shipping companies, Shin Yang reported that the reduction of crude oil price had resulted in a cost reduction on bunker fuel to the group’s shipping sectors.
“Furthermore, the strength of the domestic economy and development and balanced consolidation of our business activities would continue to guide us to revenue earning and business achievements,” Ling said.
Ling highlighted that the Sarawak Pan-Borneo Highway which is expected to be completed in Year 2021, would maintain the state as one of the top priorities for development, thus bringing about a lot of internal spring off business activities.
Hence, Shin Yang believes there is requirement for shipping logistics from the group’s container vessels, project use of barges and tug, dry and liquid bulk fleets plying South East Asian regions.
“In the shipbuilding sector, the emphasis is on taking steps to aggressively carry out repair and maintenance and fabrication works to meet the requirements of the niche markets from operating expenditures in the oil and gas industry and also to meet the potential requirements of the resource based sectors,” he said.
For Shin Yang’s Middle East sector, Ling pointed out that the shipment activities to Zakum Offshore Inlands Project in Abu Dhabi, United Arab Emirates have been completed ahead of schedule and that put the group’s reputation on the forefront.
“We foresee the potential further growth of these development projects in Abu Dhabi, Dubai, Kuwait and Qatar.
“The group had completed its capital expenditures for both vessel fleet additions and shipyard facilities plans.
“The challenge for the Group is to further improve its efficiency and productivity in both the fleets efficiency and shipbuilding activities.
“The group shall continue to work on achieving and realising the full use of its resources,” he added.
KUCHING: Shin Yang Shipping Corp Bhd, which owns and operates a fleet of 297 vessels serving domestic and international routes, will see a boost to its bottom line if the current low bunker fuel price stays.
Group financial controller Richard Ling said Shin Yang had benefitted from the drastic drop in bunker fuel price as marine fuel oil consumed by the group’s larger cargo vessels and chemical tankers had plunged to US$450 per tonne from US$600 per tonne early this year.
He said industrial diesel used by the group’s smaller cargo vessels plying mostly domestic routes had also come down following the drop in global crude oil prices.
“Bunker fuel made up between 30% and 35% of our operational costs, and the group’s annual fuel consumption bill is around RM130mil. The lower bunker fuel will significantly reduce our operational expenses.
“Based on the current bunker fuel cost, it will increase the group’s profit margin by 7% to 8% assuming that the demand for cargo and freight charges remain unchanged,” he told StarBiz.
Ling said wages made up between 9% and 11% of the group’s operational expenses while other operational expenditures include overhead costs, such as port charges and marine insurance.
For financial year ended June 30, 2014 (FY14), Shin Yang posted group net profit of RM6.2mil on revenue of RM1.14bil, compared with RM4.49mil and RM889.2mil respectively in FY13.
The group’s 18 container vessels transported 70,738 twenty-foot equivalent units (TEUs), which was a 22.9% increase from 57,526 TEUs in FY13.
Ling attributed the higher container shipment volume to additional vessels joining the fleet.
In FY14, the group’s 13 twin-decker cargo vessels shipped 697,000 cu m of timber products from Malaysia to the Far East region. Shin Yang currently operates three chemical tanks transporting crude palm oil (CPO) from Malaysia and Indonesia to China ports. A fourth tanker is expected to be deployed early next year.
The group also owns landing crafts, tugs and barges, and has shipping operations in the Middle East.
On market outlook for 2015, Ling said the group’s container shipping business was expected to remain stagnant due to the world’s challenging economic environment but he expects its CPO transportation business to stay positive.
The Baltic Dirty Tanker Index was reported to have rebounded from its low point of 605 in September to peak at 975 in November, and has since come down to the current level of around 888.
On the strengthening of US dollar against the ringgit, Ling said this had benefitted the group in terms of higher freight rates.
“But the weakening ringgit against the dollar is unfavourable to Shin Yang’s shipbuilding business as imported raw materials have become more costly,” he explained.
The group owns and operates four shipbuilding yards in Miri and Bintulu, which have an annual capacity to construct 60 vessels based on 100m length vessel. The group also operates one ship repair yard in United Arab Emirates.
In FY14, Shin Yang completed and delivered 12 new vessels with total contract value of RM385.2mil to clients. Currently, 17 vessels, including high-value end vessels, with combined contract value of RM451.9mil are under construction for completion within two years.