Jinhui Shipping and Transportation Ltd

OSE:JIN

Earnings Call Transcript 2021-Q1

[Wei Man Ching, Vice President]

Good afternoon, ladies and gentlemen. Good afternoon, and good morning to those in Europe. This is Raymond Ching from Jinhui Shipping and Transportation Limited. Thank you for attending the Q1 2021 results presentation. I believe that you all have a quick look at the results as well also as have a copy of the presentation. If you don't, it's on the screen right now. So I shall begin. To go through the highlights. For the Q1 2021, we have recorded a revenue for the quarter, USD 16 million. We are delighted to report a profit. Net profit for the quarter is at USD 5 million. The earnings before interest, tax, depreciation and amortization, EBITDA is at USD 9 million. The basic earnings per share is at USD 0.048 per share. And the gearing ratio as at March 2021 is at 12%. The consolidated net profit of USD 5 million for the current quarter is mainly due to an increase in 76% of chartering revenue due to the rebound of the market drive bulk freight rates as compared to the last corresponding quarter. Now of course, we can't capture exactly what the prevailing market rates on a daily basis because there will always be a time lag. There will be time lag between the previous contract. We have to perform existing contract before we can renew as well as there will always be a time lag between when you conclude a fixture to the actual execution of a particular fixture. A net gain of USD 1.4 million on bunker was recognized during the quarter. There is a decrease in shipping-related expenses mainly due to bunker-related expenses of USD 5 million in last corresponding quarter. You can imagine when the bunker prices fluctuate, there will always be a P&L effect to us, although the volume of bunker doesn't change. This is because when -- for example, when we deliver a particular vessel to a charterer, it will have, let's say, x tons of bunker onboard, And when they return the ship to us, they can either refill it back to that x tons of bunker or they will pay us the prevailing price of the bunker. So there will always be a fluctuation on that. Realized net gain of USD 1.6 million upon disposal of equity and debt securities in the current quarter, compared to a realized net gain of USD 0.3 million from the last corresponding quarter. During the quarter, the group drawn new secured bank loans of USD 12.6 million and repaid USD 3.2 million. A Supramax, which was contracted to be disposed at consideration of $5.5 million in December 2020 was delivered to the purchaser during the quarter. We've acquired a 2004-built Supramax at consideration of $7.3 million in Q1 2021. And as of today, I'm sure you guys would have read the announcement yesterday, which is after the reporting date, we contract to acquire another 2004-built Supramax and a 2006-built Supramax at a consideration of $10.8 million and $9.3 million, respectively, in Q2 2021, the $10.8 million, the yesterday. On the next slide is the summary of the financial highlights. You can see good improvements in terms of revenue from Q1 2021 relative to Q1 2020. Operating profit has also increased from -- operating profit at $9.4 million versus Q1 2020, a negative $13 million. Operating profit of $5.75 million versus a minus $17.3 million. Finance cost has gone down to $498,000. Net profit at $5.25 million as previously mentioned. And the basic earnings per share at $0.048 versus a loss of $0.168 in the corresponding quarter in 2020. In terms of the balance sheet, total assets stands at $380.8 million. Our secured bank loans is at USD 117.7 million versus Q1 2020, $129.7 million. The current ratio is at 1.32:1. And net gearing is now at 12%. Working capital, $28.319 million, increased from Q1 2020 to -- '20 at 18.2% and also an increased available liquidity at USD 89.1 million. I think everything is looking encouraging. The next slide is the fleet development. I won't go into too much details. We have been increasing tonnage on a net basis overall. The next slide is our fleet of vessels, which we have 19 at this very moment. We have -- we have not been buying very new vessels. I think the reason is because we are not -- I think overall, the industry is not very sure of the next generation of commercial ocean-going vessels, what kind of technology there will be et cetera. So we have seen -- we are confident with the outlook. But nevertheless, we do not want to overspend on buying too new a vessel. We don't see that much or the freight differential between a newer vessel versus an older vessel, it doesn't quite justify the higher price tag of younger vessels.On the next slide, it's the schedule of the installation of ballast water treatment system. In terms of ballast water treatment system, we will time it in a way where -- when the ship is scheduled for dry dock and do the water ballast treatment installation at the same time. In terms of the ballast water treatment system, we roughly estimate roughly around $250,000 for each. Now by doing it while it's -- the ship is scheduled for drydocking would minimize additional docking costs i.e., we don't want to arrange a specific trip just for the ballast water treatment systems. Doing all the regular maintenance, drydocking, scheduling the BWTS along with its required maintenance at a dock would save us a lot of money. And it's in the interest of the company to keep the cost at check. In terms of debt maturity, as of end March 2021, our total outstanding debt is $117.7 million as of end March. 