The global ship broker says figures exclude acquisition-related costs.
Clarkson PLC (Clarksons) saw its profits sink 20.8 percent to 14.5 million British pounds (U.S. $18.5 million) in the first half of 2018, according to the firm’s most recent unaudited financial statements.
The U.K.-based global ship broker and research consultancy noted, however, those figures exclude GBP 900,000 in acquisition-related costs, which if included, bring the figure down to GBP 13.6 million for the first six months of the year.
Clarksons reported diluted earnings per share (EPS) before acquisition costs of GBP 0.46 compared with GBP 0.57 per share in the same 2017 period as revenues slipped 2.7 percent year-over-year to GBP 152.6 million.
The firm’s ship broker segment reported an underlying profit of GBP 15.9 million on GBP 111.5 million in revenues, decreases of 24.3 percent and 5.5 percent, respectively, from the first half of 2017.
Profits in Claksons’ financial services unit slipped 6 percent year-over-year to GBP 4.7 million as revenues declined 2.2 percent to GBP 22.7 million.
The company’s support services division, on the other hand, saw segment profits jump 28.6 percent year-over-year to GBP 900,000 thanks to a 27.7 percent increase in revenues to GBP 10.6 million.
Research segment profits remained flat at GBP 2.4 million, despite revenues rising 6.8 percent to GBP 7.8 million compared with the first six months of last year.
Clarksons CEO Andi Case attributed the drop in profits in large part to a “challenging trading environment” in the first quarter across the various maritime shipping and offshore capital markets that was “accentuated” by the declining value of the U.S. dollar relative to other world currencies.
“Conditions in some markets did, however, improve in the second quarter when the breadth and diversity of our business again provided opportunity irrespective of volatility in the market,” added Case. “We should benefit in the second half of the year from these recent improvements and remain confident in the mid- to long-term potential for the group. Our investment across the business continues apace as we drive innovation and remain focused on furthering Clarksons’ position at the forefront of the sector.”
Commenting on the state of the container shipping market, Clarksons said containership earnings continued to improve in the first half after gaining ground in 2017, but noted that freight rates “have been volatile and failed to meet initial expectations” during the early part of the year. The lower-than-expected rates along with higher-than-expected bunker fuel prices have “put liner company financial results under distinct pressure,” the firm said, adding that some of the early declines in pricing east-west trades were recovered in the second quarter.
“On a global basis, freight rate levels still remain materially above the lows of 2016,” said Clarksons. “Across the first half of 2018, the SCFI composite index averaged 6 percent down on the 2017 average but up by 19 percent on 2016 average levels.”
The ship broker went on to describe what it sees as a “two-tier” market, wherein the largest carriers are ordering and chartering the vast majority of new capacity.
On the bright side, Clarksons said container freight demand remains “fairly robust, with global trade volumes projected to expand by over 5 percent in the full year to 203 million TEU following growth of around 6 percent in 2017.
“The rate of expansion on trades involving developing economies is currently very strong, though growth on the main lane east-west trades appears to be more moderate,” it added.
Clarksons noted that a continuation or escalation of tariffs between the United States and China poses a downside risk to this outlook, but said “the impact of tariffs currently in force or proposed is estimated to be relatively limited, and global volume expansion is expected to remain healthy.”
On the supply side, the firm said overcapacity is easing and fleet growth “remains manageable, despite a substantial delivery of ‘mega-ships’ in the first half of 2018,” projecting global containership capacity to rise 5 percent this ear compared with 4 percent growth in 2017.
“Surplus capacity in the sector remains much reduced, with less than 1 percent of fleet capacity standing idle at the end of the first half of 2018 compared to 7 percent at the start of 2017,” said Clarksons. “Overall sector fundamentals continue to remain supportive, although the balance between supply and demand growth in 2018 as a whole now looks likely to remain approximately even, before trade volume growth once again starts to outpace capacity expansion (set to slow to around 3 percent) in 2019.
Combined newbuild orders in the first half of 2018 stood at less than 500,000 TEUs, according to Clarksons, and the industry orderbook fell to an historically low 12 percent of the overall fleet.
“The boxship sale and purchase market remains active, having reached a record level in 2017, and consolidation of the sector remains ongoing with new joint operation activity involving the major Japanese operators underway from the start of the second quarter,” the firm added. “Liner companies still face capacity management and fuel cost challenges, and risks remain on the demand side, but as a whole, the mid-term future is likely to be characterized by positive fundamentals which could well support further market improvements.”
Clarksons’ profits sink 20 percent
