Jinhui Shipping and Transportation Ltd

OSE:JIN

Earnings Call Transcript 2021-Q2

[Wei Man Ching, Vice President]

Good morning to all of you in Europe, and good afternoon to those in Asia. Can everybody hear me?

[Unknown Analyst]

Yes. We can.

[Wei Man Ching, Vice President]

Okay. In that case, I shall begin right away. Thank you very much for attending, everyone. I believe everybody should be positive when they see the results of Q2. So I'll fire away. Sorry, there's someone still waiting to join. So I'll let them in first. To go through the highlights for Q2 2021: the revenue for the quarter is USD 32 million. Net profit for the quarter is USD 86 million. And of course, this is explained in our financial results. It includes the reversal of impairment loss on our own vessels of USD 65.5 million. The earnings before interest, the EBITDA, i.e., is $90 million. The basic earnings per share is USD 0.783, and the interim dividend per share is USD 0.03. Sorry, there is still further people coming in. The consolidated net profit of USD 86 million for the current quarter is mainly due to a 275% increase in chartering revenue due to a very strong rebound of market freight rates as compared to last corresponding quarter. The average daily time charter equivalent rates increased 266% to close to USD 20,000 -- USD 19,149 for the current quarter as compared to USD 5,229 of the corresponding quarter in 2020. And of course, when freight rates rebounds like that, the asset values, the corresponding asset values also increase. And hence, there's a reversal of impairment loss on owned vessels of $65.5 million. The fair value gain on investment properties of $0.8 million was recognized during the quarter. There's a decrease in shipping related expense, mainly due to the drop in bunker related expenses of USD 2 million. There's a net gain of $1.6 million on financial assets at fair value through the P&L. During the quarter, we repaid $17.7 million bank loans. We acquired a 2006-built Supramax at a consideration of $9.3 million, and this was delivered in Q2 2021. We also acquired a 2004-built Supramax at consideration of $10.8 million in May 2021, and this will be delivered in August 2021.After the reporting date, we've contract to acquired a 2007-built Supramax at a consideration of $15.2 million, which will be delivered to us in October 2021. The next page is the financial highlights. I believe these numbers are self-explanatory. There's the finance cost -- for example, the finance cost dropped off, of course, because we have repaid down the debt -- further debt.As of Q2 2021, the total asset stands at USD 452 million. The secured bank loans further reduced to USD 100 million. We are in a net cash position right now. So there's no net gearing. Working capital, $48.18 million, which, if you compare to the corresponding quarter of last year, obviously, there's a remarkable improvement. We have available liquidity of close to USD 108 million. And we have never seen -- well, not never, we have not seen positive -- such encouraging numbers in terms of return on equity and return on assets for a long time, 29.73% for ROE and ROA of 20.53%.On this fleet development, you would notice that it has been -- we have gone through -- throughout the history of the company, we have gone through a period of rapid increasing capacity. And then there comes a super cycle. We reached a peak of 38. And of course, we have to pair this -- the size of the fleet down when the market times were not good. And we have started to pick up moderately in recent months. Now if you look at the overall fleet, we now have 20 vessels, average age 12.15 years. On this note of the -- our owned fleet, there has been a question from [ Richard ] and -- sent in to via email in advance of the presentation and the financial results, to ask me to comment on: is there any -- what's our plan on acquiring more Supramaxes or on fleet renewal, et cetera? I think we have explained before, given the challenges going forward in terms of regulatory -- or in terms of environmental issues. So going straight for new building, we are still not so sure about expanding our fleet capacity via new