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Samudera Shipping Slips Into The Red


Fewer cargoes, lower freight rates, higher fuel costs and the consequences of operating a smaller fleet during a time of a slowdown in world trade has led intra-Asia specialist, Samudera Shipping (SGX: S56 / SAMU.SI), to report a net loss for the third quarter of the year.

Singapore-listed and headquartered ocean carrier Samudera Shipping has announced revenues of just under US$89.57 million, a loss before tax of US$418,000 and a net loss after tax of US$479,000. All financial figures will be in U.S. currency.

Samudera's Third Quarter Revenues

Revenues for the three months ended September 2019 stood at $89.57 million, a 23% decrease from the $116 million recorded in the third quarter of 2018.

Samudera experienced lower revenues in its main ocean container shipping division, along with decreases in its much smaller dry bulk and tanker segments.

Box volumes, as measured in twenty-foot equivalent units (TEU), handled by the company fell by 15.8% from 405,000 TEU in the third quarter of 2018 to 341,000 TEU in the third quarter of 2019. The company said the decline was because of "a slowdown in global trade activity and a reduction in our services." It added that freight rates "softened" during the period.

Reduction in Costs

The company also operated a slightly smaller fleet as three under-performing vessels, a tanker and two dry bulk vessels, were sold in January and August respectively.

Because Samudera was operating a smaller fleet, its cost of sales also dropped, from $110.9 million in the third quarter of 2018 to $86.9 million in the third quarter of 2019, a 21.6% reduction.

Gross Profit

Gross profit fell from $5.5 million in the third quarter last year to $2.7 million in the third quarter of 2019, a decrease of 51.5%. Although there were a series of small revenues generated from other sources and other costs incurred, the company experienced large marketing expenses ($1.8 million), administrative costs ($1.5 million) and finance costs ($768,000).

Samudera released a statement commenting on the results, noting that the "global trade for goods and services has been on the decline amid the fallout from U.S.-China trade friction and rising geopolitical tensions in Europe and Asia, putting intense pressure on the competition for cargo. Other challenges include rising operating costs from the volatility in oil prices and complying with the International Maritime Organization's low-sulfur regulations effective 2020. Overall, the shipping industry is facing strong headwinds and the outlook for the industry will continue to be challenging."

Balance Sheet

Samudera holds just under $138.7 million of current assets, which is mostly cash and trade receivables. Meanwhile, as of the end of September this year, the group also holds $142.8 million of non-current assets, which is mostly comprised of property, plant and equipment. That figure has declined from the $160.4 million recorded in the prior corresponding period. Total assets in the third quarter stood at just over $281.5 million.

On the other side of the ledger, Samudera had current liabilities of $56.1 million, which was mostly trade and other payables, as of the end of September. The total amount of current liabilities has declined from the figure recorded during the same period in 2018, which stood at just over $62.2 million. The decrease was mostly in the trade and other payables accounts. This may be because of the sale of vessels.

As ships have been sold from Samudera's ownership, the company will be incurring a smaller overall bill for fuel, lubricants, ship's stores and so on.

Samudera has just under $35.1 million of non-current liabilities in total, the majority of which are bank loans of $28.7 million. The total value of Samudera's non-current liabilities has crept down from just over $36.3 million at the end of September 2018. The amount of the company's bank loans has actually declined by about $7.05 million when compared to September 2018. The reason appears to be that Samudera has changed its accounting treatment of leases. The company has recognized right of use assets and lease liabilities of just over $16.18 million, which has increased its liabilities in the third quarter of 2019 to a level comparable to the same time last year. 

About Samudera

Samudera is a feeder operator, which means it picks up containerized cargo from the smaller regional ports and drops them off at large containerized hubs, such as Singapore.

Samudera's ships call at over 45 ports across the Middle East, the Indian subcontinent, Southeast Asia and East Asia (excluding the Koreas and Japan).

Ports of call comprise Umm Qasr (Iraq); Shuwaikh and Shuaiba (Kuwait); Dammam (Saudi Arabia); Hamad (Qatar); Dubai (United Arab Emirates); Karachi (Pakistan); Kandla, Pipavav, Mumbai, Chennai and Kokata (India); Colombo (Sri Lanka); Chittagong (Bangladesh); Yangon (Myanmar); Bangkok and Songkhla (Thailand); Kuantan, Pasir Gudang, Penang and Port Klang (Malaysia); Sihanoukville (Cambodia); Singapore (Singapore); Belawan, Palembang, Jakarta, Semarang and Surabaya (Indonesia); Davao, Santos, Manila and Subic Bay (Philippines); Da Nang, Haiphong, Ho Chi Minh City and Qui Nhon (Vietnam); and, finally, Shanghai and Qingdao (China).

Samudera's Fleet

As at March 2019, the company operated a fleet of 33 vessels. At that point in time, it operated 29 container ships, of which it owned 10 and chartered 19. The 10 owned and operated vessels had a total capacity of 9,074 TEU. Samudera's chartered-in fleet of 19 container ships have a total capacity of 25,956 TEU. Together, Samudera's owned and chartered fleet had a total capacity of 35,030 TEU.

Samudera also operates a small non-box fleet. As at March 2019, it operated two Indonesia-flagged chemical tankers, each of 11,278 deadweight and built in 2006. It also operated a 2007-built liquefied natural gas tanker of 145,700 cubic meters capacity. Samudera also owned and operated two 2011-built dry bulk ships of 57,700 deadweight, but they were each sold to two separate companies. The aggregate net proceeds from the sales were just under $20.3 million. The total gain on sale of the two vessels was $245,561, Samudera said.

The funds raised on the sale of the vessels will be used to fund potential investment in Indonesia and/or working capital for the group.

Image Sourced from Pixabay. Credit: Alexander Kliem

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