Release Date: January 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Great Eastern Shipping Co Ltd (BOM:500620, Financial) reported a net profit of INR538 crores on a consolidated basis for the quarter ended December 31, 2023.
- The company declared a third interim dividend of INR6.30 per share for Q3, bringing the total dividend for nine months to INR25.5 per share.
- The consolidated net asset value (NAV) increased to INR1,300 per share as of December 31, 2023.
- The company has maintained a consistent dividend payment for eight consecutive quarters.
- Great Eastern Shipping Co Ltd (BOM:500620) has strong cash flows, with a significant portion of NAV improvement attributed to cash profits.
Negative Points
- Standalone net profit for the quarter was INR514 crores, down from INR605 crores in the corresponding quarter of the previous year.
- Tanker markets were significantly weaker compared to the previous year, impacting overall results.
- Consolidated net profit dropped from INR640 crores to INR552 crores year-on-year.
- Dry bulk earnings were slightly weaker compared to the corresponding quarter of the previous year.
- The offshore segment's EBITDA was lower this quarter due to one-off expenses related to rig maintenance and off-hire periods.
Q & A Highlights
Q: Are you seeing better opportunities for capital allocation than in the last three or four quarters? Are we still underwriting to a 10% unleveraged dollar IRR for recent ship purchases?
A: We are not seeing cheaper prices or more attractive entry points for purchases. The 10% IRR is harder to achieve at current prices. We are subsidizing new investments by selling older assets at a premium. We are cautious about new purchases and are focusing on replacements rather than growth investments. (G. Shivakumar, CFO)
Q: Why was the offshore segment's EBITDA lower this quarter compared to previous quarters?
A: One of our rigs, Greatdrill Chaaru, was off-hire for over two months for maintenance and preparation for a new contract at a higher rate. This resulted in no earnings and additional expenses during that period. (G. Shivakumar, CFO)
Q: What is the outlook for the offshore segment, especially with rigs coming up for repricing?
A: One rig has already started a new contract at a rate 75% higher. Two more rigs will be repriced in FY25, but the full impact will be seen in FY26. The last pricing was 10-15% higher than the 175% increase we saw. (G. Shivakumar, CFO)
Q: How does the recent announcement by Aramco to stop spending on increasing capacity impact the offshore market?
A: It's too early to tell. Aramco has already absorbed a lot of capacity, and the market remains tight. We don't know the exact impact of their announcement on the number of jack-ups required. (G. Shivakumar, CFO)
Q: What is the current pricing scenario in the product tankers market, and how much of the fleet will benefit from the rise in prices?
A: Current rates are very strong, around $35,000 to $40,000 for MR tankers. About 75-80% of our tanker fleet operates on the spot market and can take advantage of these higher rates. (G. Shivakumar, CFO)
Q: How has the fleet value as a percentage of NAV moved over the last three years?
A: We will need to work that out and connect on this. We have mentioned this in previous presentations, and it is a summation of those. (G. Shivakumar, CFO)
Q: What is the bifurcation of contracted ships versus spot ships in your fleet?
A: Typically, about 80% of our fleet is running on spot or spot-related rates, with contracted ships making up 20% or less of the fleet. (G. Shivakumar, CFO)
Q: Are we looking for opportunities for offshore support vessels outside of India?
A: Yes, we are always looking for opportunities. Currently, five out of 19 vessels are outside India. We actively market internationally and have taken two vessels out of India in the last 1.5 years. (G. Shivakumar, CFO)
Q: How is the capacity evolving at shipyards, and what does it mean for new ship supply?
A: Capacity at shipyards is fully booked for 2024 and 2025, mainly for LNG and container ships. There are hardly any slots available even in 2026 for large crude tankers. This means there will be limited new supply of ships in the near future. (G. Shivakumar, CFO)
Q: What is the dry docking schedule for Q4 FY24?
A: We have two to three vessels scheduled for dry docking this quarter. Some of these may spill over by a month. (G. Shivakumar, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
