Mercator Lines warns of 'adverse earnings'

India-based Mercator Lines has warned that its earnings would be affected by the continuing weak global dry bulk market, given that growth may not be strong enough to absorb an oversized order book. “Based on the present order book the existing fleet size is expected to grow by around 35-40% in 2011 and 2012. Even if we consider scrapping of around 10-20%, there is an oversupply,” the company said.


“Unless this demand-supply gap is restored, freight rates will continue to be pressured. Continuance of a prolonged low freight rate regime would impact our earnings adversely,” it added. The Singapore-listed firm has announced lower net profit for the financial year ended 31 March 2011 despite higher revenue. Net profit fell 24% year-on-year to $31.1m but revenue posted an 8% increase to $155.36m Mercator Lines blamed rising bunker prices and bad weather conditions in Australia and China for a weaker net profit in the last quarter of 2011.


The global dry bulk trade is expected to grow at 6-7% a year in 2011 and 2012 provided there is strong support from Chinese imports of iron ore and coal, and demand from the construction and power sectors of Japan due to the tragic tsunami.
(Source:http://www.seatrade-asia.com)