Shipping Corporation’s Turnaround Led by Lower Crude Prices
The financial performance of Shipping Corporation of India Ltd. saw a turnaround in the fiscal year 2014-15 and improved further in fiscal year 2015-16 mainly due to falling fuel costs even as its topline remained broadly flat during the same period.
SCI posted a net profit of Rs 377 crore in fiscal year 2015-16 and Rs 201 crore in fiscal year 2014-15, compared to losses during the previous three fiscal years (FY12-14).
The turnaround in the company's financials was mainly on account of lower crude oil prices, resulting in lower fuel costs. Fuel costs fell sharply to Rs 637 crore in fiscal year 2015-16 from Rs 1,419 crore in fiscal year 2013-14.
The company's topline remained broadly flat in that same period.
The company's managing director BB Sinha cites a host of reasons for the turnaround in the financials of the company, in an interview to BloombergQuint.
Apart from lower crude oil prices, the efficient deployment of vehicles, lack of break-downs and proper preparation of sailing ships have contributed to the financial turnaroundBB Sinha, Managing Director, Shipping Corporation
The company has been selling assets (mainly ships) over the past five years. The profit on sale of assets lifted SCI's bottomline between FY14 and FY16. However, it is noteworthy that the company's profit on account of sale of ships fell to Rs 34 crore during fiscal year 2016 compared to Rs 121 crore in fiscal year 2015 and Rs 99 crore in fiscal year 2014.
Looking ahead, the company plans to invest in areas where it foresees strong growth, mainly in the offshore and tanker markets. It has earmarked Rs 800-1,000 crore capital expenditure for this financial year. A bulk of that will be directed towards the purchase of ships, some of which are available at dirt cheap prices, Sinha says.
But the worst is certainly not over for the industry, he says. The dry bulk and containers are still bleeding since the beginning of global financial crisis of 2008.
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