KUCHING: Shin Yang Shipping Corp Bhd’s (Syscorp) profits have soared, bolstered by firmer ocean freight rates, high utilisation of shipping space and delivery of new-built vessels.
In the financial year ended June 30, 2022 (FY22), Syscorp’s net profit jumped to RM141.8mil from RM16.6mil in FY21 or an increase of RM125.2mil, as revenue climbed to RM897.7mil from RM610.9mil, up RM286.8mil.
The fourth quarter 2022 (4Q22) earnings were particularly spectacular with group net profit of RM84.9mil (4Q21: RM6.2mil) on expanded revenue of RM289.4mil (4Q21: RM161.9mil).
This makes it one of the highest quarterly earnings, if not the highest, since Syscorp was listed on Bursa Malaysia in 2010.
Chief operating officer Richard Ling attributed Syscorp’s impressive earnings to a combination of factors, namely a double-digit rise in freight rates, high utilisation of shipping spaces for its container vessels and the sale of newly built vessels.
“In the April to June 2022 period, the utilisation of shipping space rose to between 80% and 90% as compared to the lowest level of about 50% before the movement control order (MCO). There was a shortage of containers after the MCO.
“The group currently operates a fleet of 14 container ships, the largest one plying between Sarawak and Singapore and the rest serving ports between Peninsular Malaysia, Sarawak and Sabah,” he told StarBiz.
Ling said the group had converted three tug-and-barges to transport containers for shorter routes to ensure that there is no shortage of shipping spaces.
After the MCO was lifted, Ling said there was a big surge in cargo shipment from local manufacturers, as well as imported cargo.
In view of attractive charter rates, Ling said Syscorp has leased out two container vessels to a Chinese company for cargo shipment between Hong Kong and China.
Syscorp owns and operates a fleet of more than 220 vessels.
Besides container shipping, the group provides vessels for voyage and time charter for dry bulk cargo, such as timber, plywood, quarry, aggregate, sand, cement and others within Malaysia and Asean countries.
Syscorp also operates a chemical tanker for shipment of crude palm oil
Over the past 12 months, Ling said the group had revised upward shipping freight rates by 10% to 20% and delivered four new-built vessels.
The largest among the four vessels is an 80 metre-long landing craft built for US$25mil (RM112mil) for a United Arab Emirates (UAE) client and delivered in 4Q22.
Going forward, Ling said while the current freight rates might be sustained, he expects the utilisation rate of the group’s shipping spaces to come down between 10% and 15%.
“Some have predicted cargo volume may increase in view of the upcoming festive seasons such as Christmas and Chinese New Year. But we have to wait and see.”
Another major Sarawak-based shipping player, Harbour-Link Group Bhd
, has also benefited greatly from the upswing of the shipping industry.
According to the Bintulu-based company, domestic shipping activities between Peninsular Malaysia, Sarawak and Sabah are more stable with consistent volume and favourable freight rates.
Harbour-Link said the relaxation of the MCO had resulted in the increase of export-oriented cargo volumes from local manufacturing as well as the oil and gas (O&G) sectors.
However, Harbour-Link said recent ocean freight and shipping charges have weakened slightly due to lower cargo volume and increase in shipping space from other shipping companies.
The group’s cargo shipment volume has also been affected, as certain Chinese ports are still experiencing scattered Covid-19 lockdowns.
Riding on higher freight rates and better utilisation rates of shipping space in Intra-Asia trade, Harbour-Link more than doubled its group net profit to RM140mil in FY22 from RM60.6mil in FY21, as group turnover surged to RM871.2mil from RM609mil year-on-year.
Domestic and international freight rates for container shipping have remained depressed for many years due to over overcapacity, forcing some players out of business.
The pandemic has, however, changed the fortune of existing shipping firms, as the severe shortage of containers worldwide due to supply chain interruptions has driven freight rates from Asia to Europe and the United States by several folds last year.
According to Ling, operational costs for shipping companies have gone up due to higher bunker fuel price, as diesel price has risen to about RM4.9 per litre from RM2.4 and RM2.7 per litre before Russia invaded Ukraine in February this year.
Adding to it is higher labour costs due to the shortage of crew members.
On Syscorp group’s shipbuilding business, Ling said the company is currently in negotiation with Petroliam Nasional Bhd (PETRONAS) for the construction of offshore support vessels (OSVs) for the O&G industry.
“There is yet to be any firm contract,” he added.
According to media reports, PETRONAS has recently put out a tender for the construction of 16 units of OSVs in view of its ageing fleet.
The report said this is the first batch of contracts up for grabs as the national oil firm has plans to build 100 vessels in four years to phase out its old vessels. It takes 18 to 24 months to construct one vessel.