52% is repayable within 1 year. 13% is payable within 1 to 2 years and 35% repayable between 2 to 5 years. In terms of the Q1 cargo analysis 2021, 68% are minerals, 24% coal, 8% steel. We have not been carrying any cement in the current quarter. We did in Q1 2020.In terms of the loading port analysis, we have been concentrating in the Asia Pacific route. Hence, 78% of our ships are loading cargoes in Asia ports, excluding China; 14% Australia; 8% China. In general, given we are very, very mindful of the geopolitical dispute between sovereigns. So there are locations which we try to or -- no, we don't try to, we shy away from, in order to maximize our utilization. Discharging port analysis, 77% of our cargoes are discharged in Chinese ports; 23% in Asia, excluding China. Repeatedly we said that especially in terms of our market focus, the dry bulk market is very much driven by the commodity requirements of Asian ports -- of Asian countries, especially China. On the next slide is our -- the TCE of our owned vessels in this quarter. Post-Panamax, the TCE is USD 12,250 per day versus USD 8,223. For the Supramax Fleet, the TCE is at USD 10,022 in Q1 2021 versus USD 5,007 in Q1 2020 and on average, is at USD 10,279 per day. Now I do have feedback from some shareholders saying that how come our TCE is lower than some of our competitors. Firstly, I think you have to be mindful of the factor that I've previously mentioned, the time lag or the -- we have to complete our existing voyage before we can renew and then there will be time lag between fixture versus the actual execution of the contracts. And even more so, one factor is the fact that the routes, different vessels, different companies or different trade routes would -- do not exactly fetch what you see on the daily fixture reports according to Baltic Exchange. And also, despite there are -- I mentioned that we do not want to further invest into vessels, which are too young because we believe they are too expensive, but there is a price differential. But I think you all understand that you are -- you get what you paid for to a certain extent. So if the CapEx of a particular older vessel is cheaper, then I think it's also reasonable that there will be a lower freight rate versus newer vessels, which are a lot of times they have higher carrying capacity as well. Daily running costs of our vessel. As of Q1 2021, our daily running costs at USD 3,664 per day. Depreciation at USD 2,144 and the finance cost at USD 173 per day. We have been keeping our cost side very much in check. There will always be fluctuation depending on when duties maintenance bills come in and when do we -- so we book them as soon as they come in. So there will always be some fluctuation. But all in all, you can see this -- the pattern is fairly stable. Again, this is a chart -- I'm sorry, I should have updated this, but the trend is no different. We believe we are in a period of the dry bulk shipping cycle, where the number of new buildings supply is a -- is 1 of the lowest points. So as long as there are no new black swan events, touch wood, we hope not, we believe the market would remain favorably stable. Again, I think this chart is also sending the same message, the new dry bulk fleet growth is at 1 of the lowest points in the cycle. If you can compare -- go back to 2008, 2009, this is very favorable. In terms of the outlook, as I've just mentioned this, we believe the market -- the freight market is -- we expect the freight market to stabilize at favorable levels. I think I don't need to -- you don't need too much imagination, although I don't usually put out forward-looking statements. But I would say that we do expect Q2, for example, the TCE effect is to further go up north. We see very healthy demand of dry commodities across the Board, from iron ore, coal, grain, nickel, timber, you name it, overall, especially due to the pandemic when the logistics of finished goods as well as dry commodities have been disrupted. Also, there seems to be a lot of -- there are a lot of inefficiencies because of geopolitical disputes. So we -- there has been a lot of restocking happening in this world and in higher volumes, and we expect that to be so, to remain so going forward. In terms of supply of new vessels -- sorry, supply of vessels remain low. And hence, we see a very strong support for asset values. We continue to look out for opportunities to add on tonnages at reasonable cost in the secondhand market. We will continue to shy away from newbuildings , however. As much as we are fairly confident with the market going forward, we are very mindful of potential risk, including any reemergence of the COVID, geopolitical events or any changes in monetary policies going forward. I see the chats, so hold on. So hold on, let me answer them.

