Singapore-listed dry bulker shipping company Mercator Lines (Singapore) suffered a loss of USD125.3 million for its full financial year (FY) that ended on 31 March 2015, from losses of USD22.7 million in 2014.
This has marked a third consecutive year of losses owing to lacklustre dry bulk market demand.
Revenue dropped by 25% to USD56.3 million for 2015, compared with USD75.3 million in 2014. The lower earnings were due mainly to the fall in spot or contract rates and the unscheduled repairs of the vessels.
Meanwhile, the company has recorded an allowance for impairment of USD63.5 million in 2015, which comprised USD27.9 million of provision from a vessel sold for a sale price of USD8 million in FY 2015/16. No allowance for impairment was required in the corresponding previous FY that ended on 31 March 2014. In the meantime, the firm also provided for onerous contracts of USD18.9 million for 2015. No provision for onerous contract was recognised in profit or loss for 2014.
Moreover, Mercator Lines (Singapore) has incurred USD8.8 million in its other expenses for 2015, compared with USD0.71 million in 2014, mainly because of write-off or allowance of doubtful receivables. For instance, the company has written off USD0.6 million towards bad debts, provided USD7.5 million as allowance against recoveries from trade receivables, and USD0.7 million as allowance for impairment of available for sale investment in 2015.
On the other hand, the company’s vessel-related costs have dipped by 10% to USD46.7 million for 2015 from USD51.9 million in 2014. The decline was due to the reduction in the number of voyage charters resulting in lower voyage expenses.
Mercator Lines (Singapore) foresees a challenging market for the next 12 months on account of the slowdown of Chinese economy and the continued new delivery of vessels in the market.
“Falling commodity prices, an oversupply of new bulk carriers, and weakening international demand have resulted in a considerable slowdown in global trade and downward pressure on freight rates,” said the company in its filing to the Singapore Exchange.
In addition, the company noted that the average market rate for Panamax vessels in 2015 was USD6,304 per day, compared with USD10,308 in the previous year, indicating almost a 39% fall. The market rate for Panamax vessels closed at a rate of USD4,780 per day on 31 March 2015.
“The company continued to outperform the Baltic Panamax Index rates, achieving a timecharter equivalent (TCE) of USD9,193 versus the average market rate of USD6,304 per day,” said Shalabh Mittal, CEO and managing director of Mercator Lines (Singapore), highlighting the company’s confidence in riding over the current industry downturn.