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.