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.