PAKISTAN NATIONAL SHIPPING CORPORATION - PNSC

A National Flag Carrier's Fleet

MARIAM NASIR, Research Manager
May 28 - Jun 03, 2007

Shipping is a capital intensive industry. In 1971 the government nationalized the shipping industry which resulted a set back for private sector back in 1974. The Pakistan National Shipping Corporation is a self governing corporation works under full control of Ministry of Ports and Shipping, Government of Pakistan. GoP has merged all shipping lines under the Pakistan National Shipping Corporation (PNSC). Later, PNSC went to the public sector also with 90.2% government ownership and 4.9% private sector ownership. PNSC has a fleet of 22 vessels and its subsidiary, the National Tanker Company, owns one tanker.

'THE GROUP' & ITS SUBSIDIARY COMPANIES

Pakistan National Shipping Corporation 'The Group' is based on the holding company 'PNSC the corporation' and 18 subsidiary companies including 'Karachi Shipping Pvt. Ltd.' recently acquired fully against total consideration of Rs.168,764,862 (Fair M. Value of 100.63 per share dated May 11, 2006 by the group. In addition to that the group holds 55% of the share capital of 'Pakistan Co-operative Ship Stores Pvt. Ltd' and 100% of remaining seventeen subsidiaries.

CORPORATION AND ITS OPERATIONS

PNSC was established under provisions of the Pakistan National Shipping Corporation Ordinance, 1979 and is principally engaged in the business of shipping, including charter of vessels, transportation of cargo and other related services and providing commercial, technical, administrative, financial and other services to third parties in relation to business of shipping. The Corporation is also engaged in renting out its properties to tenants under long-term lease arrangements and managing a fleet of 10 multi Purpose Cargo Ships, 04 aframax tankers and one bulk carrier having a dead weight tonnage of 636182 DWT.

PRIVATIZATION - LISTING ON BOURSES

The Corporation is listed on the Karachi and Lahore Stock Exchange with an authorized capital of Rs.2000 million and a paid up of Rs.1320.63 million. The Corporation's registered office is situated in PNSC building, Moulvi Tamizuddin Khan Road, Karachi and had applied for delisting from the Lahore and Islamabad Stock Exchanges which was approved by the Securities and Exchange Commission of Pakistan (SECP).

SHARE HOLDING PATTERN

The Corporation is governed by a board of directors constituted by the Federal Government. Five of these Directors including the Chairman are nominated by Government (majority share holder), while two Directors are elected by the shareholders.

FLEET'S EXPANSION PLAN - NECESSITATE FRESH TONNAGE

Lack of adequate fresh tonnage (new ships) due to financial constraints has resulted in gradual deterioration of the PNSC fleet in terms of age profile and unless the trend was reversed, foreign vessels would grab a bigger chunk of the country's seaborne trade. The age profile of the fleet, however, is gradually deteriorating as in terms of dead-weight tonnage (DWT), over 62 per cent of the fleet of 15 ships with about 636182 DWT is over 26 years old, while remaining 38 per cent is 18 to 23 years old.

As a part of national flag carrier's fleet expansion plan PNSC has finalized a US$135 million financing for acquisition of three vessels. It includes two double-hull oil tankers of 'Aframax class' and one bulk carrier of 'Panamax class', considering delaying the purchase of bulk carrier amid declining trend of tonnage (ships) in the international market. The vessel acquisition plan would cost an amount of US$150 million, of which US$135 million has been arranged through financing from ABN-Amro Bank, while remaining amount of US$15 million would be provided by the Corporation from its own resources and is expected that these vessels would be inducted into the fleet in the financial year 2006-07.

