Softer bunker prices fail to halt MISC profit slide

Friday, 27 February 2009

Leading Malaysian shipowner MISC Berhad saw profits tumble in the last three months of 2008, despite softer bunker prices. Profit after tax for the three months ended December 31 was $76 million (RM 280 million), close to half the $131 million (RM 480 million) earned in the same period in 2007. “Whilst easing bunker price provides some element of relief for operating costs, other costs remain high, compressing profit margin,” said MISC in a press release.Singapore 380 centistoke (cst) bunker fuel prices plummeted 64% from July 2008 to January 2009.

MISC said weakening demand and increasing vessel supply were putting downward pressure on freight rates for its box carriers and tankers.Looking ahead, MISC said that “in light of the decrease in global trade, the Group's profitability for the current and next financial year is expected to be lower than the previous financial year.”MISC has attributed previous slump in profits to bunker prices which it said “played a significant part.” Reporting its financial results for the quarter ended June 30, 2008, MISC said its revenues rose 24.9% to RM 2,921.2 million, but its profit before tax slipped to RM 559.4 million ($168 million), down 2.6% compared to the corresponding quarter a year earlier. "The decrease was mainly attributable to higher operational costs particularly in bunker, crewing costs and port charges," MISC said.

MISC says it is the largest single owner-operator of LNG carriers in the world, counting 29 LNG vessels in its owned fleet. It is also the world's second largest owner-operator of aframax tankers, with a 59-strong petroleum tanker fleet including 28 aframax tankers and 11 VLCCs. It has a further 29 chemical tankers. Recent Tankerworld reports indicate MISC has cancelled orders for four chemical tankers from SLS Shipbuilding. The four vessels are part of a $430-million order for eight 45,000 dwt chemical tankers placed at the South Korean yard in July 2007. MISC officials that Tankerworld spoke to declined to comment on whether financial constraints had forced the cancellations.

The cancellation at SLS Shipbuilding is the second investment pull-back decision made by MISC in recent months. Meanwhile, oil trading firm Scandinavian Bunkering has filed a lawsuit against MISC for an alleged breach of contract, reports said.Singapore-registered Scandinavian Bunkering is claiming between $24-27 million from MISC for allegedly breaching a contract signed in September 2008 to supply marine fuel oil, according to documents filed with the High Court of Malaya. (See Story Link)MISC entered into a contract with a private firm, Marinehub Malaysia, to buy 102,600 metric tonnes (mt) of bunker fuel between October and December for $559.80 per metric tonne (pmt), Singapore's Business Times reported.Bunker prices fell 33%, 41% and 1% in October, November and December respectively, according to Bunkerworld price data.

Source: TankerWorld