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Pacific Basin warns of $132m in write-downs

Pacific Basin warns of $132m in write-downs
Dry bulk shipowner Pacific Basin Shipping has issued a profit warning arising from approximately $132m in total of non-cash provision and non-cash charge that would hit its bottomline.

Hong Kong-listed Pacific Basin is expecting a provision of $101m for “onerous vessel inward-charter contracts” and a non-cash charge of $31m from the fair value change of bunker fuel swap contracts caused by the significant fall in oil prices. The provisions for in-ward charters relate to long-term handysize and handymax charters taken in 2010 on the expectation of a stronger dry bulk market in the long-term.

The provisions will be recorded in the company’s consolidated income statement for the year ended 31 December 2014.

“The board also wishes to draw the attention of the company’s shareholders and potential investors to the announcements relating to the impairment of the group’s towage assets and the loss on the disposal of the group’s harbour towage business,” Pacific Basin said.

The shipowner noted that the dry bulk market continues to be weak, pointing to a challenging outlook.

“Despite reduced global dry bulk net fleet growth in 2014, the market has yet to fully absorb the supply overhang following the 2010 to 2012 newbuilding boom,” it commented.

“Demand weakened in the second half of 2014 due primarily to decreasing coal imports to China and the continued Indonesian unprocessed minerals export ban.”

Pacific Basin added that the last quarter of 2014 saw bunker prices drop 45%, resulting in early signs of a general increase in vessel operating speeds, effectively increasing global shipping supply further.