Jinhui Shipping and Transportation Ltd

OSE:JIN

Earnings Call Transcript 2020-Q2

[Wei Man Ching, Vice President]

[Audio Gap] 51% -- sorry, 50% will be payable within the current year, 13% payable within 1 to 2 years and 37% between 2 to 5 years. The amount to be repaid within the next 12 months seems high, but do not worry, we will arrange this financing to stretch out the debt maturity in due course with our lenders.In terms of the cargo volume analysis, the total cargo volume that we have transported in Q2 2020 -- as of Q2 2020 is 5.56 million tonnes. 60% are minerals, 23% coal, 11% cement and 6% steel products. Majority of our cargoes were loaded in Asia, excluding China, 82% of it, 11% from Australia, 4% from China and 3% from Africa. In terms of the ports that our cargoes are discharged, 83% were discharged in China and then 17% discharged in Asia, excluding China. As of Q2 2020, the TCE, time charter equivalent of our own vessels, have declined, as you can imagine, for the post-Panamax fleet, $5,750, Supramax, $5,194, and average is $5,229, not exactly a very exciting number. For the entire of 2020 the post-Panamax fleet, $7,382; Supramax, $5,096, average $5,293. We have seen encouraging signs in recent weeks, where the freight rate has rebound quite significantly. So on average, for the entire fleet, I would say we are very comfortably right now at above $7,000 for Supramax and above $10,000 for our post-Panamax, which is good news. We see that the market is picking up despite a very, very negative backdrop due to the fires as well as geopolitics, I believe there could be some catch-up in terms of cargo shipping going forward. It will be volatile, but we remain cautiously optimistic. On the next slide, in terms of the daily vessel running costs of owned vessels. For Q2 2020, it is $6,662, $267 per day is the finance cost, $2,210 is the depreciation and the running cost has increased slightly to $4,185 when compared to Q2 2019 as well as 2019. As we previously mentioned, there's a reason to that, partly because of a reduction in the utilization. In terms of what we expect on the outlook, of course, we do not have a crystal ball. We believe that we -- every single industry is exposed to the same macro environment and right now, it's gloomy. The worldwide economy has been very, very badly affected by a combination of political tensions, the COVID-19 pandemic and for some countries, there has been some natural disasters. So it's like a triple whammy for some. The overall recovery will depend on how individual economies rebound going forward. And that -- the way we see it is how the pandemic is kept under control. This is very important because it has to -- unless this takes place, it's very hard for consumers to get confident to spend and for business confidence to rise so that they invest. From our perspective, the financial markets and the political tensions remain the biggest uncertainty going forward because we are confident that there will be a solution. There will be vaccines for the COVID-19 going forward, hopefully end of the year. And I believe, overall, what I see in Hong Kong and what I learned from friends as well as business counterparts all over the world, we are getting more and more used to how to protect ourselves in the -- against the virus. So this is a problem that we -- that I see definite light at the end of the tunnel. On a positive note on the specifics of our industry dynamics, the supply of newbuildings in the dry bulk shipping remains low, given the poor sentiment. There's a recent event, that unfortunate event that took place, where one of the Asian cruise operator run into financial trouble and has to halt payments to the lenders. I believe this will negatively affect lending towards the overall maritime industry, hence especially for any aspiring new entrants to the industry. So banks will be very, very cautious to lend against the owner of ships. With this in mind, we see that the newbuildings will continue to remain in check, which is a positive news given fragile demand side. We are cautiously optimistic with the rebound of demand in dry bulk seaborne trade. We believe that industries worldwide will eventually need to catch up given a lot of the procurement of the cargoes, be it energy, industrial or agricultural commodities have been pulled back, given the macro backdrop, but these will have to normalize. In addition, in this environment, I think you can see that, for example, scrapping of ships has been very, very low. We see that this will pick up. There are a number of old tonnages in the market that will go to the scrap yard as soon as the situation allowed. We see that the scrap price is coming back up again. Rumor that Capesize has been scrapped for about USD 400 per tonne committed. So we believe the overall demand-supply situation will improve. If you have any questions, please go ahead.

