Hellenic's earnings sink as over-supply hits bulk freight market

published 14 March 2012

Hellenic Carriers, an international provider of marine transportation services, has suspended dividend payments as it seeks to conserve cash to meet loan repayment obligations.

The group saw revenue slump in 2011 to $33.2m from $57.5m the year before, as freight rates took a dive, although the reduction in the fleet size also had an impact. On average, the group operated a fleet of 5 vessels in 2011 versus 5.6 vessels in 2010.

The group's operating fleet will expand in 2013 when the two new building Kamsarmax vessels on order since 2010 will be delivered.

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Earnings before interest, tax, depreciation and amortisation (EBITDA) sank to $16.9m from $38.4m in 2010.

"During the first quarter of the year, our company benefited from the continuation of charters agreed prior to the market downturn in Q4 2008 at very high rates. Following the expiration of these agreements, the vessels were traded in the spot market avoiding long term commitments at low rates. Our strategy moving forward is to secure period employment for the vessels when the freight market improves," the firm said.

In view of the changes in the market, the company has reviewed the recoverable value of the vessels in its fleet and has decided to make a substantial adjustment in their carrying value on the balance sheet. This has resulted in a non-cash impairment loss of $29.3m, which was enough to tip the company into the red.

An operating profit in 2010 of $27.5m switched to a loss of $25.7m in 2011. Excluding non-cash accounting adjustments, Hellenic made an operating profit of $3.6m in 2011, which kept it above the financial equivalent of the Plimsoll line but was still a share decline from the $24.5m of operating profit in 2010.

The firm expects 2012 to be a "challenging" year for the dry bulk sector, mainly due to fleet supply issues.

Cash for the year fell from $58.99m to $44.06m. Debt as of 31 December 2011 amounted to $88.2m compared to $105.3m as of 31 December 2010. Having restructured one loan deal during 2011 to lighten up the debt repayment schedule over the next two years, Hellenic has, since the year end, agreed a restructure of the repayment schedule with a second lender.

With cash clearly a concern for the company, the board has decided to jettison the final dividend, having paid out 5.45p per share the year before. The decision was not a surprise as back in September of last year it also threw the interim divi overboard.

The share price fell 6% to 39.50p.

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