Jinhui Shipping and Transportation Ltd

OSE:JIN

Earnings Call Transcript 2023-Q2

[Wei Man Ching, executive]

This is Raymond Ching. Welcome to Jinhui Shipping and Transportation 2023 Q2 and Semiannual Report. I hope anyone -- I hope everyone can hear me.

Okay. I shall start right away. For Q2 2023 revenue for the quarter is at USD 23 million. Given the very challenging market, the net loss for the quarter is USD 7 million. We recorded a basic loss per share at USD 0.06 per share. In light of the rising interest rate environment and in order to remain prudent and defensive we have lowered our gearing ratio. And as of end June 2023, our gearing ratio is at 8%.

Highlights for the quarter. Given the considerable pressure in freight rates of shipping market in the first half of 2023, the group reported a consolidated net loss for the current quarter of $7 million. Chartering revenue decreased 55% to USD 23 million for the current quarter, as compared to $51 million of corresponding quarter in 2022. This is due to a weak dry bulk shipping market, very challenging macroeconomic and financial environment in 2023, not just first half, to be honest, it's first half and continuing, relative to a strong freight market and favorable macro environment same time last year.

The reported average TCE of the group split was USD 10,132 per day, for Q2 2023. This represented a decrease of 62% as compared to $26,397 per day in Q2 2022. On the more positive side, we have been working hard on cost control. So there's a decline in vessel running costs mainly due to a drop in crew cost and continue reduction in pandemic-related manning expenses as a result of the lifting of COVID-related restrictions.

There was a net loss of $1 million on bunker recognized during the quarter as compared to a net gain of USD 4 million on bunker in the corresponding quarter of 2022. Other operating expenses decreased as the group recorded a net loss of $2.2 million on financial assets at fair value through P&L in current quarter as compared to a net loss of $4.5 million in the corresponding quarter in 2022. Depreciation and amortization decreased from $9.1 million for the second quarter of 2022 to $7.9 million for the second quarter of 2023.

This is mainly due to the decrease in depreciation on owned vessels as a result of reduced in carrying amounts of owned vessels after the recognition of impairment loss of owned vessels in 2022, partially offset by the recognition of depreciation on right-of-use assets during the quarter. Due to a rising interest rate, we also recorded an increase in finance costs. As of end June 2023, secured bank loans decreased from USD 83 million as of end December 2022 to $81 million as of June 30, 2023. The current portion of secured bank loans was $24 million and noncurrent, i.e., long-term portion is $57 million, respectively. So for the first half of 2023, we repaid $2 million in bank borrowings.

On the CapEx side, I think we are very much under control. No new building expenses and about $1.6 million was spent on dry docking and ballast water treatment systems during the quarter. A final dividend of USD 0.04 per share was declared in 2022. So a total of $4.4 million was paid in June 2023. I think this page of numbers is a very self-explanatory. So I will go to the next one.

In terms of key financial ratios, as of Q2 2023, total assets stands at 501.57, I'd say, USD 501.5 million. That's a drop from Q2 2022, of course. Net equity, USD 387 million. Secured bank loans, USD 80.8 million, current ratio has slightly improved to 1.83:1, gearing at 8%. Working capital, USD 33.3 million and we have an available liquidity of close to USD 50 million as of end Q2 2023.

Next slide shows our fleet development. We have been shy in terms of fleet expansion. And I think it turns out to be a very wise decision given the turbulence and volatility and uncertainty in the market. So for 2023, actually, for the past 2 years, we have been focusing more on maintaining the quality of our fleet or in fact, shedding weight of our fleet. So the main CapEx that has been -- we've been spending on was the ballast water systems.

Next slide is the fleet list, which you'll be aware of. As of 27th of August 2023, we are operating 24 owned vessels with a total capacity of 1.37 million metric tons. Average age, 13.8 years. In addition, we have 1 chartered-in vessel. In terms of the ballast water treatment systems, we only have 1 vessel remaining to be treated and that's Jin Gang, which will be done by 2024. So 96% of our vessels are all fitted with ballast water treatment systems now.

