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Edited Transcript of JIN.OL earnings conference call or presentation 29-Nov-19 8:00am GMT

Q3 2019 Jinhui Shipping and Transportation Ltd Earnings Call

Hong Kong Dec 2, 2019 (Thomson StreetEvents) -- Edited Transcript of Jinhui Shipping and Transportation Ltd earnings conference call or presentation Friday, November 29, 2019 at 8:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Wei Man Ching

Jinhui Shipping and Transportation Limited - VP

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Presentation

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Wei Man Ching, Jinhui Shipping and Transportation Limited - VP [1]

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Ladies and gentlemen, this is Raymond Ching from Jinhui Shipping speaking. Thank you for dialing in to the conference. Good morning to those in Europe and good afternoon to those in Asia. I believe you all have a copy of the presentation as well as the results announcement, so I shall go ahead and begin.

Can all of you hear me? Just to ensure that the conference is -- the number is working. Everybody hear me? Hello?

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Unidentified Company Representative, [2]

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I hear you.

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Wei Man Ching, Jinhui Shipping and Transportation Limited - VP [3]

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Okay. Thank you. If we go through the presentation, just to go through the highlights for Q3 2019. Revenue for the quarter is USD 17 million. We have recorded a net loss for the quarter, USD 2 million. This is due to a mark-to-market loss on the financial portfolio. EBITDA of USD 2.9 million. So loss per share for Q3, USD 0.018. Gearing ratio as of 30th of September 2019 stands at 7%.

On the next slide is the financial highlights for the quarter and the 9 months ended September 30, 2019. We've just talked about the actual Q3 numbers, so maybe we haven't go through are the 9 months 2019 numbers. For the 9 months up to 30th of September 2019, we recorded a revenue of $43.37 million. We've not sold any vessels in the past 9 months, so there's no net gain of disposal -- on disposal of vessels. EBITDA is at USD 13.6 million. We recorded an operating profit of $2 million, and for the full 9 months is a net loss of $1.1 million. So the basic earnings per share for 9 months up to end September 2019 is USD 0.01 -- USD 0.011 loss.

In terms of the -- sorry, actually, my apologies. Maybe I should go through the highlights of the quarter as well. If you go back 1 page, the decrease in revenue for Q3 is mainly due to the reduction of number of owned vessels after the disposal of 3 vessels in the third quarter of 2018. As I briefly mentioned before, we recorded a net loss of USD 2 million for Q3 due to a net loss of USD 4 million on financial assets at fair value through profit or loss, i.e., mark-to-market loss. It's mainly due to unrealized loss on the investment portfolio.

During the quarter, we entered into 2 facility agreements to provide the aggregate amount of USD 10 million loans to 2 borrowers under terms of 3 to 5 years. Since the end of Q3 2019, we have entered further into 4 facility agreements to provide the aggregate amount of $28 million to 4 borrowers under terms of 5 years. We have entered into these transactions in order to generate a stable and recurring interest income. We are very comfortable with the value of the collateral ships, so we don't carry any operating risk. We believe this is a reasonable allocation of capital into income-generating assets. And it doesn't -- it keeps -- we want to have part of our revenue coming from asset-light nature.

So we go to the next -- to the fleet development side. We now have 19 vessels in our book. On the page, you're going to see the trend of how our ships have been -- or the fleet size have been evolving.

And on Page 8, if you go to Page 8, is the list of our own fleet. We do not have any charges in fleet ships at the moment. And we've added a new column to show you that the due date of the BWTS, the ballast water treatment system. Most of the ships, we have obtained extension from 2020 up to 2023. And of course, we will be arranging those ships, which would need to fit a ballast water treatment system by 2020 into the docks, respectively, next year. We will arrange them and fit the BWTS going forward.

On the next slide, the debt maturity profile. 51% of our debt will be repayable within 1 year, 7% to be repayable within the next 2 years, 36% will be repayable between 2 to 5 years, and 6% will be over 5 years. Total debt as of end of September is USD 121 million.

On the next slide, on the cargo volume analysis. For Q3 2019, we have carried a total of 3.12 million tonnes of cargo, mostly minerals. This is fairly comparable to Q3 2018, which pretty much stands at 3.1 million, just 20,000 tonnes more.

On the next slide, on the loading port analysis. We focused all our activity pretty much in the Asia region. So 90% of revenue were loaded in ports in Asia excluding China, 6% from Australia, 3% from North America and 1% from Africa.

On the next slide, we also show the discharging port analysis, and again, this pattern has not changed for us for a number of years now. 94% of our cargo are discharged in China and the remaining 6% in Asian ports excluding China.

In terms of the time charter equivalent of our fleet, for Q3 2019, for the Post-Panamax fleet, the TCE is $11,304; the Supermax fleet, $9,855. The average TCE is USD 10,016 per day.

