Jinhui Shipping and Transportation Ltd

OSE:JIN

Earnings Call Analysis

Steering Through Rough Seas Towards Growth

Amid the weak dry bulk shipping market in 2023, driven by factors like rising interest rates, geopolitical tensions, and inflationary pressure, the company reported a challenging year with a 46% decrease in chartering revenue to $82 million and a net loss of $55 million, including a significant non-cash impairment loss of $19.7 million. Notably, the Time Charter Equivalent (TCE) for the fleet averaged $9,063 per day. Despite this, the firm actively managed its assets, acquiring and chartering vessels, aiming for growth in an industry with limited newbuilding supply and anticipated freight rate support. Operational strategy delivered reduced daily vessel running costs and increased interest in period deals. The company remains cautiously optimistic, looking to capture growth opportunities while maintaining a solid financial position.

A Rocky Year with Promise for Recovery

The year 2023 has presented a tumultuous landscape for our company, a period notably rough compared to the advantageous position enjoyed during the pandemic trade. With revenues at $82 million for the year—a stark decrease of 46% from the previous year—the situation is the culmination of weak freight rates, thus delivering a net loss of $55 million. Substantial impairment losses of $19.7 million have contributed to a basic loss of $0.50 per share. However, the final quarter brought a silver lining; despite the annual Time Charter Equivalent (TCE) rate plummeting by 52% to $9,063 per day as against $18,813 in 2022, there was an ascent to $19,472 per day for the post-Panamax/Panamax fleet during Q4 2023, raising prospects for improved performance in the coming year.

Navigating Costs and Investments

In response to the downturn, we've taken strides in reducing vessel running costs, particularly by cutting crew expenses as part of a broader cost containment strategy which saw our overall daily costs drop to $9,212 from $9,885 the previous year. Even finance costs have not been spared, marking an uptick as a consequence of rising interest rates, pushing our secured bank loans to $88 million by year's end. We've channelled $24.3 million into strategic capital expenditures, primarily directed at vessel acquisitions and upgrades reflective of our commitment to maintaining a competitive edge.

Strategic Transactions and Liquidity Position

In 2023, we demonstrated pragmatism by divesting older vessels while also opportunistically acquiring and leasing younger, more efficient tonnage. Significant transactions included the acquisition of a Supramax and a lease agreement for a Panamax, alongside the disposal of three vessels netting $28.2 million—a clear indicator of our proactive fleet renewal strategy. Crucially, despite the financial pressures of the past year, we've managed to maintain a solid liquidity standing, ending the year with $62.6 million of available funds.

Outlook and Path Forward

Looking to the horizon, we're cautiously optimistic. Expectations for heightened chartering and seaborne trade activities could signal a buoyant period for freight rates. New vessel building supply is forecast to remain limited, hinting at potential market advantages for our recently refreshed fleet. As such, we're poised to grasp growth opportunities and partake in the more robust market dynamics while steadfastly adhering to a conservative financial philosophy—a balance we deem critical for weathering the cyclical nature of the shipping industry.

Earnings Call Transcript 2023-Q4

[Wei Ching, executive]

Good afternoon all in Asia, and good morning to those in Europe. This is Raymond Ching speaking. Welcome to Jinhui Shipping and Transportation Limited 2023 Q4 and Annual Results Presentation.

If anybody who cannot hear me, please type in the chat. I presume you can all hear me. And so I shall begin.

Year 2023 has been a very rocky year. Especially, we have experienced in the previous period enjoying the COVID trade. There's a couple more.

For Q4 2023, revenue for the quarter, USD 25 million. Net loss for the quarter, USD 28 million, and this included a noncash impairment loss on group's fleet of $19.7 million. Basic loss per share for the quarter is USD 0.254.

For the year 2023, revenue for the year, USD 82 million. The net loss for the full year 2023, USD 55 million. Again, that included the noncash impairment loss of $19.7 million. Basic loss per share at $0.50. Gearing ratio as of the end of 2023 is 7%.

