Pacific Basin warns of asset impairment as dry bulk demand sinks

Hong Kong's minor bulk specialist, Pacific Basin, yesterday (3 July) warned shareholders that, due to an uncertain market outlook for dry bulk shipping, the company expects to incur a one-off non-cash impairment charge of US$198m on its fleet of handysize ships. The asset impairment would be reflected in the company's unaudited consolidated results for the six months ended 30 June 2020.

 

“Including this impairment, the Group is expected to record a net loss attributable to shareholders for the period in the range of US$212m to US$227m as compared to the US$8m net profit recorded for the six months ended 30 June 2019,” the company said in a statement issued yesterday.

 

However, the Group is expected to record positive EBITDA for the period in the range of US$75m to US$90m as compared to US$101m for the six months ended 30 June 2019.

 

As at 30 June 2020, the Group's estimated cash balances are approximately US$316m.

 

“The expected impairment will not impact the operations or operating cashflows of the Group, which will continue to benefit from a robust balance sheet,” the company stated.

 

“The Group continues to have access to diverse sources of external funding and has recently secured US$63.6m in new long-term credit facilities secured against five of its previously unmortgaged vessels, of which US$33.5m was undrawn as at 30 June 2020. These new facilities provide fresh capital at very competitive interest costs, and further enhance the Group’s liquidity and funding flexibility.”

 

Pacific Basin's statement coincided with the latest dry bulk analysis from Drewry. The analyst the demand for dry bulk vessels will contract 1.3% this year, as a direct result of COVID-19.

 

“Additionally, effective supply has increased because the incentive for slow steaming has reduced due to the abysmally low fuel prices.

 

“Risks for dry bulk charter rates loom large given the uncertainty regarding the duration of the pandemic, successful development of a vaccine and the response of various governments to deal with the situation,” Drewry concluded.

 

Source:hongkongmaritimehub

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