Jinhui Shipping and Transportation Ltd

OSE:JIN

Earnings Call Transcript 2023-Q1

[Wei Ching, executive]

Good afternoon, everyone. This is Raymond Ching from Jinhui Shipping and Transportation Limited. Thank you for joining Q1 2023 results presentation. Can everybody hear me? Please let me know if anyone cannot hear me. Excellent. Thank you.

I believe you have seen the results announcement, and you have a copy of the presentations, I shall fire away. We have a new design of the presentation to -- hopefully to cheer everyone in this not so bright economic environment -- markets. Sorry, letting more people coming in. Okay.

2023 has not been a very good start. For the Q1 2023, we recorded revenue of USD 14 million. The freight environment has not been good. We recorded a net loss of USD 13 million. A basic loss per share of USD 0.117. On the bright side, our gearing ratio has still been kept at a very low level, 7% as of March 31, 2023.

Highlights for Q1 2023. Q1 has been a very weak market, to be honest. I think this is very clear just even by observing the Baltic Dry Index. From looking at shipping news headlines, et cetera, it's very clear that the beginning of 2023 has not been great for most business.

The chartering revenue has decreased 56% to $14 million for Q1 2023, mainly due to weak market sentiment. I think this weak market sentiment is -- there are quite a few factors affecting that. In general, people are worried about the global economic growth. Pursuant to the reopening of economies of many countries. There has been great or very high expectations to economic recovery post reopening. But this has not generated very, very positive results yet.

The average TCE for the group's fleet was USD 6,580 per day for Q1 2023. Now this is a significant drop compared to Q1 2022, which was USD 17,510 per day. Other operating income also increased. There's a net loss of USD 1.1 million on bunker, recognized during the quarter as compared to a net gain of USD 4.6 million on bunker in Q1 2022. There was a net gain of USD 1.3 million recognized in first quarter of 2023 on financial assets at fair value compared to a net gain of $2.6 million in the first Q1 2022.

Also, we have not had any disposal activities in Q1 2023, whereas in first -- in Q1 2022, we disposed of 2 Supramaxes, generating a total gain of USD 6 million.

Depreciation and amortization increased from $8.6 million for the first quarter of 2022 to $9 million for the first quarter of 2023. This is mainly due to recognition of depreciation on the right-of-use assets during the quarter, partially offset by the decrease in depreciation on owned vessels as a result of reduced in carrying value of our owned vessels after the recognition of impairment loss of owned vessels in 2022.

The finance cost has also increased in the current quarter to USD 1.3 million, which is an increase from $0.4 million in Q1 2022. This is mainly due to the rising interest rate, which I believe all -- whether you're in shipping or not, if you have borrowings, you would have felt the increase in interest expenses.

As of March 31, 2023, secured bank loans decreased from $83 million to $79 million as of end of March 2023. The current portion and noncurrent portion of secured bank loans was $35 million and $44 million, respectively. During the quarter, we also drew down new secured bank loans of $6.5 million. At the same time, we also repaid USD 10 million of bank borrowings.

We have a CapEx of $0.7 million, mainly on dry docking and vessel improvements.

Financial highlights. I think this is self-explanatory, so I wouldn't go through them.

As of Q1 2023, we have a total of $519 million, almost USD 520 million, which is a decline from Q1 2022. Net equity, USD 398 million. Secured bank loans of USD 79 million. Current ratio 1.48:1. Net gearing 7%, slightly increased from Q1 2022. Working capital, $25 million. And we have available liquidity of USD 49 million, almost USD 50 million.

As of May 2023, we have 24 owned vessels. So the total carrier capacity is approximately 1.37 million deadweight tonnes with an average age of 13.83 years. We also have one chartered-in vessel, a Kamsarmax, named Taho Circular. We chartered this in June 2022 and it will expire in February 2029.

Very much of the majority of our vessels have finished installation of the BWTS, ballast water treatment systems. Jin Sui will be installed within this year and another one Jin Gang will be installed by 2024.

In terms of debt maturity profile, as of Q1 2023, we have a total of USD 79 million, 43% will be payable within 12 months, 19% within 1 to 2 years and 38% will be between 2 to 5 years.

In terms of cargo volume, the cargo mix, 61% of our cargo are minerals, 20% coal, 19% steel products.

In terms of the distribution cargo -- in terms of loading, 68% of our cargos are loaded in Asia, excluding China, 19% in China from Chinese ports, 6% North America, 4% Australia and 3% Europe.

In terms of the destination of where our cargos are discharged, unloaded. 66% of our cargos are unloaded in China; 31% in Asia, excluding China; and 3% in South America. Of course, again, I want to stress that our own experience in terms of cargo destination is not representative of the market. However, one shouldn't be surprised that lots and lots of cargos are being discharged in China because China has been one of the, if not the biggest, raw material importer in the past, I would say, over almost 2 decades.