[Wei Man Ching, Vice President]

Can I say something about our coverage in Q2? .Yes and no. Hold on a second. I would say we are seeing -- we are covering some of the vessels beginning in the 20,000s or something or very, very high teens. I think this is all I can say right now, instead of committing to a number. I would say in Q2, I'm seeing very encouraging -- I expect the TCE will turn out to be high teens in Q2, just on the back of the envelope calculation. Okay. In 2020 blah, blah, blah. Yes, I see your -- about Eagle Bulk, Pacific Basin, et cetera, et cetera. I believe I explained this already. Some companies would have younger vessels, which have a higher carrying capacity. They have different size of ships, which could fetch a higher freight rate. But bear in mind, this is the revenue side. On the cost side, on the financing side, everything basically on -- the cost side of the business would also proportionately increase. So in terms of the net profit coming in, I think it's all -- it all reflects through the P&L, okay?For example, Pacific Basin, I don't know whether you guys know about the lock trade. The lock trade has been amazing. There are some lock trades have been for handy-sized ship. They are fetching USD 30,000 per day in the market for lock trades. I'm afraid this is not a sector that Jinhui Shipping is focused in, but I don't think it's wise to jump into something that we're not good at. We will focus on to the market that we have experience . Is there a reason for not answering e-mail to IR for several years? No answer. No, actually, I think I'm afraid there must be some misunderstanding because some of the shareholders would say that I've been really answering them. Maybe there's some problem, maybe send it again -- to us again. What is your estimation of the average time lag between the observed rates in the Baltic? You're putting me in a very difficult position because to be honest, I can't say. It's very hard to say that because, for example, let's say, I fix a particular ship at today's rate. But the actual late cancellation date could be in June, mid-June, it could be in end June. So it could be between 2 to 5 weeks. It's very hard to pin down an average number. Maybe I can work out something like that next time to tell you, but there will always be a time lag. Nobody looks for a ship -- nobody, let's say, looking for ship tomorrow only comes out to the market today. There will always be time lag. At what spot rates are we currently fixing our ships? As I said, there will be some in 20-something thousand. There are some in high teens. And overall, I expect Q2 to be in the high teens. As far as I know, the average voyage of a vessel of Jinhui Shipping is around 1 month. So there shouldn't be a very long time lag. Yes. As I said, let's say, I have a fixture finishing today, 21st of May, I don't fix the ship yesterday. I don't fix the ship's mix employment yesterday. I fix it in probably a couple of weeks in advance and give others a late cancellation date to take delivery of the vessel. So I'm sorry, there will be time lag. What has the status of the 2 Post-Panamax, which have been locked up in harbors? Well, you can say that they're locked up, but they're not. They are constantly -- we're basically, we are receiving the existing charter rate for those 2 vessels. For everybody's information, there's a shareholder , thank you very much, who follows our business very, very, very closely. It has been carrying Australian coal original destined to be discharged in China. But because of the 2 sovereign dispute, it's yet to be discharged, so they are paying us, not the freight rate in the prevailing market, but in the previous fixed number. Status of our Tower A project in Shanghai. Status of -- sorry, Shanghai project. The market is -- obviously, you can imagine, a lot of cities are still yet to be fully back to normal, it's still in the progress of seeking a tenant. So in terms of the income, right now, there's no income from the Tower A project right now. Actually, I'm going to unmute everyone, so that you can all -- if you have any questions, please go ahead. I saw another question, dividends. Right, we have not -- I do not know when we will declare a