[Wei Man Ching, Vice President]

Okay. I've got a question from an investor. Why the vessel-related expenses remained high for Q2? It's mainly because of the bunker as well as the utilization. You can imagine the utilization is not at 100% in this environment. The utilization is actually 97%. But this bunker expense, as I've previously explained before, for example, before, I -- we charter the ship out to a customer, a charterer, we have to fill up the bunker. We -- let's say, we pay $10 per tonne of bunker. At the end of the charter, when the charterer redeliver the vessel to us, return the vessel back to us, they will have to refill the petrol to the original position or pay us the money. Okay. Let's say, at this time, the prevailing market price of bunker is at $8, then we will have to reflect $2 loss in terms of the value of bunkers on board of our ship. So this is the reason. Another question on the -- from one of the investors again. No, it's actually not from the voyage charter. We have minimal voyage charter. I think [ Leo ], your question, you may be a little confused we -- when you do -- when we do a time charter contract, we often say that we pretty much bypass the bunker risk. Well, this is absolutely the case when the bunker price is very stable. Otherwise, there could be bunker gain or bunker loss in -- on paper. The actual amount because think about it, we have to fill up the petrol full tank before or to a certain level and we agree, we measure the tank between ourselves and the charterer. What is used will have to be refilled back to that level. So when there are changes in the bunker price, this has to be reflected. Unfortunately, in this environment, the bunker price is going down. [ Henrik ], share buyback, right now, I have not been told of any plans for share buyback. We hear you. We'll reflect this to the Board of Directors and explore this. And we'll inform the market, should there be any share buyback program. If there are no more questions, then I'll call this an end. I wish everybody best of health. Keep yourself and your family protected from the virus. Should you have any -- oh, sorry, I have 1 final question. What are the results until August? I'm afraid I'm not under regulations and securities law to give you too much details. But as I said, you may have missed in the beginning of the presentation, we do see the freight market improving. As for Supramax, we are seeing -- we are actually on current contracts, all our Supramaxes at present on above USD 7,000 CC rate, for our post-Panamaxes at above USD 10,000. So it's much better than back in May-June period. Hopefully, this trend will continue. I think there's [ to it ], the Supramax index? I think in previous presentation, I've explained this before. The Baltic Supramax index is not exactly representative of all sizes of Supramaxes as well as the route. I have a detailed explanation on this which would require an additional slide. But basically, the route that we operate as well as the size of our ships are not exactly -- they're actually smaller than what the Baltic Supramax index is saying. The Baltic Supramax index, if you look at the Baltic index definition, the Baltic Supramax index is actually representing a much larger ship. Very, very -- well, yes, you are correct. But not -- firstly, it depends on clientele. That's number one. And secondly, it actually depends on the age as well as the size of the ship. For example, the Supramax that, for example, that can fetch the best of rates in any environment would be the younger ones as well as having all the equipment installed. Some -- for some, possibly with scrubbers. You will note that we have not installed the ballast water tanks. The average age of our ships are now around 11 years old. There will be additional cost to call those ports, for example, in the U.S. ports. The actual cost of running the vessel will go higher. Quite a bit higher if you start carrying grains. So it all works into the equation. At the end of the day, it's the net cash flows. Why are we not rejuvenating our fleet? Well, we do not have the full confidence right now of how the regulations of vessels will trend. Is the next generation going to be remain the current diesel engine? The actual regulation, the environmental regulation, we want more time to see how that changes. And if you see how newbuilding prices have been trending, while we are shying away from newbuilding prices, they keep dropping. We will be installing the water ballast tanks in accordance to the time docked -- or in accordance to the time line or the deadline. We do not want to specifically, for example, send a ship. The planned capital for the entire fleet, I would roughly estimate around -- for the ballast water tank equipment alone, it should be around $300,000 per ship, but we are going to plan together to do this kind of work, along with its dry docking schedule. So the overall planned capital will be around maybe a little bit north of $0.5 million each in due course for each ship. We also won't like to send them in batches. So we send them one by one to stretch out, so that at any point in time, we will have majority of our vessels in business. Any further questions? Will you pay a dividend this year? We will announce any dividend payout as soon as I get the instructions. Right now, I'm not aware of any -- there's been no talks of any dividend payout. Any further questions? Okay. Thank you very much. If you guys have any further questions that springs in your head, I believe you guys know my e-mail address. I'll type it here right now. Send me an e-mail, and I'll try to answer your queries as soon as possible. Thank you. Have a good day, and take care all of you. Thank you.