Pakistan National Shipping Corporation (KSE: PNSC) was listed on Karachi Stock Exchange in 1980. PNSC is an autonomous corporation, which functions under the overall control of the Ministry of Ports and Shipping, Government of Pakistan. It is the national flag carrier engaged in transportation of dry bulk and liquid cargoes globally.
Pakistan National Shipping Corporation manages a fleet of nine ships, real estate and a repair workshop. At present the shipping corporation operates 4 modern double hull Aframax tankers of 107000 DWT of total capacity. With a total capacity of over 681 thousand tons of deadweight (DWT), its fleet is a mix of double hull Aframax tankers, and bulk carriers like Panmax, Supramax, Handymax and Handysize. PNSC has transported about 80 million tons of crude oil since 1998 when it's commissioned its tanker operations.
PNSC runs its cargo business on several geographical routes around the world. Its Handymax and Handysize dry bulk carriers carry fertilisers, minerals, forest products, iron and steel products, ores, bauxite, alumina, cement and other construction materials. On the other hand, its Panamax dry bulk carriers carry coal and iron ore for energy and steel production as well as grain for feedstock. The national shipping firm's also has a share in sea borne trade in various trade routes where it carries a wide range of cargoes for a number of traders and charterers globally.
SNAPSHOT FY14 PNSC's core business is based on the fundamental demand for transportation services and cargo handling infrastructure required by the country's refining industry. Amid supply and demand constraints, PNSC has been able to achieve satisfactory performance in FY14 due to improved global environment. It has made progress in its oil transportation segments through focus on crude and dry bulk carriers, and expanded strategies for market penetration and fleet optimisation. PNSC's fleet was fully engaged round the year without any break in transportation of dry-bulk and liquid-cargo globally, which means that it did not make any vessels disposal during the year.
FY14 proved healthy for the shipping giant. PNSC's top line saw a colossal growth of 46 percent year-on-year in FY14. Majority of the sales revenue comes from chartering services, making around 95 percent of the total revenue in FY14 compared to 85 percent as four year running average. The top line growth is largely assignable to better liquid-cargo freight business in spite of dropping freight rates internationally.
The firm has been carrying crude oil on its owned tankers from 2003 under a 10-year Contract of Affreightment (CoA) with three refineries. These CoAs have been protracted for further 5 years until 2018. In the meantime, PNSC is also transporting fuel oil and white oil for an oil marketing company since last year. During the year, a total of 2.486 million tons of cargo was carried by PNSC dry bulk fleet, which is five percent lower than that of FY13, while liquid bulk cargo stood at 15.396 million tons in FY14 - four percent higher than that in FY13.
Gross margins of the firm receded significantly in FY14. The direct fleet expenses also increased by 78 percent year-on-year in FY14. While the net margins also tapered, the bottom line registered a lift of 22 percent year-on-year in FY14, and aside from the liquid cargos fuelling the earnings for the year, a 23 percent year-on-year reduction in finance cost also boosted the net earnings for FY14.
PERFORMANCE 9MFY15 During the first nine months of FY15, PNSC saw a decline of around five percent year-on-year in its net revenues. This was primarily due to the shrink witnessed in the key revenue component - chartering revenue.
Direct operating costs saw an increase during the first nine-months of FY15 as the as chartering-in rates were very firm as there was an up tick in charter hire and related expenses for employing foreign chartered vessels on the firm's liquid cargo business with refineries and OMCs. In 9MFY15, direct fleet expenses increased by six percent year-on-year, which resulted in a drop in gross profits by 48 percent year-on-year. The gross margins can be seen to have taken a dip of around six percentage points to 11.4 percent.
The firm's bottom line further contracted with increase in administrative and finance cost. The firm's earnings for 9MFY15 dropped from earning to losses. PNSC has negative net margins for 9MFY15.
OUTLOOK PNSC maintains a strong cash position, which is the key reason for the firm's recent undertakings for expansion. The firm is working hard to keep costs under control and exploring new business ventures to maximise profits as well as adding more capacity to its fleet to cater to higher oil transportation need. .As per its FY14 Annual Report, PNSC's short term goal is to enhance the scope of Contract of Affreightment (CoA) with oil refineries and oil marketing company to total 18 million tons of import of crude oil and oil products and reduce dependency of chartering in from open market. Its medium term plan revolves around the transportation of coal, LNG, edible oil, shipping service to public sector organisations, while in the longer term it hopes to enhance and maintain deadweight carrying capacity of over 1.5 million tons by 2025, by adding Aframax and product tankers, Supramax and other Bulk carriers.