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BW's Sohmen-Pao astonished by amount of new equity in shipping given rates of return

Given how difficult it is to recover the cost of capital in shipping BW Group chairman Andreas Sohmen-Pao says he is “astonished” by the amount new equity that comes into the industry.

Speaking at Marine Money Asia in Singapore the third-generation family shipowner painted a picture of an industry that is fantastic to work in, partly because it is so challenging, but in terms of making money for shareholders is an extremely tough environment.

“On a short term, medium term and long term horizon shipping has struggled to return its cost of capital,” he stated.

Many of the companies that did fantastically well in the boom years have since been forced into bankruptcy protection worth little or nothing.

“How many of those companies have disappeared or gone to zero in the meantime? OSG, General Maritime, Torm, Seadrill, and countless offshore provider companies. So all these people who did fantastically well in the boom days gave it all back.”

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Despite being an industry that Sohmen-Pao described as that is very tough from an economic perspective it does continue to attract new equity investments.

“On a short term, medium term, and long term horizon shipping has struggled to return its cost of capital. It astonishes me that so much new equity keeps coming into the industry when the facts don't really support it,” he said.

As a family owned group comprising both private and listed entities Sohmen-Pao was honest about BW's own ability to deliver a returns of equity. “We have created very little equity value in our group over the last 10 years, some would say that's an achievement because a lot of others have gone to zero.”

Answering his own question as to why therefore is he in shipping Sohmen-Pao noted it was a family business, but also that, “I genuinely love shipping, I think its a fascinating industry, not the most lucrative and we do the best we can.”

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