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PNSC: Depressing financial results

PNSC is looking at hard, very hard, times

By Syed M. Aslam
Feb 12 - 18, 2001

Record accumulated loss for the year ended June 30, 2000 has eroded the paid-up capital of the state-owned Pakistan National Shipping Corporation posing serious challenges for an already financially troubled national flag carrier.

According to the Annual accounts released here late last month PNSC's accumulated loss soared to an all time high of Rs 1.052 billion during July 1999 to June last year. While operating revenues dipped by 4.5 per cent from Rs 3.711 billion to Rs 3.54 billion, PNSC's operating expenses increased by eight per cent to Rs 3.839 billion over the previous year. PNSC which managed to earn an operating profit of Rs 158 million in 1998-99 suffered an operating loss of Rs 299 million during 1999-2000 to push its pre-tax loss by over four-fold from Rs 116 million to Rs 488 million. The after-tax loss depicted an over four-and-half-fold increase from Rs 102 million to Rs 582 million which alongwith the Rs 470 million accumulated loss carried forward from the previous year totalled the whopping Rs 1.052 billion.

One of the major factor attributed to the massive operating loss was blamed by the PNSC Board of Directors on an unprecedented increase in the international prices of oil. This increased the expenditure on the purchase of bunkers to Rs 606 million, almost double than Rs 319 million during the previous year. The fact that international oil prices touched a new ten-year high in early September last year, and its persistent spiral since, would mean worsening of PNSC's financial results during the current fiscal.

The record accumulated loss of Rs 1.052 billion has eroded the paid-up capital of the Corporation to a dangerously low level of Rs 217.8 million. PNSC remains an extremely top-heavy corporation despite an overall reduction in the number of its staff worker on June 30 last year from 1,458 to 1,021. This is evident as the total remuneration and benefits paid to 610 executives; including the chairman, 4 directors and 605 other executives, totalled Rs 257.7 million which far exceeded Rs 166.8 million in salaries and allowances to the rest of the employees.

Similarly, though PNSC was leaner by 437 employees on June 30 last year, the bulk of the staff cut occurred at the low level as the numbers of executives was cut by just 12 — from 622 in 1998-99 to 610 in 1999-2000.

The PNSC is not only facing a serious challenge for its financial survivor but is also facing acute problems from a fleet the bulk of which comprises vessels which have long passed their productive and economic life needing frequent maintenance and repairs which do not come cheap. Moreover, the Corporation which is already lifting just a fraction of the national seaborne cargoes has floated tender to sell one of its vessel for scrap.

PNSC's fleet comprise a total of 15 vessels — 12 break-bulk having an average age of 19 years and three used container vessels acquired a few years ago. PNSC has scrapped many vessels in the past and recent tender for m.v. Ayubia, built in 1981, is expected to expand to other vessels which was built in the same or even earlier year. The oldest ship in the PNSC fleet is 1979-built m.v. Makran while the latest, m.v. Lalazar, a container, was built in 1985. Of the rest of 12 vessels, 6 were built in 1980, three excluding Ayubia were built in 1981 and three were built in 1983.

The dilapidated PNSC fleet is posing a yet another serious challenge for the PNSC as the implementation of International Safety Management Code (ISM Code) would become mandatory for cargo ships, container vessels included, from July 1, 2002. The ISM Code has already been made mandatory since July 1, 1998 for the oil tankers. It is hardly an overstatement to say that PNSC is looking at hard, very hard, times.

Tender for the sale/scrap of m.v. Ayubia has recenltly been advertised which will reduce the number of ships in its fleet from 15 to 14.

PNSC'S Financial Results for the Year Ended June 30, 2000
(Rs '000')

.

1999-2000

1998-99

Percentage Change

Operating Revenues

     

Freight (Net)

2,322,675

2,471,333

-6%

Chartering Revenues

1,217,495

1,239,454

-3%

Total

3,540,170

3,710,787

-4.5%

Operating Expenses

     

Fleet Expenses - direct

3,544,960

3,233,155

+9.5%

- indirect

43,892

58,340

-25%

Total

3,588,852

3,291,495

+9%

Admin. and general

250,284

261,023

-4%

Total

3,839,136

3,552,518

+8%

Operating (Loss)/Profit

(298,966)

158,269

 

Insurance Claims

4,672

26,626

 

Other Income

121,950

83,740

 

Other Expenses

316,199

384,852

 

Pre-Tax Loss

(488,543)

(116,217)

 

Taxation

93,830

13,817

 

Post-Tax Loss

(582,373)

(102,400)

 

Accumulated Loss Brought Forward

(470,004)

(367,604)

 

Accumulated Loss Carried Forward

(1,052,377)

(470,004)