Pacific Basin Shipping Ltd. (2343), Hong Kong’s biggest dry-bulk ship operator, fell the most in about eight months after writing down its vehicle-carrying RoRo fleet by $190 million and predicting a first-half loss.
The company slumped 6.3 percent to HK$3.25 at the close of trading in Hong Kong, the biggest drop since October. The benchmark Hang Seng Index dropped 0.1 percent. The expected loss compares with a $3 million profit a year earlier, the company said in a statement yesterday.
Pacific Basin wrote down the value of its RoRo, or roll-on, roll-off, ships for the third time in four years as a global glut of vessels and the European debt crisis damps rates. The company, whose new Chief Executive Officer Mats Henrik Berglund started this month, eventually plans to exit the RoRo business and focus on its dry-bulk and towage operations, it said.
The writedown “was larger and earlier than we expected,” Citigroup Inc. analyst Rigan Wong said in a note to clients today. “This reflects the sudden deterioration of the RoRo market.”
Wong reiterated a buy rating and a HK$4.85 target price, citing a strong balance and the company’s “good position” to expand its main dry-bulk fleet. The ship operator had unaudited cash balances of $662 million as of the end of May, borrowings of $860 million and a net borrowings ratio of 14.5 percent against the net book value of property, plant and equipment post impairment, according to the statement.
Pacific Basin has six RoRo ships. The newest two 3,700-lane meter vessels are laid up awaiting employment, the company said. The ship operator booked an $80 million impairment against the RoRo business in the first half of last year and a $25 million charge in 2009. The total investment in the fleet was $530 million, Chief Financial Officer Andrew Broomhead said on a conference call today.
The company plans to sell the RoRo ships when market conditions allow, it said. The operator’s towage business is “performing well and in line with our expectations” and the company will continue to look for opportunities to expand its fleet of handysize and handymax commodity carriers, it said.
“What we’re good at is operating handysize and handymax ships, using our business models and anticipating changes in the market,” Broomhead said. “That is absolutely our strength, and any company should play to its strength.”
The company operated 152 dry-bulk ships and 43 towage vessels at the end of last month, according to its website.
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