So right now, I think if you can see in the Chinese economy, the economic growth is weaker than market expectations. It's clearly translated into lower imported volumes. So the economic news you read from news headlines is also what we're experiencing. They are importing less. So we hope that as the recovery go forward, gathers pace, these numbers would improve; freight environment, et cetera, will improve.

It's a very disappointing set of time charter equivalent, of course, in Q1 2023. For the Post-Panamax fleet, $13,116 is a significant decline compared to Q1 2022. Supramax has the TCE as of Q1 2023 is $6,301, average of $6,580 compared to Q1 2022 $17,510 and the full last year 2022 results of $18,813. We have kept ourselves busy to keep the cost of owned vessels as low as possible.

For Q1 2023, the running costs per day averaged at $5,444, which is a slight improvement from the figures in Q1 2022 as well as the full year 2022. Finance cost has slightly increased to $167 per day. As we mentioned, no one can escape the rising interest rate cycle.

In terms of the outlook, what I can share with you is our own expectations, and we'll be very frank, the immediate sentiment is still poor. 2022, 2021 have generated very good results. I think you can see it's largely because of the COVID trade, manmade port congestion as well as economies sucking in raw materials as well as goods in fear of logistics problems. So this all really stocked up more than normal. Once this COVID restrictions is over, things start resuming back to normal, so the port congestion is gone and we all come back to reality.

What will be the economic growth? What kind of pace are we growing at, the world going forward? So far, it's slower than expected. The tightening monetary policy, i.e., the rising interest rates also had a negative effect on both sentiment and actual willingness to invest, trade, et cetera.

I think we look on the positive side, I think we still need some time. It's only a few months of post-COVID trade. So let's give them some time. Let's give ourselves, let's give the market some time to see the true recovery strength of economies both in the West and in the East.

Now those are uncertainties that we cannot control or -- with high uncertainty. At the same time, when we look in our own industry, fortunately, supply of new vessels remains limited at this juncture, especially with such monetary environment. Banks are not too willing to lend. Borrowers are also not too keen on borrowing given the cost of borrowing. In the event that economic recovery start gaining pace, I think we're in a very good position to capture increased activities with our fleet.

We have no material CapEx at the moment. We have no plan on any new buildings, et cetera. It's a very unpredictable market. It's a very -- it's a world with high level of uncertainty. The visibility, right, to be honest, is not too high, but we will remain flexible, and we will do our best to maintain a young and modern fleet.

If you have any questions, please fire away. You may want to type it so that we can maintain order.

[Wei Ching, executive]

Well, I don't know what you mean by the market average rate or what you see as the 50% discount to market average rate?

If you look at the Baltic Dry index, if you look at those reported numbers, they only select certain routes. As you can see, we focus very much in the Pacific region, our customers. So versus going -- operating in Atlantic, for example, there will be price differential.

Okay. Yes, you can say Q2 pandemic is over -- okay, sorry, pandemic is over, so does quarantine measures?

We -- some of our vessels were fairly new. So what we newly acquired certain vessels. So it takes time for those expense to come down. Our expenses has always been around $5,000-ish, okay? So I don't see what you mean by our expenses alone is higher than the chartering revenue.

The freight rate shipments depends on a number of factors: Where you're operating, what kind of cargo is available and the competition. So if -- I don't understand what you mean by saying the market average rate. Where did you get the market average rate?

It is a huge drop. I think if you look back at the Baltic Supramax Index, we're experiencing what the market is experiencing. But obviously, differential in the market rates. For example, they may be using a 5-year new Supramax to showcase the market rate at the point in time, while we have an average of 12, 13. So a younger vessel do come on higher rates. But at the same time, it is more expensive. You have a higher finance cost to service the debt, et cetera, et cetera, okay?

There's no free lunch. No, Kelvin, I cannot give you Q2 daily TCE rate guidelines. We don't do forecast, remember? I would say that it's getting better. But to be honest, so far, not getting -- not that much better. It doesn't excite any of us at the company right now.

It's very -- reality is shipping is -- the business model is not too complicated, but the actual operating environment is very complex. We are at the mercy of a lot of factors that are beyond our control.

Nice try, Heison. I can only give you right now, the snapshot in time is better, okay? I didn't say the overall Q2 TCE is better than Q1. My job is to disclose information that is allowed to be disclosed to you. I'm afraid it's not to help you trade.

Why don't I put it this way, guys. It's the end of May. So on all your calendar, it's another month until the end of Q2. So how Q2 would average out, I really do not have a clue. All I can say is we hope that going forward, the remaining of 2023, things will improve. It is showing improvement relative to Q1. That, right now, this is all I can say.

We have so many moving parts, uncertainty. It's not just economical. It's not just in shipping. It's not just in dry bulk. It's from all directions, economical, non-economical. Right now, I think we are operating in a very, very complicated market.

Any further questions? Okay. If there are no further questions, we'll call this an end. Thank you very much for joining. I'm sorry that I can't deliver better news, but in the market is the market. So until next time, fingers crossed, I hope I will be able to deliver more cheerful news with regards to Jinhui as well as dry bulk market. Good morning, and good evening. Thank you.