dividend. We have not declared a dividend in Q1 as evidently shown in our announcement. We are saving up our resources, on the lookout for further acquisition opportunities to increase tonnage. But selectively, of course. I think when it comes -- there will be a time where -- when we see that we will stop looking for further acquisitions and down the line, I'm sure there will be some return of capital to shareholders. I will wait for the Board decision and I will inform shareholders accordingly. No. We have not locked in any long 6-month charters so far, they are all at short voyages. Yes. As of now, all our contracts are on spot basis. Maybe I can say apart from the 2 that is carrying the Australian coals. Those were short charters to start off, but unfortunately, the sovereign dispute between Australia and China, it's a situation that I think both charters and ourselves don't like to see. No, Atlantica is on us. I don't know you know what you mean by no reports on marine traffics. We are still receiving higher freight. What is the most current daily charter rate of our vessel in average? No. No, I'm not going to give you an average right now. As I said, some are in the 20,000-plus, some are high teens. Unfortunately, there are 2, which are still in the teens because it's the 2 carrying Australian coal and they could not be discharged right now. We're still waiting. No, there won't be any demurrage received from these 2 unlucky Panamax vessel. It's still on hire. It's just unfortunate that the charter -- you can't just dump the cargo elsewhere. The charter is actively looking in discharging elsewhere. Well, I -- it's hard for me to say. I mean, of course, I wish it to end -- I wish with this saga will come to an end as soon as possible. We are seeing -- despite the unfortunate sovereign disputes caused chaos into us, innocent ship owners as well as, I would say, innocent charters, this is hard to predict. But we do see slowly there are some vessels carrying Australian coal, 1 by 1 being discharged at various Chinese ports. We hope that we would see the same to our 2 ships so that we could redeploy them in the current high market. No, we are not looking for any more investments in the real estate in the meantime. May I correct? We do -- we did fix out -- my correction to a previous question on the 6 months . We don't -- as of -- we did fix out 6 vessels on 6-month charter back in March, but not recently. So out of the 19, starting from -- we fixed that in March, they will be delivered to the charters around April, May. So it has gone for 1.5 months already. So those are on 6 months. No, we are obliged to announce to the market whenever we buy ships. So right now, no, we are not in the process of completing any further purchase of ships. I would say we are on the active lookout for any potential purchasing opportunities. The BW -- the ballast water investments, I think by the time that we have a schedule of roughly when they are going to go in during the year. No, I don't think exactly would impact utilization time lag. All in all, for regular drydocking would take around, let's say, 3 to 4 weeks. And the installation of the ballast water system would happen at the same time. I'm going talk about 3 to 4 weeks max, usually no more than 3 weeks. So it will be fitted within that drydocking period. So I expect the downtime would be no less than 3 to 4 weeks. Yes, I would say that. The 14 ships, I believe, is in 2022. Is the company looking for chartering opportunities outside Asia? I presume you're talking about whether we want to charter i.e., doing -- do Atlantic fixed. I think you have to realize there are 2 legs to a trade. So let's say if I -- my shipments currently in Asia, and I want to fix it out to the Atlantic, there will be -- it will have to balance out. Of course, in a good market, there will be balanced bonus. But if I want to redeploy back to position the ship back into Pacific, then I might miss out leg, on the returning leg where I get no revenue for that returning leg. So it depends. I wouldn't say no, but right now, we don't have any. Any more questions? By the way, I'm sorry, about investors not being able to reach us through IR. Why don't you type your e-mail [Audio Gap]