Dry reality check

Jinhui Shipping and Transportation says a mind-blowing deleveraging of the global economy and payment problems for blue chip charterers mean it is not getting carried away by the recent bulker rally.

Its now trademark cautious outlook comes after charter party defaults helped it to an improved first quarter profit.

In its quarterly report Jinhui said: “One of the many reasons we believe that the outlook remains to be extremely challenging is because we are experiencing a deleveraging on a global scale that is mind-blowing in its scope.

Liquidity pumped into the banking system remains locked up in the financial sector and has not led to any increase in lending, the shipowner says.

Jinhui added: “The dilemma is economic activities will not kick start as quickly as everyone would like and expect if banks do not begin to resume lending as soon as possible.

“Economic activities will remain to be dull, and extreme volatility across all markets will be a highly likely outcome if banks remain their current stance.”

Size no salvation

Jinhui, which banked a profit of $50.45m for the quarter against $43.32m a year ago, says it remains cautious due to the weak economic fundamentals and a lack of improvement in world trade.

It said: “We believe 2009 remains to be extremely tough even for the largest and strongest shipowners, and outlook down the road will depend on whether there is solid positive developments in global trade volumes, availability of credit, freight market and vessel values collectively.

“As highlighted before, the group will not be 100% immune from a wide number of counterparty defaults and have been negatively affected in the first quarter due to a number of non-performing counterparties.

“We also experienced increasing delays in receiving charter-hires from charterers, a few of such charterers surprised us given they are widely regarded as blue chip quality.”

Jinhui pocketed $39.71m in the first quarter from the termination of charter contracts, outflanking the $10.14m hit from impairment charges due to “prolonged delays” in hire payments.

Revenue woe

The one-off income helped the Hong Kong and Oslo-listed bulker owner overcome a 28% drop in first quarter revenue.

Analysts say the impact of failed charter deals was not as bad as the market had feared, but were less impressed with Jinhui’s operating performance.

Adjusted net income reached $9m, less than half the $20m expected.

Overall income from its bulker fleet slumped to $82,57m from $114.79m 12 months ago.

Average income from its panamaxes slid from $47,056 to $17,311 daily. Its supramaxes and handymaxes bagged 26,955 daily, down from $34,130 per day in the first quarter of 2008.

Jinhui said: “Despite there are encouraging signs of slowing down of worsening in the global economies after various government bailouts and stimulus packages launched in the first quarter of 2009, there are still uncertainties over the macroeconomic recovery path and the dry bulk market environment remains difficult.”

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