Now for the full 9 months 2019, however, of course, it's slightly lower. For the Post-Panamax fleet is $8,778; Supramax, $8,876. On average, the average TCE for the entire fleet for the full 9 months 2019 is $8,865, which is a lower number than the comparable period in 2018, 9 months as well as the full year 2018. As you may all know that for the beginning of the year, in 2019, the freight market was fairly weak. We had a very good run in Q3 and reached a peak in mid-August actually and then slowly tailed off and it has turned weak again. And for our size of the ship, it's particularly unwelcoming news where there's a temporary nickel ore ban out of Indonesia. We hope that this ban is -- will be -- is going to be temporary. We will find out more as -- I think probably -- it's more likely we'll find out how this ban will unfold in early 2020, around January.

On the next slide, on the daily vessel cost of owned vessels. Given a fairly challenging operating environment, we have not slowed down on cost control. For Q3 2019, you see that the daily cost of our own vessel, we have been keeping it fairly consistent with a little bit of savings in Q3. Total cost is $6,224 per day on average for our fleet. The running cost is $3,808, $2,000 of it is depreciation and $398 is the finance cost. And the daily running cost is calculated as the aggregate of crew expenses, insurance, consumable stores, spare parts, repairs and maintenance and other vessels' miscellaneous expenses divided by ownership days during the period.

There's a slight increase in finance cost in Q3 2019, mainly due to the impact of the rising interest rate as the group's bank borrowings were committed on a floating rate basis, and there's an increase in new secured bank loans for the current quarter.

On the outlook. Right now, I think, especially in the fourth quarter to -- going into 2020 and especially before Chinese New Year, we expect a seasonal weakness in the freight market. At the same time, we see a lot of focus have either headed into -- or going to head into the shipyards to retrofit scrubber, especially large-sized vessels. So hopefully, this will soften the pressure in terms of freight weaknesses.

And of course, the current -- I would say current, I'm actually going forward in the immediate future, at least, the trading environment is expected to be weak, not just of the seasonal factor, but also amplified by our negative sentiment due to the U.S.-China trade dispute.

For the smaller size of ships, events like the temporary ban on the nickel ore exports by Indonesia is also putting pressure in the freight.

Now of course, looking on the positive side, the supply is -- remains to be under check. There's -- the number of newbuildings to be delivered or the overall supply in the next few years is still at a very, very historic -- low number, pretty much a historical low. So this provide a favorable downside protection, we believe. But then, of course, we -- on the demand side, this is something that is quite beyond the control of shipowners. It really hinges on how the global economy evolves and how geopolitical events unfold, and let's hope that there won't be any more unexpected geopolitical events.

If you have any questions right now, please go ahead. Please fire away.

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Questions and Answers

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Unidentified Analyst, [1]

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Yes. This is [Neil] from Hong Kong Zhoncai Finance Investment. Yes. I have 2 questions. The first one is regarding the financial asset position. This was in Q3 and given the unstable political situation in Hong Kong, I'm not sure the management will consider cash outcome of the financial assets during the coming quarter or the first quarter in 2020?

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Wei Man Ching, Jinhui Shipping and Transportation Limited - VP [2]

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Yes. We are -- of course, we are monitoring the very, very unwelcoming ordeal. Most of our financial instruments, in terms of equity, they're mostly traded on the Hong Kong Stock Exchange. There are some -- there are -- of course, there are fixed income products, which those are less affected. Now having said that, we have told you about the position as of end of September. We're also happy or glad to tell you that since the end of September, that position has recovered significantly. But of course, we -- going forward, we will monitor this very carefully and adjust this position in terms of reduction, lower the portfolio should we see the timing is right and as well as lower down the risk, of course.

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Unidentified Analyst, [3]

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Got it. My second question is regarding the BWTS. Can you give us some details about the average CapEx for each ship? Or -- and how the company would like to fund the CapEx.

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Wei Man Ching, Jinhui Shipping and Transportation Limited - VP [4]

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We will fund the ballast water management system, obviously, through internal cash flow or any undrawn facility. Now we have been playing the waiting game in terms of the ballast water management systems, okay? It was originally very, very expensive. But of course, as this becomes more and more bread-and-butter for -- in terms of the suppliers as well as the installation efforts from shipyards, we expect for the equipment itself, probably $0.25 million for each ship. It could -- that's like the ballpark figure, okay? And in order to save the installation cost, obviously, we will -- we have timed this in accordance to the ships for the next survey, for the next dry dock and survey. So on the installation charges, we expect the fitting of the ballast water management systems wouldn't be substantial. It wouldn't be another -- additional substantial maintenance cost. So we do it -- we install it while we are doing the periodic maintenance at the dry dock. So I would say $0.25 million to maybe $300,000, maybe slightly more, the ballpark figure. So we don't need to do any special funding for such CapEx.

If there are no further questions, I'll call this an end to the presentation. Let's keep our fingers crossed that the U.S. trade dispute will come to some kind of conclusion soon so that the uncertainty in markets would reduce for everyone, for everyone's sake or industry's. If you would like to have -- if you have further questions you would like to take it off-line, you know where to e-mail me or call me. Thank you.