China Merchants Energy Shipping (CMES), part of state conglomerate China Merchants Group, has forecast a six-fold increase in net profits during the first half of this year due to strong tanker rates.
Preliminary results showed the Shanghai-listed company, one of the world’s largest VLCC and valemax owners, achieved a net profit between CNY 2.79bn ($397m) and CNY 3.09bn in the six months.
This compared with a net profit of CNY 474m between January and June 2019.
“During the usually seasonally weak second quarter, the market turned out to be strong and we took advantage of that,” CMES said in an exchange filing.
“We fixed some contracts of affreightment, voyage and period charters at high rates.”
According to the company, the improvement came despite its dry bulk and ro-ro businesses being plagued by “a deep downturn” in the first half this year.
Earlier in 2020, CMES agreed to take over 75 bulkers and interests in five Yamalmax LNG carriers formerly owned by Sinotrans & CSC group firms, and their respective shipmanagement firms, for a total of CNY 6.57bn ($957m).
That was part of the intra-group restructuring of China Merchants Group, which acquired Sinotrans & CSC to create China’s second-largest shipping group in 2017.
“Our dry bulk fleet was growing due to the deal for Sinotrans & CSC assets. But seasonal weakness and the coronavirus pandemic lead to a deep downturn of international and domestic bulker and ro-ro markets,” the filing said.
“This dragged down the overall performance of the company.”
The share price of CMES closed at CNY 6.43 on Monday, up 4.21% from late Friday.
In the first quarter, CMES’ net profit grew to CNY 1.27bn from CNY 281m between January and March 2019. Revenue increased to CNY 4.58bn from CNY 3.14bn.
The company is due to release the full results for the first half of 2020 on 28 August.
