PNSC'S FINANCIAL RESULTS
What poses a serious challenge in the PNSC is its aging fleet
By Syed M. Aslam
Jan 24 - 30, 2000
The operating revenues of the state-owned Pakistan National Shipping Corporation (PNSC), the sole shipping line of the country, dipped to their lowest in five years for the year ended June 30, 1999. PNSC which reverted back into black in 1996 by earning an operating profit of Rs 59.01 million managed to still make an operating profit of Rs 125.4 million in 1998-99.
PNSCs accumulated loss, however, soared to Rs 469 million in 1998-99 from Rs 353 million in 1997-98 as its pre- and post-tax profits in the previous year turned into losses in 1998-99.
PNSC handled a total of 3.271 million freight tonnes of cargo in 1998-99 which was the lowest since 1994-95. It also undertook a lesser number of voyages, including foreign chartered vessels 449 compared to 467 in the previous years.
PNSC which suffered an operating loss of Rs 528 million in 1994-95 reverted back into the black when it earned an operating profit of Rs 59 million in 1995-96. It bettered its profit to Rs 282 million in 1996-97 which decreased to Rs 204 million in 1997-98.
The management of PNSC blamed the inconsistent economic policies, an unabated declining trend in the flow of foreign direct investment, economic sanctions retarding the economic activities and reduction in cargo availability imperative to maintain low freight rates for the overall dismal performance.
It also blamed the withdrawal of the Right of First Refusal, which allowed PNSC to match the lowest bid to lift the cargoes, by the government to have a negative impact on its performance. It said that the withdrawal of the First Right of Refusal resulted in PNSC lifting 84 per cent less of such captive cargoes as iron ore, wheat and coal in 1998-99 only 0.312 million tonnes of these captive cargoes were lifted by the PNSC in 1998-99 as compared to 1.937 million tonnes of the same in the previous year.
The drastic reduction in the volume of these captive cargoes with the withdrawal of the Right of First Refusal is obvious from the following statistics. PNSC which lifted 297,000 tonnes of wheat in 1997-98 did not lift any shipments of the same in 1998-99 while the liftings of iron ore dropped by over 92 per cent from 597,000 tonnes to just 51,000 tonnes. In addition, the liftings of coal/coke dropped by 75 per cent from 1.043 million tonnes to 261,000 tonnes. What helped PNSC to avoid a disaster was its decision to start lifting crude oil imports on foreign chartered vessels from October 14, 1998 the Corporation which did not lift any crude oil in 1997-98 managed to lift 1.580 tonnes of the crude oil imports in 1998-99.
PNSCs total operating expenses in 1998-99 dropped to the lowest level of Rs 3.585 billion in 1998-99 from 5.687 billion in 1994-95 and Rs 4.393 billion in 1997-98. The biggest percentage 24.10 per cent of the operating expenses went towards the charter hire to facilitate the large volume of crude oil imports.
PNSC spent a total of Rs 864 million to charter foreign vessels Rs 281 million in time charter, Rs 382 million in voyage charter and Rs 2001 million in slot charter expenses. PNSC earned chartering revenues of Rs 1.24 billion, over 82 per cent or Rs 1.02 billion of which came from the foreign flag vessels while the rest of Rs 221 million came from its own vessels.
An analysis of the PNSC financial results for the year ended June 30,1999 show that a 58 per cent increase in the Other Expenses was the major factor for the pre- and post-tax loss that the Corporation suffered in the year under discussion. The Other Expenses increased from Rs 231 million in 1997-98 to Rs 366 million in 1998-99. The increase was primarily due to an exchange loss of Rs 134 million on the foreign currency loan which the PNSC obtained in 1996 to acquire three used container vessels. These vessels were inducted into the PNSC fleet during 1998-99 after the government decided to allow duty-free imports of the vessels. The three vessels are run on container feeder service between Karachi and Colombo at present.
What poses a serious challenge in the PNSC is its aging fleet particularly with the imposition of a much stricter operation and safety standards of the International Maritime Organisation. With an average life of 18 years the aging PNSC fleet will mean increasing maintenance, repair and dry-docking (at least twice every five years to maintain the seaworthiness as per the specifications of Lloyds of London or A.B. of USA) expenses. A soaring accumulated loss would have a direct bearing on the PNSC to help meet these challenges.
Financial Results for The Year Ended June 30, 1999
1998-99 1997-98 %age Change
Freight (Net) 2,471,333 2,467,793 negligible inc.
Chartering 1,239,454 2,129,422 - 42%
3,710,787 4,597,215 - 20%
Fleet direct 3,241,978 4,084,987 -21%
Indirect 58,340 29,439 100%
Adm. & Gen. 285,046 279,011 2%
3,585,364 4,393,437 19%
Operating Profit 125,423 203,778 - 39%
Other Income 83,740 127,385
Other Expenses 365,779 230,747 + 58%
Pre-Tax profit/(loss) (129,990) 125,390
After-Tax profit/(loss) (116,173) 101,811
Accumulated Loss (469,250) (353,077)