Hong Kong-listed dry bulk carrier Pacific Basin Shipping Limited has issued a profit warning saying it expects to record a significant non-cash provision of over USD 130 million in its consolidated 2014 results.
These relate to approximately USD 101 million for inward chartered vessel contracts and USD 31 million relating to the fair value change of bunker fuel swap contracts.
“Based on the Board’s preliminary evaluation of the consolidated management accounts of the group, it is expected that a provision of approximately USD 101 million for onerous vessel inward-charter contracts will be recorded in the group’s consolidated income statement for the year ended 31 December 2014,” the company said.
According to the company, the dry bulk market continues to be weak.
“Despite reduced global dry bulk net fleet growth in 2014, the market has yet to fully absorb the supply overhang following the 2010 to 2012 newbuilding boom. Demand weakened in the second half of 2014 due primarily to decreasing coal imports to China and the continued Indonesian unprocessed minerals export ban,” Pacific Basin added.
“In addition, during the fourth quarter of 2014, the reference bunker fuel price dropped 45% (broadly reflecting the decline in global oil prices) resulting in early signs of a general increase in vessel operating speeds, effectively increasing global shipping supply further.“
Pacific Basin expects the bunker fuel price outlook to be challenging as prices continue to weaken in early 2015.
Speaking of general announcements, the Board also drew attention to the announcements relating to the impairment of the group’s towage assets (dated 25 June 2014) along with the loss on the disposal its harbour towage business (dated 11 December 2014).