Shipping cos likely to be in turbulent waters

Margin Profile

• Further revenue fall of 5-7% expected in FY24
• Avg operating margin may moderate to 33-35% in next fiscal
• It’s due to correction in charter rates
• However, it will remain higher than pre-pandemic levels of 25-30%

Mumbai: Domestic shipping companies are likely to see a further 5-7 per cent decline in revenue in the next financial year amid normalisation of the rates, a report said on Thursday. This follows a steep 23-25 per cent fall in their revenue in the current fiscal (2023-24) after a 35 per cent growth in the last financial year when charter rates had surged because of geo-political conflicts (including the Russia-Ukraine war) and higher demand from China post-pandemic, credit rating agency Crisil said on Thursday.

While the margin profile may vary widely across players operating in different segments, Crisil said the average operating margin may continue to moderate to 33-35 per cent in the next fiscal driven mainly by the correction in charter rates.

However, it will remain higher than the pre-pandemic levels of 25-30 per cent, the rating agency forecast. This along with modest capital expenditure (capex) plans, should sustain the healthy credit risk profiles of shipping companies, Crisil said.

A Crisil study of five shipping companies, which account for about half of the around 20 million metric tonne (MMT) deadweight tonnage (DWT) of shipping fleet in India, indicates as much, it said. The shipping fleet of domestic companies is dominated by tankers that carry crude oil and petroleum products (contributing to around 70% of total DWT), followed by dry bulk carriers carrying unpackaged commodities such as coal, iron ore and grains (around 20%), according to Crisil. The balance is distributed between container ships, gas carriers and others. According to Crisil, the charter rates correlate with the global demand-supply dynamics. “We are seeing charter rates for crude and product tankers correcting 20-25 per cent this fiscal from the average of around $50,000/day last fiscal,” said Crisil.