Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Great Eastern Shipping Co Ltd (BOM:500620, Financial) reported a significant net profit of INR 812 crores on a consolidated basis for Q1 FY '25, showing a substantial improvement from the previous year.
- The company declared an interim dividend of INR 9 per share, marking its tenth consecutive quarterly dividend.
- The consolidated net asset value (NAV) per share increased to INR 1,464 as of June 30, 2024, reflecting strong financial health.
- All vessels are on time charter, with new time charters fixed at significantly higher levels than before, indicating strong market demand.
- The company has achieved a net cash position of $350 million, reflecting a $700 million swing from net debt over the last five years, showcasing robust financial management.
Negative Points
- Crude tanker earnings were softer year-on-year due to a significant drop in Chinese crude imports and weak refinery margins.
- The order book for crude tankers has increased to over 8%, and for product tankers to 17%, indicating potential future supply pressures.
- The company faces challenges in finding business for older ships, leading to a strategy of swapping them for relatively newer vessels.
- There is uncertainty regarding the pricing and future contracts for two rigs coming off contract in the second half of FY '25, which could impact future earnings.
- The company does not provide earnings guidance, making it difficult for investors to predict future performance and returns.
Q & A Highlights
Q: You had formed a subsidiary in Gift City a quarter ago. What business do you intend to do in this subsidiary?
A: The main intention of the subsidiary is to conduct in chartering activities. Currently, we have two ships in chartered. We plan to see how this develops before expanding significantly.
Q: Last quarter, you mentioned difficulty in finding business with old ships, leading to swapping them for relatively less old ships. How does the buyer of your old ships employ them?
A: Older ships can still be employed in certain markets with fewer restrictions, such as the coast of China. Our strategy is to operate ships internationally without age restrictions, which is why we sell older ships.
Q: What are the triggers for further NAV increase from here? Do you see earnings remaining firm across all types of ships in the foreseeable future?
A: We don't give guidance as market conditions can change rapidly. However, the offshore vessels have been repriced at substantially higher rates, and we expect them to contribute significantly to profitability.
Q: What kind of incentives are you expecting the government to provide for local shipping companies?
A: Currently, the details are not clearly defined. We will wait for the government to come out with more complete information before commenting.
Q: How do you look at spot versus period charter, and at what point would you move to more period charters?
A: This decision is opportunistic and depends on market conditions. Historically, we have found that remaining predominantly in the spot market yields better returns over time.
Q: Are there any plans to expand into new or adjacent businesses?
A: No, not at the moment. We are focused on our current lines of business.
Q: What are the expected growth and valuation for GE Shipping by year-end?
A: We cannot comment on future valuations. Our focus remains on operational efficiency and market opportunities.
Q: Could you provide the dry docking schedule and costs for FY '25?
A: Typically, 1/4 of the fleet will undergo dry docking each year, costing around $2 million per dry dock on average.
Q: What are the factors that can lead to an increase in trade for different types of ships and consequently increase freight earnings?
A: Global economic growth is a major factor. Additionally, specific events like the Red Sea crisis can impact trade routes and increase demand for shipping services.
Q: Are there any plans for a buyback in the near term?
A: No, there are no plans for a buyback. Recent changes in tax treatment make it more expensive to do so.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