The national flag carrier have to replace its ageing oil tankers as one of its oil tankers would be out of business under restrictions of Condition Assessment Scheme (CAS) of International Maritime Organisation (IMO) in 2007, while another three tankers would fall under the same in 2010. According to its nine month report the proposed induction of these proposed vessels in PNSC's Fleet will be a step towards its growth sustainability. In addition all fully subsidiaries of the cooperation operate one vessel/tanker each with the exception of Pak Nippon Car Lines Pvt. Ltd. and NTCL which currently do not own any vessel. PNSC's current fleet strength apprehended below:

VESSEL

YEAR OF BUILT

DWMT

GRT

NRT

BULK CARRIER

MV Kaghan

1986

65,716

36,098

21,824

OIL TANKERS

MT Johar

1985

86,803

49,688

25,546

MT Swat

1985

86,593

49,601

25,534

MT Lalazar

1984

113,881

60,099

35,604

MT Shalamar

1981

99,361

54,474

29,641

COMBI VESSELS

MV Islamabad

1983

18,204

12,395

6,747

MV Sibi

1981

16,436

13,402

7,693

MV Khairpur

1981

16,430

13,402

7,693

MV Sargodha

1980

18,242

12,395

6,747

MV Multan

1980

18,257

12,395

6,747

MV Malaknd

1980

18,224

12,395

6,747

MV Hyderabad

1980

18,257

12,395

6,747

MV Chitral

1980

18,144

12,395

6,747

MV Bolan

1980

18,144

12,395

6,747

MV Makran

1979

23,490

16,199

8,184

Total

.

636,182

379,728

208,948

FINANCIALS

PNSC nine months results ending March 31, 2007 posted a net profit of Rs1,361m translating into an EPS of Rs10.31 as compared to Rs1,026m in FY06 (EPS: Rs7.78) showing a growth of 33%. Major factor owing to growth is 12% increase in sales revenue to Rs6.73bn compared to Rs.6.01bn in FY06. Expenditures on the other hand rose by 5%, resulting in a 35% increase in gross profit to Rs1.87bn as against Rs.1.38bn in the same period last year. Other operating income also provided sustainability, increase by 38% to Rs302m which in the same period last year were Rs.219m.

NINE MONTHS RESULTS

RUPEES IN '000

JUL-MAR FY07

JUL-MAR FY06

CHG%

Revenue

6,731,041

6,012,839

12%

Expenditure

4,855,881

4,623,068

5%

Gross Profit

1,875,160

1,389,771

35%

Other Expenses

508,323

396,072

28%

Other Operating Income

302,146

219,651

38%

Profit Before Taxation

1,668,983

1,213,350

38%

Taxation

307,257

182,533

68%

Share of net loss in associate

-

3,919

-

Profit After Taxation

1,361,726

1,026,898

33%

Earning Per Share (Rs)

10.31

7.78

33%

FUTURE PROSPECTS

The national fleet has chalked out an expansion and renewals plan in regard to its growth sustainability plan. In this regard the management has deal out purchasing out three vessels worth US$150 million, out of which US$135million has been arranged through financing from Bank. Necessary approvals have been obtained and it is expected that these vessels will be included in to the fleet in FY2006-07. The management is also in the process of incorporating two more companies and accordingly total number of subsidiaries will be nineteen. Hence, it will initiate a step towards PNSC's future growth escalation.

TERMS:

DEAD WEIGHT TONS - DWT

DWT is the amount in tons that a vessel can carry, and includes besides the cargo, bunkers (gas-oil, freshwater, ballast), provisions, weight of crew and passengers, etc.

GROSS REGISTER TONS - GRT

A unit that measures the size of a ship. 1 register ton = 2,83 m3

The GRT of a vessel is used to decide how many crew members a vessel must carry, which amount has to be paid as a coastal fee, harbour dues and other fees. GRT can give the size of a passenger ship and the so-called 'paragraph vessels' (499 GRT, 1599 GRT).

NET REGISTER TONS - NRT

A unit that measures a ships ability to carry cargo. In large terms NRT equals GRT minus the volume of the machine hold, accommodation for the crew, water ballast tanks, etc. In some countries this unit is used to calculate canal- and port dues.

TEU

Container standard unit, 1 TEU = Twenty feet Equivalent Unit.

One standard 20" container measures: 20" x 8" x 8" (L x B x H) = abt 6,096m x 2,438m x 2,438m. One fourty feet container equals 2 TEUs.