MISC Sees Higher Bunker Rates Increasing Operating Cost

MISC Bhd, the largest single owner operator of liquefied natural gas (LNG) tankers, expects higher bunker rates to increase it operating cost for the financial year ending March 31, 2010.

"We now see bunker prices, which are a major portion of our cost, moving up," MISC chairman Tan Sri Mohd Hassan Marican said on Thursday.
Last year, the bunker price breached almost US$700 per tonne, easing in the middle of 2008 to US$200 per tonne and is now close to US$400 per tonne.

However, the impact is cushioned by the nature of MISC's business, which is 70 percent on long-term contracts with major energy companies, Mohd Hassan said at a press conference after the company's 40th annual general meeting here.

"As far as being exposed to volatility of freight rates in the present downturn, only 30 percent of our business is affected," he said. Mohd Hassan said that MISC would continue to expand and grow organically, and consider merger and acquisition (M&A) opportunities when these arose. "These are not off the radar screen but there is none at the moment," he said, adding that any M&A would need to fit with MISC strategies.

On the latest joint venture to construct an oil terminal in Tanjung Bin, Johor, Mohd Hassan said the oil terminal is expected to come into operations in 2012.

MISC's unit MISC International (L) Ltd yesterday entered into a joint venture agreement with VTTI Tanjung Bin SA to set up Asia Tank Terminal Ltd (ATTL) with the purpose of constructing, commissioning and operating an oil terminal with a base capacity of 741,200 cubic metres in Tanjung Bin. MISC International and VTTI Tanjung Bin will take up a 50 percent stake each in ATTL, to be incorporated in Bermuda. On its liner business, Mohd Hassan said MISC will exit from the Grand Alliance by end of 2009 and will focus on the intra-Asia and Oceania sectors and built on its halal routes.

As part of the reengineering of the liner business, a total of 11 vessels were laid off, he said. "It cost us less to lay off than to keep them going," he added. On other developments, Mohd Hassan said MISC was in discussions with China LNG Shipping (Holdings) Co on a joint venture but declined to disclose further details.

A recent news report stated that MISC Bhd is to partner China LNG Co to build and supply a tanker to transport LNG from Bintulu in Sarawak to Shanghai in China.
It said that both parties will hold equal stake in the joint venture to build the LNG vessel estimated at US$150 million to US$200 million in Shanghai.

For the financial year ended March 31, 2009, MISC's revenue rose 21.9 percent to RM15.78 billion from RM12.95 billion previously while net profit declined by 39.5 percent to RM1.53 billion. This was attributed to earnings from petroleum, offshore and LNG businesses being weighted down by the highly adverse performance of the container shipping division amid lower volume, depressed rates and high costs.

At 3.20pm today, the MISC share price dropped half sen to RM8.75.

Source: Bernama