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Conference Call      
          Shipping Corporation of India
Expects delivery of 11 newbuild ships by end of FY12


Shipping Corporation of India held a conference call on Nov 14, 2011 and in the conference call the company was represented by its top management

Key takeaways of the conference call

Revenue days for bulkers and tankers have for the quarter ended Sep 2011 stood higher on the back of induction of additional tonnage to the fleet but that of offshore stood lower with higher dry docking during the quarter.

The total operating days for the bulk area is 1384 for the quarter ended September 2011.

Topline growth was largely driven by increase in tonnage which resulted in higher operating/revenue days which facilitated higher income for the quarter compared to corresponding previous period.

On the other hand with increase in tonnage as well as sharp rise in bunker price during the quarter has resulted in 125% jump in bunker cost.

Similarly the port dues too were up by 63% to Rs 102 crore on the back of increased tonnage. Bunker price moved up from USD 460 at the start of the quarter to USD 676 by end of the quarter.

The company also had a forex loss of Rs 126 crore during the quarter. This has escalated the total expenditure but with no improvement in realisation the margin suffered.

Segment revenue of liner was up by 21% to Rs 350.74 crore that of bulk were down by 5% for the quarter.

However at PBIT level both Liner as well as bulker registered a loss of Rs 1.59 crore and Rs 43.73 crore compared to a profit of Rs 37.09 crore and Rs 167.35 crore respectively in the corresponding previous period.

The company has about 26 vessels on order as on Sep 30, 2011 at a capital cost of USD 1.3 billion. And of which about 11 ships (including 5 bulkers & 6 AHTVS) will be delivered in 2011-12. Another 10 vessels including 1 PSV will get delivered in 2011-13. The balance of 5 ships including 2 tankers and 3 container vessels will get delivered in 2013-14.

The capital cost of USD 1.3 billion will be funded 80% through debt and the remaining 20% through equity. The company has already released about USD 600 million.

The company has reduced its capex programmes for 11th five-year plan given market conditions. Long-term acquisition depends on market conditions.

The company does not have any other expansion planed beyond what is on order already, but the company may consider some acquisitions in AHTV and bulkers.

Given the above acquisition plans the debt equity ratio is expected to go up to 1:1 compared to 0.76 as of now. Debt as end of Sep 2011 stood at Rs 5400 crore and cash was about Rs 1900 crore. Of the total debt about 97-98% is dollar denominated loans.

Gross NAV is at Rs 203/ share and net NAV is at Rs 130/share

Total income for the quarter was higher by 1% to Rs 1037.5 crore but excluding the profit on sales of vessels the total income was higher by 14% to Rs 1017.37 crore. The profit on sale of vessels was lower by 84% (or Rs 108 crore) to Rs 20.13 crore.

The EBITDA margin was lower by 66% with fall in margin and at net profit level it was a loss of Rs 140.6 crore as against profit of Rs 250.63 crore in the corresponding previous period.

The management mentioned that there is a slow down in the shipyard orders overall in the world.

The asset prices have decreased substantially and the company is not expecting the price of newbuilding to go down further.

However the older vessel prices are expected to go down further given lot of shipowners going for bankruptcy and bankers taking over vessels and putting them back in the market.

The company expects the bunker cost to continue to hover at higher levels as there is no indication of the fuel cost coming down.

The management indicated that they have no problem with finance and they have the intention of going to other segments of offshore business but as of now there are no current plans on it.