China Merchants Energy Shipping (CMES) will order more VLCCs after recording strong first-quarter results amid major group restructuring.
The Shanghai-listed unit of state-owned China Merchants Group, said its board approved a proposal to order two eco VLCCs from Dalian Shipbuilding Industry for up to about $169m.
Further details will be announced when the newbuilding contract is signed, said the company, one of the world’s largest VLCC owners.
In December, CMES booked four VLCCs at the same yard for a total of $332m. The 307,000-dwt vessels are due for delivery between late 2021 and the first half of 2022.
The company announced the latest newbuilding plan in its first quarter, which showed its net profit jumped to CNY 1.27bn ($179m) between January and March from CNY349m in the same period of 2019. Revenue rose to CNY 4.58bn from CNY 3.68bn.
The result was largely in line with its earlier forecast.
CMES’ oil tanker fleet achieved a net profit of CNY 1.25bn, up CNY 991m from the first quarter of 2019.
“Tanker demand fluctuated widely in the reported period due to seasonal demand weakness, coronavirus, geopolitics and Opec+ production,” the company said.
“Freight rates collapsed before surging in mid-March.”
Bulker profit slumps
The company’s bulker fleet, composed of 29 VLOCs and some smaller ships, saw net profit decrease by CNY 63.3m to CNY 22.5m.
“Requirements for raw materials were low as factories were operating at low rates…Demand for bulkers was weak and rates dismal,” CMES said.
Its ro-ro division saw its net loss widen by CNY 19.7m to CNY 29.4m due to weak shipping demand, according to CMES. The company said it would dispose two ro-ro ships without elaborating.
Moreover, CMES said it had completed the CNY 6.57bn takeover of the dry bulk and LNG assets of former Sinotrans & CSC group firms, which were acquired by China Merchants Group.
In the past month, the company received 75 bulkers and interests in five Yamalmax LNG carriers and their respective shipmanagement firms.
CMES's net profit amounted to CNY 1.61bn last year, up 38.2% from the level seen in 2018. Full-year revenue rose to CNY 14.6bn from CNY 10.9bn.
The company said it would distribute cash dividend of CNY 674m, equivalent to CNY 0.1 per share.
