Pacific Shipping (02343-HK) recorded a shareholder-attributable loss of 208 million yuan (US dollars, the same below) in 2020, while it made a profit of 65.2% less than 25.12 million yuan in 2019.

First of all, from the information provided by Pacific Shipping's (1) Financial report Review, we can see that there is some truth in its management's optimism about the prospects of the group and the shipping industry, especially (I) the strength of convenient dry cargo ship chartering, on the grounds that market demand appears to have recovered almost completely, including exports of European metals, American grains, soybeans and iron ore from Brazil and Australia, which increased significantly at the beginning of the year. And this (II) confirms that the IMF expects the global economy to grow by 5.5 per cent in 2021 and 4.2 per cent in 2022, both higher than the 3.5 per cent increase in 2020.

What is important is that Pacific Shipping's (III) contract has performed well. Among them, (I) the average daily freight of the Mini Ling cargo ship is 10150 yuan in the first quarter of 2021, which has reached 94% of the carrying rate, 9830 yuan and 46% respectively for the whole year; (ii) the average daily rental fee of the Daling convenience type in the first quarter is 13380 yuan, the carrying rate is 100%, and that for the whole year is 1.105 yuan and 63% respectively.

This is (2) a benign continuation of the Group's business in the global market since May 2020, that is, (1) a strong rise in China's import and export of dry bulk commodities, especially iron ore and soybeans, and (2) bumper harvests of crops in North and South America. This has stimulated the trade in food and other food commodities with a strong performance.

Let's take a look at Pacific Shipping's (3) track record. Of course, the most eye-catching thing is that there was a loss of $199 million for the impairment of cargo ships, a substantial increase of 130 times over the $1.51 million in 2019. This non-cash impairment resulted in a loss of $206 million per month in pre-tax performance, reversing the situation of $26.23 million in pre-tax profit last year.

However, Pacific Shipping also needs to more strictly control cost expenditure, including service cost expenditure, reaching 1.434 billion yuan in 2020, down 5.22% from the same period last year, and 1.74% less than the 6.96% decline in turnover of 1.47 billion yuan. as a result, the gross profit of 36.87 million yuan shrank by 49.12% compared with the same period last year, while the gross profit margin was 2.5%, which was significantly lower than the 4.57% in 2019.

The average daily income of the fleet of the Group (5) is better than that of the same industry in 2020: 7860 yuan for Xiaoling stool and 11140 yuan for Da Ling stool, which are higher than the average market prices of 1140 yuan and 3360 yuan respectively.

Li Weicheng, senior financial commentator