Great Eastern Shipping is looking to cancel more vessel orders, to reduce the load on its order book. The company has placed orders worth around $1 billion. The company on Thursday cancelled an order for one new building dry bulk vessel, the third bulk vessel order it has cancelled this year.
In a statement to the BSE, GE Shipping said it cancelled an agreement with a shipyard to build a Kamsarmax which was scheduled for delivery in FY12.
Speaking at an analyst conference call, Bharat Sheth, vice-chairman and managing director, GE Shipping, said, “We are in negotiation with all the yards where we have orders and if we can work out a suitable deal, we will look at cancelling more ships, both on dry bulk and tanker.”
The company’s new building order stands at 7 vessels — 2 Supramax bulk carriers, 3 Kamsarmax bulk carriers and 2 Suezmax tankers. In January, the company had cancelled 2 new building contracts it had placed with a Chinese Shipyard in 2007, for the construction of two Supramax bulk carriers approximating 57,000 DWT.
Since the dry bulk market collapsed the second half of 2008, GE Shipping has initiated a plan to reduce its dependence on the dry bulk sector. The company has sold off some of its old dry bulk vessels, reducing the tonnage. The contribution of dry bulk to the total capital has come down to 15% from 22% last year. The rest is covered by tankers.
GE Shipping expects difficult times to continue in the coming quarters, with weaker outlook in the tanker market.
“The tanker earnings in July-September quarter will be almost certainly lower than the April-June, however, we expect the average earnings on dry bulk to be higher,” Sheth said.
“There will be a time when our vessels will be operating at lower the operational costs. The crude as well as petroleum freight rates are trading at below operating costs,” he added.
About 55% of GE Shipping’s revenue days are contracted. During the June quarter, vessel rates were not below operating costs, which helped the company book profits. The average day rate earnings in the dry bulk category was $19,500, for the product tankers it was $17,000 and for crude tankers, $24,000.
The company reported a 68% fall in standalone net profit at Rs 126.28 crore, from Rs 387.59 crore last year. On a consolidated basis, net profit stood at Rs 154.17 crore, down from Rs 427.93 crore a year earlier.
Income from freight and charter hire fell by a third in the quarter to Rs 468 crore from Rs 700 crore, the company said.
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