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Chile’s CSAV reports $32.4m profit for Q4 2016

Chile’s CSAV reports $32.4m profit for Q4 2016
Chile’s CSAV (Compania Sud Americana de Vapores) ceo Oscar Hasbún said that the company posted profits of $32.4m in the fourth quarter of 2016 thanks to Hapag-Lloyd's strong performance in that period.

However, he warned that the conditions of the shipping industry remain unstable.

"We continue in a scenario of high volatility of rates. In addition, in the first quarter of 2017 there has been an increase in oil prices and in the values of the market for ship chartering, both effects creating an upward pressure on the structure of costs of the container industry,” Hasbun said.

With those results, CSAV accumulates profits in two consecutive quarters. But as a result of losses recorded during the first six months of the year, the company closed 2016 with annual loss of $23.3m.

Services operated directly by CSAV (vehicle transport, bulk cargo transportation, freight forwarder and logistics business) posted profits of $2.4m in the fourth quarter of the year, thus closing nine months consecutive positive results and managing to compensate for a very depressed first quarter.

Although market conditions remain unfavourable, the company has managed to reverse this trend through operational agreements that have led to a significant drop in costs and improvements in the use of ships and larger volumes transported.

At an extraordinary meeting, CSAV shareholders have approved a capital increase of up to $260m, aiming at providing liquidity in order for the company to acquire new Hapag-Lloyd shares once it merges with the United Arab Shipping Company (UASC). With that, the company will seek to maintain a participation of at least 25% in the combined company. With this percentage, CSAV will be able to decisively influence fundamental matters of the firm, such as mergers, acquisitions, capital increases, and others, CSAV said. The realisation of this capitalisation is conditional upon the closing of the merger.

If the capital increase at Hapag-Lloyd is made at current price of the share and at the prevailing exchange rate, the funds that CSAV would require would be around $212m but the intention of the company is finally to put in the market what is strictly necessary to get 25%. According to CSAV, the amount approved March 30 provides for a slack, if the placement price of Hapag-Lloyd shares or the evolution of the Euro/dollar exchange rate, merits it.

The merger between Hapag-Lloyd and UASC will allow the company to strengthen its position in the industry, consolidating itself within the world’s five largest container lines in the world, said Hasbun. The process will allow for estimated synergies of $435m per year and one of the most modern fleets in the industry.

The completion of the merger of Hapag-Lloyd and CSAV has been delayed by two months with reported concern over Qatari shareholder commitment post merger.