THE troubled global container shipping sector has seen profits shrink for Korea's Hyundai Merchant Marine (HMM) and Hanjin Shipping as freight rates weaken, says Drewry Maritime Equity Research.
Losses in their key segments of container shipping have led to severe deterioration in their financial health, said the Drewry report, adding that the two companies have failed to generate enough cash to sustain operational expenses and have gone into the local debt market to cover the shortfall.
"Korean container shipping companies have their backs to the wall. Both HMM and Hanjin have severely strained balance sheets in the downturn and the near term outlook doesn't seem benign," said Drewry analyst Rahul Kapoor.
"They have seen massive book value erosion between 2009-12, to the tune of 60 per cent and will need years of profitability and massive capital increase to tide over what we see as still challenging freight markets," he said.
"Even as we see the worst is behind them in terms of losses, we are not optimistic of a major turnaround near term and expect the two to continue grappling with weak financial health," Mr Kapoor said.
HMM is seeing unsustainable debt, he said, adding that the company's financial health remains under tremendous strain with any further stress will likely put HMM's ability to meet its maturing debts under stress, thus there is little doubt HMM to be loss making in FY13.
Hanjin will continue to be in the red in 2013 as weak fundamentals and high interest costs weigh, he said as Drewry estimates suggest the company needs KRW4 trillion (US$3.6 billion) to fund its capital expenditure and debt maturities. With continuing losses the company could find financing highly expensive, said the report.
WORLD SHIPPING
29 August 2013 - 21:15
Korea's HMM, Hanjin under severe stress as debt load mounts: Drewry
THE troubled global container shipping sector has seen profits shrink for Korea's Hyundai Merchant Marine (HMM) and Hanjin Shipping as freight rates weaken, says Drewry Maritime Equity Research.
WORLD SHIPPING
29 August 2013 - 21:15
Korea's HMM, Hanjin under severe stress as debt load mounts: Drewry
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