PNSC in rough seas
THE global shipping industry has witnessed a paradox in recent times, that of rising volumes and falling prices. While demand has been increasing, capacity has expanded at a much faster pace, creating an imbalance.
As volumes grew at approximately four per cent annually over the past few years, capacity grew at 10 per cent per annum.
Pakistan’s own flagship shipping lines, the Pakistan National Shipping Company (PNSC), had bought an additional bulk cargo vessel last year as part of expansion.
The company has recently entered into a strategic accord with Pakistan State Oil (PSO), to jointly purchase specialised vessels for the haulage of liquefied natural gas (LNG) and liquefied petroleum gas (LPG).
PSO also awarded PNSC contract of affreightment (COA) for the haulage of three million tonnes of furnace oil for 2013 in October this year.
Previously, PSO had used international carriers for its shipping needs, and with this contract it intends to save up to Rs2.5 billion per annum by paying in local currency. However, Transparency International Pakistan and Public Procurement Regulatory Authority have raised objections over the contracting procedure, and urged PSO to cancel the awarded contract and issue an open tender.
Another approval by the Economic Coordination Committee (ECC) of the cabinet in November held that all public sector cargoes would be managed by PNSC, and all government departments and institutions were directed to utilise the company’s services for the same. The ECC further stated that all contracts and agreements should be on an FOB basis with the PNSC nominated as carrier. The PNSC should act as shipping agency for all the ministries, autonomous and semi-autonomous departments of the government, and organisations such as the PSO, Trading Corporation of Pakistan, and Pakistan Steel Mills, should have long-term contracts of affreightment on a market-based formula as is being done successfully with the refineries.
The Pakistan National Shipping Corporation is involved in the business of transportation of dry bulk and liquid cargoes, offering tanker services, bulk carries, charters, and an agency function. The company currently manages ten shipping vessels, with a combined capacity of 660,000 tonnes.
The company is listed on the Karachi Stock Exchange, and its stock has gained over a 100 per cent since the start of this calendar year. The stock stood at Rs27.68 at day-end Tuesday.
PNSC’s management also works with 18 private limited companies, which administer either different vessels or other aspects of operations.
Out of the 63.3 million tonne domestic trade haulage, PNSC lifted a total cargo of 10.3 million tonnes (approximately 16 per cent) and displayed volume growth of 7.45 per cent. However, the company’s consolidated revenue figures declined 4.5 per cent year-on-year (YoY) in 2012 attributed to declining global freight rates and lower rental income. The company bounced back in the first quarter of the financial year 2013 (1QFY13), with revenues touching Rs2.546 billion, an increase of 9.2 per cent from the same quarter in the corresponding year.
That being said, the company’s gross profit grew to Rs2.095 billion, a YoY increase of 1.65 per cent, largely due to lower direct fleet expenses. In the first quarter of 2013, gross profit grew by 77 per cent over the corresponding year to Rs884.2 million.
Profit After Tax (PAT), however, declined by a whopping 54 per cent YoY, to Rs753.15 million. While general and administrative expenses declined marginally, other operating expenses increased by 162 per cent YoY, largely due to higher gratuity costs and revaluation loss on derivative instruments. The company’s finance cost also increased 99.3 per cent year on year, in part due to additional debt of Rs10.3 billion (by way of a syndicated term facility and issuance of Term Finance Certificates).
PAT grew by a staggering 135 per cent in the first quarter of 2013 over the corresponding quarter last year, to reach Rs456 million.
Earning per share dropped to Rs5.70 in 2012, from Rs12.36 in 2011. EPS for the first quarter of 2013 stood at Rs3.45, compared to Rs1.47 for the corresponding period in 2012.
Gross profit margin in 2012 increased to 23.61 per cent from 22.18 per cent in 2011. On the other hand, PAT margin fell to 8.5 per cent,
from 17.5 per cent a year earlier, reflecting the global shipping industry trends. Thus, return on equity fell by more than half, from 9.04 per cent in 2011 to 4.05 per cent in 2012. However, margins improved in the first quarter of this year, with GP margin reaching 34.5 per cent, and PAT Margin touching 18 per cent.
The company’s cash and cash equivalents figure grew to Rs3.267 billion from Rs2.57 billion a year earlier. The current ratio also improved, from 1.59x in 2011 to 1.73x in 2012. The current ratio enhanced further in the first quarter of 2013, at 1.81x. Financial leverage declined from 0.44x in 2011 to 0.37x in 2012.