Stabilised shipping rates should help improve Thoresen Thai Agencies Plc (TTA) business outlook for the rest of the year, after the country's largest dry bulk carrier posted a 95% drop in net profit in the first quarter.
Overcapacity and weak global economic conditions will remain a concern for the shipping industry throughout 2009. But TTA managing director M.L. Chandchutha Chandratat said positive signs were seen in line with the slight rebound of the Baltic Dry Index (BDI) in the first three months of this year.
"We expect the index to be stable at the current rates until the end of the year, thanks particularly to stimulus packages being implemented by governments globally," he said.
The Chinese government, for instance, has stepped up public investment through infrastructure projects, subsequently boosting the demand for steel imports.
China is the world's top importer of steel, which accounts for almost half of the dry-bulk trade, he said.
TTA's net profit dropped to 99 million baht in three months to March - the second quarter of its 2009 fiscal year - from 2.1 billion baht in the same period in 2008.
Its total revenue almost halved to 4.42 billion baht from 8.1 billion baht, 69.5% of which was shipping revenue.
BDI, the most closely watched measure of shipping costs, fell 46.6% from 3,000 in October last year to 1,615 by the end of March, resulting in the decrease of TTA's fleet cargo by 25% to 6.05 million revenue tonnes.
"The credit crunch has also made it difficult to open letters of credit, which had severely affected spot trading of many commodities, such as grains, soybeans, sugar, and cement," said the TTA managing director.
"New supplies of vessels entered the market steadily while demands for trade remained low."
Citing the current challenging operating conditions and reduced operating income, the company has also decided not to pay an interim dividend for 2009. The BDI, meanwhile, has bounced back, rising by 70% in a one-month period to hit 2,544 based on the strong demand for steel and grains.
Other positive factors supporting the BDI are the cancellations of new ship orders and extended scrapping which will further reduce the current surplus, said M.L. Chandchutha.
KGI Securities has revised down TTA's profit estimates for 2009 fiscal year from 2.3 billion baht to 1.5 billion baht, given the lower-than-expected second-quarter results. But the brokerage stated that since TTA business had already bottomed out and should recover in this quarter, it upgraded the recommended price from 12 baht per share to 23 baht.
Shares of TTA closed yesterday on the Stock Exchange of Thailand at 20 baht, down 30 satang, in trade worth 1.19 billion baht.