Jinhui Shipping and Transportation Ltd

OSE:JIN

Earnings Call Analysis

Earnings Call Transcript 2023-Q3

[Wei Man Ching, executive]

Good afternoon to those in Hong Kong in Asia, and good morning to those in Europe. Sorry, there's still participants entering the conference. Okay. Thank you very much for joining Jinhui Shipping and Transportation Limited Q3 2023 presentation.

Can anybody -- can everybody hear me? If you can, please type in the chat. Again, I believe you have -- all have a copy of this. If not, please look at the screen of the presentation. And you should have been received or got a copy of the results announcement.

Highlights for the Q3 first. Revenue for the quarter, USD 20 million. EBITDA for the quarter, USD 4 million. Net loss for the quarter, USD 8 million. And the basic loss per share for the quarter is USD 0.074.

On a 9-month 2023, we recorded a revenue of USD 57 million. EBITDA for the period, USD 4 million. Net loss for the period, USD 27 million. Basic loss per share, USD 0.25. Gearing ratio at 30th of December -- sorry, 30th of September 2023 is 10%.

I'll give you all the highlights for the Q3 2023. Given the considerable pressure in freight rates of shipping driven by rising interest rate, inflation as well as heightened geopolitical tensions, the group reported consolidated net loss for the current quarter of USD 8 million. The reported EBITDA was USD 4 million for the current quarter. Chartering revenue decreased to 49% to USD 20 million for the current quarter as compared to $40 million of corresponding quarter in 2022. This is due to very weak freight rates as compared to Q3 2022.

Reported average TCE of the group's fleet was USD 8,796 per day for Q3 2023. This represented a decrease of 55% when comparing with Q3 2022 figure of USD 19,562.

On the cost side, there's a decline in vessel running costs mainly due to a drop in crew costs under our cost reduction strategy, lower crude repatriation costs given COVID-related controls have been relaxed in 2023. There's a net gain of USD 1 million on bunker during the quarter compared to a net loss of $4 million on bunker in Q3 2022.

Other operating expenses decreased as the net loss on financial assets and their value through P&L in the current quarter narrowed to USD 0.1 million as compared to a net loss of USD 4.3 million from corresponding quarter in 2022. Other operating expenses also included an impairment loss on assets held for sale of USD 1.9 million on the disposal of the Supramax during this quarter, which will be delivered to the purchaser -- actually, has been delivered, which was delivered in mid-November 2023. But of course, this is not reflected in the 9 months reports because this -- the delivery happened in mid-November.

Finance costs increased for the current quarter, mainly due to rising of average cost of borrowing.

As at end of September 2023, secured bank loans increased from USD 83 million as of end December 2022 to USD 85 million as of end of September 2023. Current portion and noncurrent portion of secured bank loans was USD 31 million and $54 million, respectively. So there's a net increase in bank borrowings of $2 million.

We have very good CapEx. About USD 1.4 million was spent on dry docking and installation of ballast water systems during the quarter.

Although times differ right now, we have to look ahead and think about coming months, years. We contracted to acquire a 2014-built Supramax at a consideration of USD 20.4 million. The vessel was delivered in October 2023. One Supramax was contracted to dispose at a consideration of USD 8.08 million and was delivered to the purchaser in mid-November 2023.

Here is the summary of the financial figures, which I believe is self-explanatory, so I won't go into detail. As of Q3 2023, our total assets stands at USD 494.76 million. Net equity, USD 371.6 million. Secured bank loans of USD 85 million. Current ratio 1.77:1. Net gearing, 10%. Working capital, USD 36.9 million. And our available liquidity is approximately USD 49.62 million as of Q3 2023.

We have been very actively managing our fleet size in accordance of prevailing and what our expectation of the markets will be going forward. As of November 2023, we have 24 owned vessels. And here's the list of our owned vessels. As of yesterday, we are operating 24 owned vessels with a total capacity of 1.38 million deadweight tonnes at an average of 13.4 years. We also have a chartered vessel TAHO CIRCULAR. It's a 7-year charter, which we charted in June 2022, and the expiry date will be February 2029.

As of Q3 2023, out of the $85 million interest-bearing debt, 37% of that will be repayable within next 12 months. 45% will be repayable within next 2 years. And beyond that, between 3 to 5 years, 18%.

