Malaysian-based shipping company Hubline Berhad has decided to exit the container shipping business amid depressed freight rates and stifling overcapacity in the market.
The company’s Board of Directors decided to sever the container shipping arm of the group, and instead focus on its break bulk division, which, according to Hubline, has the potential to develop without being challenged by the pressures of subsidizing the container shipping division.
“Due to the losses incurred by the container shipping division over the last few years, the Board has been forced to reassess the group’s financial and operational strategies. It has determined that continued participation in the container shipping market without immediate turnaround in the industry landscape, will eventually ‘harm’ our profitable operations of the break bulk division,” Hubline said in a filing to Bursa Malysia.
According to Hubline, the exit process will involve withdrawal from various trade routes, termination of related service and operational contracts, as well as the disposal of container shipping related assets.
The liner business is expected to cease its operations by the 30th of September, 2015.
The company explained that the decision is expected to impact various subsidiaries and agencies, which are related to the liner business.
“The exit will have a material effect on the financial results of the group for the financial year ending 30 September 2015, as impairments and losses will be crystallized to terminate the drain to the group’s resources,” the company said.
The company’s container shipping division, in the last four years, has contributed an average of 79% to the group’s overall revenue, and an average of -134% of profit before tax, hence an overall negative impact to the group’s overall net result, Hubline went on to say.