Given the weak dry bulk shipping market in 2023, driven by a number of factors, [ rising ] interest rates, due to inflationary pressure, heightened geopolitical tensions, the group reported a consolidated net loss for the year of $55 million, including an impairment loss on owned vessels and right-of-use assets of $19.7 million.

Chartering revenue decreased 46% to USD 82 million as compared to $152 million of last year due to weak freight rates as compared with 2022. Average TCE of the group's fleet was USD 9,063 per day for 2023, representing a decrease of 52% as compared to USD 18,813 per day for 2022.

Decline in vessel running costs mainly due to a drop in crew cost under our cost reduction strategy, lower crew repatriation cost since the COVID controls has been finished or relaxed in 2023.

A net loss of USD 1.3 million on bunker was recognized during the year as compared to net gain of USD 2.4 million of bunker in 2022.

Other operating expenses increased mainly due to fair value loss of investment properties in the amount of USD 2.3 million and an impairment loss on assets held for sale of USD 1.3 million on disposal of a Supramax during the fourth quarter, which was delivered to the purchaser in January 2024.

Finance costs increased in 2023 due to rising average interest rates. Secured bank loans increased from $83 million as of the end of 2022 to $88 million as of December '23 with current portion and noncurrent portion of USD 32 million and $56 million, respectively.

Capital expenditure of $24.3 million, mainly on acquisition of vessels, dry docking and installation of ballast water tank systems during the year.

A 2014-built Supramax was acquired and delivered in the fourth quarter of 2023.

During the year, three Supramaxes were disposed at total consideration of $28.2 million during the 2023 year. Two were delivered in 2023 and one was delivered to the purchaser in January 2024.

We entered into a charterparty for leasing one 2021-built Panamax for a minimum of 22 months. And subsequent to reporting date, we also contract to acquire one 2012-built Capesize at USD 31 million and one 2019-built Panamax at USD 31 million.

This is a summary of the financial highlights for the quarter and the year-end of 31st December 2023. I think it looks -- it's fairly self-explanatory, so I'm not going to go for it.

The key financial ratios as of the end of 2023. Total assets, USD 483.6 million compared to end 2022 USD 538.3 million. Net equity as of end 2023, USD 349.9 million compared to 2022 USD 411.1 million. As mentioned before, the interest-bearing loans has increased to USD 88.16 million versus $82.8 million. Current ratio 1.7:1. Net gearing has slightly increased to 7% from 5%. Working capital, USD 40.6 million. We've increased that by USD 6 million. Available liquidity have been maintained pretty much the same at similar levels as of 2022 -- end 2022. As of end 2023, we have USD 62.6 million of available liquidity.

I think this is a very nice chart. Actually, it looks very nice. It's very self-explanatory in terms of our fleet development. Right now, we have 22 owned vessels as of February 2024.

And here is a list of our own fleet. Total capacity of date, 1.28 million tonnes, average age of 14 years old. And as of 26th of February 2024, as of today, actually, we're operating two chartered-in vessels, EVER SHINING and TAHO CIRCULAR.

In terms of debt maturity, 37% of the USD 88 million are to be repayable within 1 year and 16% of the $88 million will be repayable within 2 years.

In terms of cargo mix: 72% of the cargo we carry are minerals; 13%, steel products; 12%, coal; 2%, agricultural products; and 1%, others.

In terms of where we load our ships: 64% of the cargo are loaded in Asia, excluding China; 15% are loaded in China; 1% in Australia; 3%, Europe; 4%, North America; 3%, Africa; and 9%, South America. 1% are various other smaller ports. I think if you compare this to our previous -- periods of previous years, you'll see that we have a more diversified base in terms of cargo loading.

In terms of distribution of cargo or discharging, the destination of where the commodities are being unloaded: 70% of our cargoes are discharged in Chinese ports; 22% are in Asia, excluding China; 3% in South America; 1%, Europe; 3% in Africa and 1% in other minor ports.

