Pacific Basin Posts Loss amid Dismal Dry Bulk Market

Dry bulk shipping company Pacific Basin Shipping Limited posted a USD 285 million loss in its annual results ending with 31 December 2014.

The company’s revenue totaled in USD 1.72 billion in line with results from 2013 worth 1.70 bn.

The company’s dry bulk arm reported a net loss of USD 30 million amid weak dry bulk spot market rates in 2014, which fell more than 60% over the year and are currently at their lowest levels.

Additionally the Group’s consolidated results were affected by non-cash accounting charges and provisions of USD 130 million.

Mr. Mats Berglund, CEO of Pacific Basin, said that 2014 was a very difficult year characterized by an oversupplied dry bulk market and negative demand-side surprises.

” Our results were undermined by significant one-off and mainly non-cash accounting charges we had to book due to market-related challenges in both dry bulk and towage. Poor as these results are, it says much about our effective business model and competitive cost base that we remain EBITDA positive in these testing times and able to generate Handysize earnings that outperformed spot market rates by 28%,” Berglund said.

The company remains cautious with respect to the freight earnings outlook due to “the threat of worsening balance of supply and demand.”

As explained, demand growth continues to be impacted by the on-going Indonesian mineral exports ban, reduced Chinese coal imports, a further reduction in Chinese economic growth and the softer growth outlook for most developed economies.

“Good control of our vessel operating expenses, efficient workflows and minimising administrative costs are especially important in these difficult times. We are implementing new ship management and accounting software to facilitate these objectives. In Handymax, we will concentrate our fleet and cargo focus on a tighter geographical range to provide a better quality service to our customers, enable better ship-cargo matching and to optimise our front and backhaul combinations to generate better vessel earnings. While we are currently neither buying nor taking ships on long-term charters, we will continue to supplement our core fleet with low-rate short-term chartered ships, which contribute to our service and our results even in the depressed market,” according to Berglund.

The 2015 had a poor start with Baltic Dry Index falling to its lowest since indices began in 1985 and a dysfunctional freight market in some regions, the company said.

“We expect weak market to continue in 2015 and take a cautious view on freight earnings outlook. Net fleet growth has reduced, but excessive dry bulk supply is not yet fully absorbed. Low fuel prices may lead to faster ship speeds thereby potentially further increasing shipping supply,” Berglund concluded.

Pacific Basin operates 218 dry bulk ships of which 80 are owned. The company has 18 owned and 14 chartered newbuildings on order.

As indicated in the company’s annual report, 56% of contracted 40,220 Handysize revenue days in 2015 are covered at USD 8,880 per day net.