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PanOcean Third Quarter Net Profit Rises on Freight Rate Increase

The group achieved sales of US$ 1,592 million, decrease of 13.8% compared to the same period in the prior year. And Costs of sales was decreased from US$ 1,661 million as of 2018 3Q to US$ 1,409 million as of 2019 3Q.

The group recorded operating profit of US$ 137 million in 2019, as compared to the operating profit of US$ 139 million in the corresponding period of preceding financial year.

For the non-operating profit, the group recorded finance cost of U$ 41 million in 2019 3Q.

Consequently, Profit for the period, which had recorded US$ 103 million in 2019, as compared US$ 107 million in 2018 3Q.

(2) Balance Sheet & Cash Flow

The group’s total assets increased US$ 85 million, from US$ 3,684 million as of 31 December 2018 to US$ 3,769 million as of 30 Sep 2019.

Total liabilities of the Group increased US$ 17 million, from US$ 1,305 million as of 31 December 2018 to US$ 1,288 million as of 30 Sep 2019.

Cash flows from operating activities were surplus amounting to US$ 253 million but Net cash used in investing activities for 2019 3Q recorded the deficit amounting to US$ 128 million. And financing activities for 2019 3Q recorded the deficit amounting to US$ 92 million.

Where a forecast or a prospect statement, has been previously disclosed to shareholders, any variance between it and the actual results.

Not applicable.

A commentary at the date of the announcement of the significant trends and competitive conditions of the industry in which the group operates and any known factors or events that may affect the group in the next reporting period and the next 12months.

The average Baltic Dry Index (BDI) is 895 for the first half of 2019, which is down 26% from the average BDI in the same period of 2018 due to the impact of some accidents in major iron ore production places and a decrease in grain trade affected by US-China trade disputes. The average BDI in the third quarter was up 26% from the same period in 2018 thanks to the resumption of iron ore production and increased grain exports from South America. Eventually, the average BDI in the first to third quarters fell just 5% year-on- year, despite the market slump in the first half.

On the supply side, the newbuilding deliveries of dry bulk vessels were 29.3 million DWT, up about 29% from 22.8 million DWT a year earlier. Scrapping volume of the bulkers in the first three quarters rose 74 percent year-on-year to 5.4 million DWT due to the market slump in the first half. Due to the favorable market conditions, the scrapping volume of the bulkers is expected to decrease for the remainder of 2019 and new ships will continue to be delivered. As a result, it is estimated that the fleet supply growth rate will reach to be in the early 4% range.

As for the demand, China’s imports of iron ore in the first three quarters of 2019 fell 2 percent year-on-year to 786 million tons due to supply disruptions caused by accidents in major iron ore-producing areas earlier this year. In the first three quarters, global coal shipments reached 950 million tons, unchanged from the same period a year earlier, due to both positive factors such as increased electricity demand in emerging economies and negative factors such as increased supply of natural gas, a substitute for fuel coal.

According to the International Monetary Fund’s World Economic Outlook report released in October, the world’s GDP growth rate for 2019 was forecasted to 3.0%, down 0.2% from last July’s forecast, which is 0.6% lower than last year. The contraction of manufacturing industries, trade conflicts, and worsening sentiment in the financial market have adversely affected economic growth. However, despite these concerns, dry bulk shipping volume in 2019 is expected to increase 1.6% year-on-year. Demand growth for iron ore in the fourth quarter is expected to be eased due to relatively high prices, but demand for coal in major emerging economies and grain exports in the Northern Hemisphere are expected to continue to strengthen. In addition, the fourth quarter market is expected to be supported by reduced operational efficiency due to the installation of ship facilities prior to the implementation of the International Maritime Organization’s environmental regulations, and the average BDI for 2019 is expected to exceed last year’s level.
If a decision regarding dividend has been made: N/A

Not applicable.

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Source: Pan Ocean Co. Ltd.

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