It's not the best set of results for 2023, but the market is the market. For Q4, the TCE for our Q4 2023, the TCE for our post-Panamax/Panamax fleet, USD 19,472 per day. That's an increase compared to Q4 2022. So on this sector, it's encouraging.

For the full year 2023. For the post-Panamax/Panamax fleet, the annual average TCE is $13,126. Now you can see how much the market or how poor the market was in the first 3 quarters. Q4 is encouraging. There's a significant pickup in Q4 as well as in recent weeks. Of course, that compared to the full year 2022 figure is still somewhat likely behind.

For the Supramax fleet, as of Q4 2023, the TCE for Q4 2023 is $10,276 compared to Q4 2022 of $12,591. If we compare the full year 2023, which is $8,892 again, you can see the first few quarters were very, very difficult. And compared to the 2022, obviously, it's a significant drop given -- prior to 2023, we were enjoying the COVID trade. So overall, in average for Q4 2023 for the whole fleet, the TCE is $10,642 and for the full year, $9,063. Again, not a very good set of results.

Let's look on the bright side. I think as of today, the signs are encouraging. We are back into the teens figures in terms of thousands. So hopefully, for 2024, we will be able to report to shareholders better results in coming quarters.

On the cost side, Q4 2023, the overall daily vessel running cost of our own vessels, $9,731. This compared to Q4 2022 is a reduction. For full year 2023, the overall all-in cost of owned vessels daily cost, $9,212, compared to 2022, $9,885.

Now we look at the running cost in Q4 along the blue part, Q4 2023, $6,214. This looks like a big increase compared to the same quarter in 2022 as well as in previous years. But I would like to highlight that we are in very good relationship with our suppliers. So a lot of times, a lot of the spare parts or consumables, the actual bills don't come until the end of the year. It's consumables and spare parts, which we have in previous quarters, is not included. So it's not like spreaded out evenly over the quarters. So bear that in mind.

In terms of outlook, you will notice that we have been selling some older vessels as well as been fairly active in terms of acquiring as well as chartering tonnages, overall seeking growth. We are seeing charters getting more confident as per the increase in inquiry for period deals. If we look at the secondhand market, the younger and more efficient secondhand tonnages from cape to medium-sized bulkers are being -- are flying off the shelves.

When we look at the overall picture, we remain confident despite a not so good set of results for 2023, we remain confident in looking forward, given the newbuilding supply remains limited in the foreseeable horizon.

We expect there'll be meaningful increase in activities. One activities I actually meant, chartering activities or seaborne trade activities. So we expect that will increase. And i.e., there'll be -- we expect there'll be good buoyancy and support in terms of freight rates going forward.

We will continue to look for opportunities to capture growth. Sorry, there's a word missing. I meant to say, capture growth via fleet renewal or chartering of more tonnages. We will do that while maintaining a conservative financial position as we firmly believe that is the most important for a shipping company.

That's all for me. Would you guys have any questions, please fire across.

[Wei Ching, executive]

[Operator Instructions] Okay. Go ahead.

Okay. Does the Red Sea crisis affect any of Jinhui Shipping's operations? If yes, to what extent and which aspects?

Okay. Question number one, we do try to avoid those danger zones. No, it doesn't affect our operation so much.

Nickel represents -- continue to represent one of our biggest trade. Going forward, I think from -- yes, it is mostly nickel. So we -- as we purchase newer vessels, we also look to have the flexibility to participate in other cargoes. Obviously, the purchase of the Capesize, Panamax would give us flexibility to participate in cargoes other than minerals, be it nickel or other things.

That's okay. I know it's a typo. Anyone else has any questions?

Okay. It seems like all others are either have no questions, very happy or a little shy today. I'll ask one more time. Any other questions?

Okay. If you guys have any questions that you can think of after I close the presentation, please e-mail me. Otherwise, thank you very much for joining the presentation.

Again, let's look on the bright side, and I look forward to reporting to all of you better results in the coming quarters. Thank you.