The quarter one financial results for FY23 of Shipping Corporation of India Ltd (SCI) has been described as “shocking” by the shipping industry after the net profit tumbled 28 percent for the first three months of the current fiscal when the overall freight market did exceedingly well.
The lacklustre performance of India’s second biggest ocean carrier by fleet size will reinforce the view that the company needs to be freed from government shackles for improving performance.
The company, which will likely be privatised this fiscal, saw its net profit plunge 27.97 per cent to Rs 114.17 crore from Rs 158.51 crore during the same period last year.
This is despite a 42.53 percent growth in revenue from operations to Rs1,465 crore from Rs1,027.84 crore in the same quarter of last year.
All the four shipping segments – crude tankers, product carriers, LPG carriers and dry bulk ships – performed well in the April-June quarter. Oil tankers, in particular, have done exceedingly well.
Shipping Corporation of India runs a fleet of 59 ships comprising 13 crude oil tankers, 13 product tankers, five very large crude carriers, one gas carrier, 2 container ships, 15 bulk carriers and 10 offshore supply vessels.
The company’s tanker fleet earned an operating profit (before tax and interest) of Rs 70 crores from a loss of Rs 63.81 crore a year earlier, while the bulk carriers reported a lower operating profit of Rs 124.29 crore from Rs 134.06 crore a year ago.
The firm’s operating profit from two container ships declined to Rs 15.72 crore from Rs 108.30 crore during the same period last year.
The Russia-Ukraine conflict provided a fillip to tanker markets as it led to significant altering of trade flows and increased fleet inefficiencies. Spot earnings rose 4-5 times year-on-year after hovering around opex (operating expenses) levels for around 2 years.
The recovery in spot earnings was led by product tankers due to supply tightness in products, mainly in Atlantic markets. Global refineries were running at close to full capacity as margins remained at record levels during the quarter amidst low inventory levels.
The spot earnings for very large gas carriers or VLGC averaged $46,000 per day during Q1 FY-23, up 29 percent on a year-on-year basis.
During the quarter, spot earnings for Capesize ships averaged significantly lower (down 32 percent), whereas those for sub capes rose 14 per cent on a year-on-year basis, respectively. This was the second straight quarter where sub capes continued to outperform the Capesize spot earnings on an absolute basis.
“In such a stupendous market, if SCI can’t make money, it is shocking,” said a shipping industry official.
“It’s the curse of being a public sector undertaking. In this market, a shipping company must be so swift to make decisions,” the industry official said, adding that the firm likely blocked some of its ships at “lower rates”.
In comparison, The Great Eastern Shipping Co Ltd, India’s biggest ocean carrier by fleet size, said its April-June 2022 net profit soared 3597.73 percent to Rs 457.04 crore from R s12.36 crore a year earlier. The company’s revenue from operations during the first quarter of FY23 grew 77.59 per cent to Rs 1,366 crore from Rs 769.18 crore a year ago, the company said.