buildings. So we will continue to be opportunistic on acquiring secondhand vessels. Yes, the average age of 12 years, so it is not one of the youngest in the market, but we believe that there is always a balance between the price that we pay for the asset versus the purpose of using it. We are trying to find the balance where it's most suitable for our operations as well in term from the financial perspective. And of course, on the next slide, it's the schedule for the installation of ballast water treatment systems. We have and we will also be very orderly arranging the installation of ballast water treatment systems as and when these ships are due for the next maintenance docking. Debt maturity profile. 58% of our debt will be due within the next 12 months, 9% between 1 to 2 years and 33% between 2 to 5 years. For Q2 2021, 100% of our cargoes are minerals. In terms of loading port analysis, as we have previously explained, we very much focus on the Asian trades. So 90% of the cargoes were loaded in Asian ports, 7% from Australia, 2% from Europe and 1% from China. In terms of discharging ports, 99% of our cargo in Q2 2021 are being discharged in China; 1% in Asia, excluding China. And here is the detailed TCE as of the latest. For Q2 2021, the post Panamax fleet the TCE is $12,250. Now I would explain that, of course, this number is not the -- is below what the market would suggest. I believe you would have noticed that we have 2 post-Panamax fleet. Those 2 that have post-Panamax were -- starting from end of last year, they were carrying Australian coal destined to be discharged in China, and we all know there has been a dispute between the 2 sovereigns. So the discharge of Australian coal in Chinese ports were somewhat delayed extensively. I think this is widely reported. As of latest, this problem has been resolved. The 2 post-Panamaxes has discharged the Australian coals. And we will be looking to redeploy them in the market at the prevailing market rate. So hopefully, these 2 post-Panamax vessels will be generating another uptick in earnings for us going forward. For the Supramax fleet, the TCE stands at $20,000 as of Q2 2021. On average, is USD 19,149 per day. And if you compare it to previous numbers, obviously, the current numbers and the expected trend going forward is very encouraging. Daily vessel running costs of owned vessels as of Q2 2021. The overall cost is $6,763, $101 above Q2 2020. This slight increase in -- to be honest, I think it's minimal. We're still controlling the costing very, very well in our eyes. We hope that shareholders agree with us. The next 2 charts are really for illustrating -- illustration really. Obviously, the new building supply outlook, it's still very, very manageable in terms of the supply-demand balance. So we believe it's encouraging that going forward with such supply-demand outlook, looking at our industry alone, there will be good support in terms of freight rate going forward. In terms of outlook, I think I don't have too much to say. Overall, we believe there's a favorable demand-supply balance. So this theoretically will lead to good support of healthy freight rates in coming months. In terms of what's going on with the world, obviously, the COVID-19 situation, again, the new delta variance is giving a headache to all of us. We believe it's a double-edged sword because with the resurgence of the COVID-19, especially this delta variant, this will create further logistics nightmare in the maritime traffic. Now this, of course, would cause congestions. So on this front, this is positive. It could be positive to the freight rates as long as demand remains the same. At the same time, of course, reading the news headlines nowadays is, as I would describe it as rather a surprise every day. Economic events and geopolitical events could be very surprising and could be very unpredictable. We had -- I had a question on asking us whether we will look to refinance to stretch our debt profile, et cetera. Right now, we are comfortable. But at the same time, of course, we will be mindful of opportunities to stretch maturity profile if we believe is appropriate, and the pricing are attractive.