Business obviously tough. As of Q3 2023, 3.81 million tonnes of cargoes have been transported with our fleet compared to 4.1 million tonnes of cargo as of Q3 2022. Majority of our cargoes are minerals, 10% steel products, 7% coal and the remaining 2%, agricultural products and 1% various other mine [ abouts ].

We load our cargoes majority in Asia, excluding China. 64% of that is in Asia, excluding China, 17% from China and 19% from South America.

In terms of where the destination of where we unload our cargoes: 73% goes to China, 14% goes to Asia, excluding China, 9% South America, 3% others and 1% Europe.

In terms of the time charter equivalent of our fleet. As of Q3 2023, the post-Panamax fleet, which is mainly the TAHO CIRCULAR, USD 15,104; Supramax fleet, USD 8,531, hence a combined average of USD 8,796 per day in terms of TCE.

For the 9 months 2023, post-Panamax, USD 10,987 per day; Supramax fleet, USD 8,416 per day at an average of USD 8,520 per day.

If you look at the Q3 figures and the relative -- versus the 9 months, obviously, the Q3 are showing more encouraging numbers, and we hope that the market -- the freight market will continue to strengthen in coming months.

On the cost side for Q3 2023, our running costs, excluding depreciation and finance costs is USD 5,181, which is a good improvement from the corresponding quarter in 2022 as well as the full year 2022. We try very hard on the cost saving side. Depreciation, USD 3,596 per day and the finance cost, USD 156 per day. When the market is challenging, we especially put an effort to try to drive costs down.

In terms of outlook, to be honest with you, it's very, very uncertain. So it's very, very hard to paint a picture. I think all of you would just know just as much as I do because the freight market is very much affected by the macro environment from the overall global economic health to the monetary environment to geopolitics. But luckily enough, from the industry perspective, we are glad that at the very least, the supply of new vessels remain low. So to a certain extent, it's one less variable to worry about. But of course, at the end of the day, the freight market performance depends on demand, remains uncertain given the slowing global growth.

Cost of borrowing is very high given the U.S. Fed has been raising interest rates, although the market expectation is there won't be too much room for further rate rise. At the same time, for any rate reduction, it's not going to happen very quickly. If there's going to be any rate reduction, it's more like a very slow tail off within next 12 to 24 months.

So high cost of borrowing, of course, means higher cost for those of gearing. But at the same time, there is some benefit where a lot of our industry fellow players, fellow ship owners, competitors, you name it, because of this high cost of borrowing, are very cautious about gearing up the balance sheet and making big investments such as new building orders. So on this front, this keeps the supply of new vessels low.

For us, we remain cautiously optimistic. The market cannot be weak all the time. We hope that as eventually the interest rate environment stabilize, geopolitical environment stabilize as well as global growth gains strength, freight market will strengthen, we will continue to be opportunistic in terms of tonnage management, selling off older vessels, chartering or purchase younger vessels to maintain a competitive fleet for our business, for our customers as well.

That's all for me. Please let me know if you have any questions. [Operator Instructions]

[Wei Man Ching, executive]

Unfortunately, if you look at our average age, it's not the youngest fleet. So the younger fleet will do command a higher rate. We have -- most of our cargoes are carrying minerals. A good proportion of that is nickel as well. The nickel market has not been very good. So the rate we fetch is not as high as we wish them to be.

At the same time, there has been, on and off, certain vessels going into the shipyard, ballast water tank system, et cetera. So the -- that drags down a little bit of the average, too. But to be honest, not that much. There is -- we do not idle our ships.

At the same time, we also have to position ships even on a -- when the market is low because the next one, the next employment, because of positioning, should fetch better rates.

Thank you Anthony. I am -- we are -- well, not me. We are just as eager as you are for turnaround in Q4 or 1Q of 2024. I cannot promise. The company cannot promise, but our interest certainly aligned. We want to be profitable as much as possible, too.

We have not fixed. Most of our ships are short-term charters. So we have free tonnage turning around to us all the time. So should the freight market strengthen, we will be able to capture such rise.

Anybody has any further questions? If there are no further questions, then I'll call this an end to the presentation.

The world is difficult. The world is challenging, but less remain helpful. I look forward to reporting a better set of earnings to you in the next quarter. Thank you very much. Good day and goodbye.