Great Harvest first half profit down to US$1.3mn

Dip in performance prompted the group to pursue conservative growth principle and prudent business strategy to capture market opportunities.

Great Harvest Maeta Group Holdings Limited (“Great Harvest”), a company providing worldwide marine transportation services through chartering its vessels for transportation of dry bulk cargoes, announced Friday its interim results for the six months ended 30 September 2011.

During the period under review, spot rates of the dry bulk freight market hovered at low levels as a result of the combined effect of the large number of newly built vessels delivered and the relatively small growth in demand for marine transportation of dry bulk cargoes. Freight rates under substantial pressure coupled with record high fuel oil prices have undermined fleet operating performance and resulted in fluctuations of the overall Baltic Dry Index and indices of other vessel types hovering at low levels.

For the six months ended 30 September 2011, revenue of the Group was US$14 million. Gross profit declined to US$3 million. Such decreases were mainly attributable to the drop in average time charter equivalent rate of the Group’s fleet. Due to the decline in gross profit and the increase in finance cost, profit of the Group decreased to about US$1.3 million. To reserve more cash for future development, the Board does not recommend the payment of an interim dividend for the six months ended 30 September 2011.

Mr Yan Kim Po, Chairman of Great Harvest, said, “In spite of the unfavourable operating environment during the period, the Group’s vessels maintained an overall operation rate as high as 98.3% and the average daily charter rate of our fleet was reaching approximately US$14,313 per day. As time charter rates were lower than spot rates, to avoid fixing long term time charters at low freight rates, the Group’s vessels, except for Great Harvest, are operating in the spot market in a bid to seek and wait for better market opportunities.”

Driven by the favourable seasonal factors such as coal transportation and export of cereals from North America for winter demand, the spot rate for dry bulk has been rising since September 2011. This has brought a greater positive impact on the overall freight market, thus the winter freight market kicked off with an upward trend this year. To generate higher operating revenue, the Group aims to capture the higher charter rates for the vessels by tapping the bullish seasonal market during the fourth quarter of 2011.

According to statistics on new vessel orders, the excess vessel supply will continue to exert pressure on the spot market in the coming year. Development of the time charter market will be even more difficult with a depressed spot rate market. The industry awaits the pace of the demolition of aged vessels to speed up or at least be maintained at the current rate. To a certain extent, if the demolition rate remains the same as that of 2011, it would certainly relieve the pressure arising from expansion in fleet sizes.

Looking forward, Mr YAN concluded, “Amidst the current volatile operating environment, the Group insists on its prudent operating strategies by chartering out vessels to creditworthy users at higher charter rates when market opportunities arise, in order to generate higher operating revenue. In a bid to consolidate and expand our scope of business, we currently intend to identify more new development opportunities and diversify our income streams by actively considering expansion into other businesses, such as the upstream business segments, apart from the shipping business.”