PNSC FINANCIAL RESULTS

 

The dismal financial performance of the PNSC is feared to increase the country's already heavy dependence on foreign shipping companies

By Syed M. Aslam
Mar 06 - 12, 2000

State-owned Pakistan National Shipping Corporation is once again heading to get back into red. For the first time since 1996 when it managed to revert back into black the PNSC suffered an operating loss of Rs 54 million for the half-year ended December 31, 1999.

If the half-yearly financial result is any indication the PNSC is going to incure huge pre- and post-tax losses and record accumulated loss during the current fiscal ending June 30 this year. The drastic financial results would pose many hardships for PNSC whose fleet comprise of 15 vessels with an average life of 18 years— 12 breakbulk ships and three containerised vessels which have long passed their productive lives.

PNSC, which have remained in red most of its existence and had been bailed out by the government more than once, managed to keep itself in black for four years since 1995-96 when it reverted back into by earning an operating profit of Rs 59 million. It earned an operating profit of Rs 282 million in 1996-97 which dipped to Rs 204 million in 1997-98 and further to Rs 125 million in 1998-99.

PNSC’s accumulated loss increased to Rs 630 million for the half-year ended December 31, 1999 compared to Rs 469 million in 1998-99. PNSC’s accumulated losses touched Rs 528 million in 1994-95. If the six-monthly result is any indication it is feared to touch a record high when the year comes to a close on June 30 this year. See the attached Table.

With the imposition of a much stricter safety code by the International Maritime Organisation the dilapidated fleet would pose many problems for the loss-prone PNSC. As is, it is paying back loans on the purchase of three used containerised vessels in 1996 which only started lifting the national cargoes last year after the government abolished the import duty on cargo vessels. The situation would not only jeopardise any plans that PNSC have for the induction of more vessels to replace its dilapidated fleet but also to meet its such day-to-day expenses as repair and maintenance cost of vessels most of which have long past their productive lives.

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.

The dismal financial performance of the PNSC, the sole shipping liner of the country either in public or the private sector, is feared to increase already heavy dependence on foreign shipping companies to cater to the seaborne trade needs. PNSC which has already been lifting just a fraction of the national cargo is feared to lift even smaller volume of cargoes in the year to come unless it adds tonnage which looks like a remote possibility understanding the financial situation of the Corporation. An even more disturbing question is will Pakistan still have a shipping industry in the near future?

The emerging scenario is discouraging in more ways than one. Number one, it means spending increased foreign exchange to meet the seaborne trade necessities of the country through heavy reliance on foreign shippers which already cost the country over $ 1.8 billion annually. Secondly, and more frighteningly the absence of a reliable national shipping company could pose a problem in case an eventuality breaks out with the hostile neighbour as foreign companies are not known to have the dedication to risk doing business in any such case.

PNSC has consistently blamed the economic sanctions imposed on the country for using its options to conduct the nuclear test in May 1998 and declining flow of foreign direct investment into the country as well as the overall sluggish local economy for its poor performance. It has also blamed the withdrawal of the Right of First Refusal by the government to lift a cargo after matching the lowest bid. It also blamed the scarcity of the cargo availability for keeping freight rates at low level to hurt the profitability.

Despite the measures taken by the government, such as duty-free imports of vessels, to encourage the private sector investment in the shipping sector has not been able to achieve the desired results. The lack of interest highlights the need for the government to come up with a concerted long-term policy to encourage investment in the shipping sector. Avoiding to tackle the issue any further would have drastic consequences in the very near future. The time to act is now.

Financial Results for Half-Year Ended December, 1999

1998 1999

Operating Revenues 2,014 m 1,791 m

Operating Expenses 1,922 m 1,846 m

Operating (Loss)/Profit 92.4 m (54.4 m)

Pre-Tax (Loss)/Profit 28 m (151 m)

Post-Tax (Loss)/Profit 18 m (160 m)

Accumulated (Loss) (335 m) (630 m)