Analysts fear plunge in RCL profit

Local brokerages estimate the company's 2009 net profit at about Bt200 million, compared to the Bt3 billion-4 billion annual average over the past few years.

RCL vice president Natcharin Sakulsumpaopol said yesterday that although the company is replacing older leased vessels with new six larger vessels, 50 per cent of total freight volume estimated for this year has been locked in long-term contracts.

In the first 11 months of last year, RCL's freight volume grew 7 per cent on year to 2.56 million 20-foot equivalent units (TEUs), said several brokerages.

Natcharin said the last two out of the six new vessels would be delivered by the end of this year and the company had no plan to cancel the order.

Presently, RCL owns and operates 40 container vessels covering more than 70 destinations in Asia, Australasia and the Middle East.

Bu, RCL has shown a drop in its results since the third quarter, recording a net loss of Bt440.77 million, compared to a net profit of Bt608.16 million in the same quarter of 2007. That caused nine-month net profit to come up 58.9 per cent short at Bt772 million, from Bt1.88 billion in the same period of 2007.

The company posted Bt15.99 billion in revenues for the first nine months. RCL's stock is trading at Bt6-B7, tumbling from its peak of Bt16.40 in August.

Asia Plus Securities reiterated in its report that RCL's freight volume in 2009 would shrink in the face of the global economic slowdown.

Freight volume in the first 11 months last year was still good, but would fall by 20 per cent year-on-year in December, resulting in 2008 full-year freight growth of only 4.2 per cent.

"RCL's freight volume in 2009 would contract by 7 per cent from last year, hitting the lowest contracted freight volume in seven years," its said.

The securities house has revised its net profit forecasts for RCL down by 51 per cent to Bt198 million in 2008 and by 89 per cent to Bt22 million in 2009.

RCL would continue to show net losses after the third quarter last year due mainly to lower demand for shipping and depreciation expenses, it said.

Phillip Securities said RCL's freight volume in November was up only 1.28 per cent to 219,000 TEUs, of which 0.88 percentage point was from the shipper-own-container business and 1.7 percentage point was from the carrier-own-container business.

The broker maintained its estimate for RCL's total freight volume in 2008 at 2.93 million TEUs and in 2009 at 2.64 million TEUs, a drop of 10 per cent.

The broker expects that RCL's freight volume in 2008 would grow by 6.88 per cent but drop by 10 per cent in 2009. RCL's net profit would be Bt560 million in 2008 and Bt209 million in 2009, it said.

United Securities expects that demand for ship freight will slow down this year, while the 55-per-cent increase in the supply of new ships to enter the business from 2008-2011 would push freight rates down over the next few years.

RCL's net profit would slide from Bt715 million in 2008 to Bt261 million in 2009, it said.

Fitch Ratings (Thailand) last month downgraded RCL's outlook to "negative" from "stable" on its Bt2.5-billion senior unsecured amortising debentures due this year, and affirmed its National Long-term rating at "BBB+(tha)".

The outlook revision reflects RCL's weakening performance due to high oil prices and its limited ability to increase freight rates during the down cycle. Recessions are also projected for the US and Europe, as well as slower growth for Asia in 2009.

Natcharin said RCL has upgraded its information systems and technology over the past few years. He hopes that this would help the company manage its freight movements more efficiently. The IT system is expected to be completed by year-end.