In terms of debt maturity profile, we have extended the debt maturity. So if you look at the red bar, 29% will be repayable within the next 12 months. 18% will be repayable within 24 months and 53% will be repayable between 3 to 5 years. As of end June 2023, our total bank borrowing debt is at USD 81 million. I apologize for my voice. I have a little bit of a flu. In terms of cargo mix, 88% of the cargo we carry out, minerals; 8%, steel products; 1%, coal; 2%, agricultural products and 1%, cement. The volume of cargo that we carry has dropped. If you look at Q2 2022, we have carried 3.29 million tonnes, whereas in Q2 2023, we carried 4.43 million tonnes. I think this is a combination of we had more ships then, as well as an even fuller utilization of the fleet.

As I pointed out and I'm sure everybody are aware, it has not been a very strong and demand has not been very strong for the past quarter, in fact for the past 6 months. In terms of loading, 76% of our cargoes are loaded in Asia, excluding China. 9% from China, 7% from South America, 2% from Africa, 4% from Europe, 1% from Australia. In terms of where our cargoes are discharged or where basically our shippers are, 83% of our cargoes' loads are discharged in China, 13% in Asia, excluding China; 2%, Africa; 1%, South America and 1%, Europe.

Time charter equivalent. For Q2 2023, for the post-Panamax, which is the one that we charted in, the TCE is at $4,719; Supermax fleet, $10,360; so average, $10,132. Unfortunately, the market has been very weak. So for the chartered-in vessel we had a rather extensive period where the ship could not get employment.

Hopefully, going forward, as the market becomes stronger, the demand, at least for the past few trading days has been showing some encouragement. We can catch up and with this, the performance of this chartered-in vessel for the remaining of the year. We've always tried very best to drive down costs. And a little bit of positive news for you all. We managed to squeeze down running costs, as of Q2, 2023, the running cost, $5,429; depreciation, $3,477; finance cost, $156. Finance cost is the one thing that is very much beyond our control, apart from lowering debt. But if you see on the operations side, on the running costs, we managed to squeeze almost $500 from Q2 2022. So we'll continue to work hard on this front.

On the outlook, I think it's very, very difficult. I think I'm pretty sure that you all have read in the press, financial news that there's a renewed round of worry over the global economic growth. This is particularly related to our trade dry bulk shipping because one of the biggest driver of the dry bulk shipping market is China. So with China economic growth slowing down, it affects our market. And in fact, if you read in the various -- from Bloomberg, Financial Times, et cetera, you'll find out that there are many articles on about the economic slowdown of China is not necessarily -- it is -- or in fact, it's not a positive at all for global economy. So but this is what's happening right now.

If we look at our industry alone on a stand-alone basis, the industry fundamentals actually are not so bad. One of the biggest fear in shipping is always supply outstripping demand. And this is not the case right now or at least, supply is under control and there is no huge new building in the market or waiting to flush into the market. Of course, the interest rate cycle is not in our favor, it's actually not in any business favor, when borrowing costs comes up. Then for, so -- this is the reason why we are keeping gearing in check. There has been shareholders asking us, why are we not borrowing more? Why are we not borrowing more, why are we so cautious on borrowing? I think now you understand why.

I think this -- the visibility, again, once again, it's becoming very cloudy right now. I'm sure there will be upside coming but we don't know when. And it requires many right pieces to fall in the right place. We need further stimulation, stimulate policy from various countries in order to boost up the dry bulk shipping market, the freight rates. In fact, you can imagine, when the macro -- the monetary policy is not in favor, even traders shy away from buying commodities, trade finance become more scarce.

But at the same time, we want to look at our business over the longer term. We will continue to react and respond to [indiscernible] of the market. We will continue to try to maintain a very high-quality fleet and as reasonable age as possible. So we will look out for opportunities and act on an opportunistic basis going forward.

Rest assured, we'll be very, very cautious. That's all from me. So if you have any questions, why don't you fire away or maybe I suggest typing on the chat, so it's clear for everyone.

[Wei Man Ching, executive]

I think you might have missed out on the Panamax TCE.

The Panamax fleet TCE, we have, only have 1 Panamax, which is the chartered-in and unfortunately, that particular market has -- was not very encouraging. So there has been a period, over a month where we couldn't find them -- the right employment for that particular ship. We have to think about positioning, et cetera and ended up, none of the right employment. We couldn't find the right employment for the ship. So that's why the TCE has been so poor.

Shipping market, July, August.

Poor, not good. I'll be very blatantly honest with you.

Okay. If there are no further questions, I'll call this an end. It's not a very exciting quarter. I hope -- on behalf of the company, thank you very much for attending and I hope to bring everyone good news in the next quarter. Thank you.