Wisdom posts Q1 loss as virus hits freight demand

Wisdom Marine Lines Co posted a pretax loss of US$4.07 million in the first quarter due to deteriorating freight rates, marking its first quarterly loss since the second quarter of 2017, company data showed.

The ongoing spread of COVID-19, disruptions at ports worldwide and lower demand for shipment with delayed production have created downward pressure on freight rates, the shipping company told the Taipei Times by telephone yesterday.

The Baltic Dry Index, which tracks the shipping costs of raw materials, such as coal, iron ore and grain, retreated from 976 points on Jan. 2 to 411 on Feb. 10, the lowest this year and the second-lowest since 2016, but last month rebounded above 600 points, according to data compiled by Bloomberg.

The falling spot rates negatively affected Wisdom’s sales performance, even though 90 of its 130 vessels were under long-term contracts, as most clients demanded a cut in contract rates when renewing their arrangements, the shipper said.

Its revenue plunged 15.92 percent from a year earlier to US$92.71 million during the first three months, the data showed.

The nation’s largest dry bulk shipper, which used to take Japanese yen-denominated loans to take advantage of lower interest rates, saw the monetary value of its debt rise last month on advancing exchange rates of the yen against the US dollar, the firm said.

Wisdom had previously expected overcapacity in the industry to improve this year amid a new International Maritime Organization (IMO) rule that limits sulfur levels in fuels for ships to 0.5 percent, a communication official surnamed Mou said by telephone.

However, with the pandemic freezing economic activity worldwide, demand for ocean freight has been lower than expected, Mou added.

It is difficult to forecast the exchange rate of yen against the greenback in the second quarter, but the firm expects shipping rates to recover with the Chinese economy reopening, which would lift demand for iron ore, he added.

The firm received three new energy-efficient ships in the first quarter, increasing its fleet size to 132, while it has not sold any vessels, despite its plan to dispose of 10, Mou said.

“We want to keep our fleet size flat to save operational costs, but we will not sell the ships if the price is not good,” he added.

Meanwhile, container shippers Evergreen Marine Corp and Yang Ming Marine Transport Corp saw their sales decline 4.86 percent to NT$43 billion and 1.24 percent to NT$34 billion respectively during the January-to-March period, company data showed.

However, Wan Hai Lines Ltd , which makes 70 percent of its revenue on intra-Asia routes, posted a 4.12 percent annual gain in revenue during the period, thanks to recovering exports from China, the firm said.
Source: Taipei Times