[Wei Man Ching, Vice President]

So if there are any questions, why don't you guys fire away? If you want to you can type it on the Zoom or you can verbally ask me your questions.

[Unknown Attendee]

Yes. This is [ Peter Scotner ], private shareholder. This -- yes, I was trying to figure out whether this nice income is based on an abnormal situation? Do your ships, are they also kind of queuing up outside the ports? So they are kind of standing in line? Or is it -- how is the situation?

[Wei Man Ching, Vice President]

No. No. Right now, I think our ships are all operating fairly smoothly, but you have to understand within the COVID-19 situation wherever we go, whether it's from port A to port B or port B to port C or port C to port D, the time to load a cargo, the time to discharge a cargo would have all stretched somehow because whenever we entered from 1 country to another country, another basically into another country's waters, the respective port agent -- the port authority would have specific guidelines for COVID. So for example, what will take normally, let's say, 5 days could easily involve a longer-time double. And let's say, if in case, if there were in case any -- involved any change in crew, for example, this would involve longer time. So because of COVID, the overall time spent of, I would say, -- I would dare say, every single ship in -- when loading or discharging would be longer. This already creates some kind of congestion. Now if with the resurgence of the COVID because of the delta variant, obviously, everyone, every country, every port authority would step up their precautionary measures. So this will create further congestion should the delta variant basically create further havoc in our world. You would have noticed that, for example, some ports have already closed down in the Chinese container ports, well which is not the commodities, but you can imagine what COVID -- what the delta variant could do in terms of disruption to the global maritime logistics. Okay. The current Asia financial is around $30,000. Can you please elaborate little at what rate you have done your bookings so far in Q3? Okay. Yes. I think if you look at the Supramax, we are doing -- our latest renewal would be in the, let's say, mid-$20,000. It depends on the route, it depends on the age. But all I can say is, we are seeing -- the current -- the rates that we have renewed lately would be above the 2021 Q2 TCE. What is the plan of contracting ships spot versus time chartering? Right now, I -- we don't see -- given the demand-supply profile, we don't find any long-term charter too attractive right now. And so we will probably be focusing on the voyage charters -- sorry, not voyage as in time charter trips. Can I indicate the prices you would consider acquiring secondhand vessels at? Absolutely not. I'm not going to tell you that. In terms of refinancing our loans -- this is [ Thor ]. I actually did -- I didn't notice that you're not on the call. Yes, we will look at it. But right now, given our balance sheet, we are comfortable and with the maturity profile. And of course, we'll always stretch it or refinance it to extend the debt maturity profile if there's attractive packages at good pricing. Strategy regarding dividends. I'm going to say before everybody asks me, okay? We have started to pay dividends at Q2. I do not believe I'm in a position to tell you or I'm not in a position to say how much more because we don't have -- the Board has not decided on a dividend policy right now given the world is quite unpredictable.But I would say that I'm confident that the Board would announce further payout should the market remained buoyant and we are pulling in good cash flows. I think this is all I can say in terms of the dividend payout going forward.

[Unknown Attendee]

Raymond, can I ask about -- will there be like a statement about like a policy down the line about dividend or will there be just like from quarter-to-quarter? I remember, when I was investor back in 2004, I think to remember, there was like a minimum 25% of net income kind of policy...

[Wei Man Ching, Vice President]

No. Right now, we don't have 1 that -- should the Board decided that there will be a policy, we would, of course, inform shareholders immediately. This is not something that I would keep anyone in the dark. Why is it that you're only getting mid-20s on your chartering when the Asian market is paying between USD 25,000 and USD 30,000 per day? That's in June. The TCE that we are indicating is the cutoff date is at June, okay? The freight rate changes every day. And as I said the TCE that you get on -- from multi-exchange involves ships of different age, different carrying capacity, et cetera, et cetera, right? For example, I will give you an indication. We have done 1 recently close to $30,000. So we have 20 ships. So averaging it out, it would be lower. And there will always be a time lag between renewal, right? I wish that we could charge, let's say, when the market is going up, today, it's $32,000, tomorrow is $33,000. I can change my rate every day, but we don't. So you observers like yourselves look at the market and say, though, the Supramax rate is at $32,000, you're only taking a snapshot in time. I think I've explained this more -- so many times that we don't fix a particular ship on the day. Charters don't fix a ship on the day when they need it. It's always in advance. So there will always be time lag. Share buybacks on the table? Not that I know of. If there are any share buybacks plan, again, we will inform the market in an official announcement. Well, thank you, [ Thor ]. You're finally saying something nice -- nice to me. Thank you. Okay. If there are no more questions, then I'll call this an end to the call. We'll continue to work hard to make sure that we will continue to squeeze out as much earnings as possible in this very good market. We -- I think we all know that this is a cyclical industry. So we will be doing our best. [ Leo ], this is about Jinhui Shipping and Transportation, this is not about the holdings. So I'm afraid I have no answer for your question. Thank you very much. I'll call this an end. We hope to bring further positive news in Q3 and fingers crossed on the good market, and let's all enjoy it. Thank you very much. Goodbye.

[Unknown Analyst]

Thank you.

[Wei Man Ching, Vice President]

Thank you.