Malaysian Bulk Carrier Earnings And Dry Bulk Shipping Prospects

I had been blogging a lot on Baltic Dry Index. You can view past blog postings via the following search link: http://everything27.blogspot.com/search?q=baltic+dry+index

Today Malaysian Bulk Carrier or Maybulk reported its earnings.

It was not nice and it clearly reflected the earlier massive plunge seen in the dry bulk index.

The previous quarter Maybulk reported net earnings of 143 million!!

So a net of earnings of only 3.238 million is pretty darn drastic!

I was more interested in what the company has to say about future prospect in the shipping industry. This is what the management wrote.

• The outlook for the world economy is grim and expectations are for the global economic slowdown to be protracted and severe. This is corroborated by the latest International Monetary Fund’s (“IMF”) forecast wherein global growth is now slashed to 0.5% for 2009. In its report the IMF expects the world economy to gradually recover only in 2010 and the growth rate to be around 3%. "A sustained economic recovery will not be possible until the financial sector's functionality is restored and credit makers are unclogged," the IMF said.
  
  The BDI plummeted 94% from 11,793 in May 20th to 663 on December 5 last year as global trade slowed sharply. However, recent restocking orders from China have caused the Cape-size rates to firm as China resumed iron ore shipments from Australia and Brazil. Consequently the BDI has recovered substantially from its December lows. But the fundamentals in the other industries such as steel, automobiles and shipyards are still bleak and recent freight market’s strength does not appear sustainable especially since substantial new-building deliveries and laid up tonnage continue to be an overhang in the market. The tanker market, though not as bad as the dry bulk is also weak and is expected to continue to be weak.
  
  The ongoing financial crisis is restricting credit for companies and consumers, and is aggravating the current world economic condition. With the financial sector gripped by their de-leveraging and recapitalizing concerns, credit overall remains tight. Amid all the grim background, it is encouraging to note that the governments of the major countries are taking steps to inject substantial financial stimulus into their respective economies so as to stem the economic slide. Despite the bleak economic outlook for 2009, MBC is well placed to weather the difficulties. The collapse of the dry-bulk market will provide opportunities for the Group to consider acquisitions and MBC along with its strategic partners have been active in exploring same. The shareholders have supported the Group’s diversification into offshore oil and gas services which continue to outperform other shipping sectors.
  
  The freight market faces uncertainty in FY2009. The recent recovery in the freight market does not appear sustainable and as such offer little prospect for over-aged tonnage to benefit from the next up cycle. In this respect, the Group completed the disposal of its 25 year old Alam Sempurna in January 2009 for a very modest gain of RM8.1m. Whilst the four quarters in FY2009 may present uneven results, the Board is generally satisfied that FY2009 will be profitable, albeit substantially lower compared to FY2008.

footnote.

I am indeed aware of Maybulk's investment in quoted securities. As had argued before I do not like it one bit and I am utterly disappointed at the lack of information. As it is, if you read Maybulk's earnings it is sitting on a sizable paper loss! Yeah, company might argue that paper loss is not real since they have not sold. But as you can also see, there is lacking of information and without the information how could one be convinced?