Offshore and liner to bring SCI back on track: BK Mandal

BK Mandal, CMD & Dir-Fin, Shipping Corporation of India ( SCI ) is of the view that though today shipping is facing a downtrend, and even big companies are posting losses, it is a passing phase. He opines that if you take into account SCI's performance for the nine months ending December 2012 as against the nine months ending December 2011, operational revenue has gone up by 13%. Though he feels bulk carriers will continue facing headwinds for another two quarters, he remains upbeat on two segments which have posted profits - offshore and liner.

Below is the edited transcript of Mandal's interview to CNBC-TV18.

Q: SCI's revenue performance has been quite disappointing. What do you foresee through the course of the next few quarters in terms of revenue performance?

A: I do not agree with you. I will take you through the performance numbers of nine months of the current year as compared with nine months of the previous year, and also on a quarter-on-quarter basis. If you take into account our performance for the nine months ending December 2012 as against the nine months ending December 2011, you will find that our operational revenue has gone up by 13%.

Now, coming to the bottom-line, we have made a profit of Rs 167 crore for nine months of the current year as compared to a loss of Rs 72 crore in the corresponding nine months of the previous year. Now coming to the last quarter ending December 2012, our operational revenue has gone up by about 5%. I am not taking into account the total revenue. Our loss is Rs 75 crore for the period under review, compared to a similar figure of loss of Rs 75 crore in the previous year. But if you go into the details of this loss, you will find that in the previous quarter ending September 2012, we had an income from sale of vessels to the tune of about Rs 60 crore. And with that additional income we had posted a loss of Rs 75 crore. However, in this quarter it is all operational income. And with that, we have posted a loss of Rs 75 crore.

So, I can say is that over time the loss has minimised. The reasons for better performance operationally is that out of the three segments that we have, one is the liner segment, another is bulk carrier and tanker segment and the third is offshore segment. Out of these three, two segments that is, offshore and liner segments, have posted profit. Profit in the offshore segment, compared on a nine month basis with the previous year, has gone up substantially. The reason for that is that we have concentrated more on offshore which is doing well. In fact, the number of vessels we had in 2011 was about 10 old vessels which have now gone up to 15 vessels. So, that is giving us good earnings.
Most interesting is the liner side. In the liner side we have really turned around through restructuring of the services, cost control and various measures that we have taken. So my analysis is that shipping is going through a very bad recessionary phase, but under the circumstances when everybody, even big companies, are affected globally and posting losses, we have also posted losses. However we find that there is a declining trend and we are getting on track.

Q: While your offshore and liner segments have done well, problem is that the bulk or the shipping segment is much bigger than those two combined and there yields have continued to remain very soft. By when do you see any respite to the core business because without that turning around it is unlikely that you will be able to return to profitability?

A: You are right. We are a tanker-centric company, we have lot of tankers. As far as bulk carrier side is concerned, the primary index has not been doing well; in fact it has been coming down. So there is a mismatch in demand and supply of the fleet in the global market, and I expect things to improve only in the later part of the current year. So I think the next two quarters are still going to be quite tough for the bulk carrier divisions.
For the tankers also this situation prevails. In the tanker side, freight rates are also quite low, there is demand and supply mismatch which it is not going to change overnight. It will take its own time, so I feel that in 2013 we have to struggle and maybe at the end of the year we can see a ray of hope.