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Hanjin-shippers and forwarders group

Hanjin went ‘Back to Black’ in Q2 – Analysis to Say is it enough for Smooth Sailing or Not?

‘Back to Black’ was the title given for second quarter results of Hanjin Shipping this month. But they are proved to go well for some extent. It is known from the source that earnings of South Korea’s biggest ocean carrier recorded much better compared to 2014. Although, there is a long way ahead to recover completely, it is good going reducing debt laid on it. Hanjin shippers and forwarders group  has KRW2tr (1.6 billion dollars) of bonds as outstanding along with KRW1.8tr maturing by the year 2017, according the results of 2014. Hanjin is unexpected about the fillip it going to receive from the business cycle, which faced downfall of revenues from 7.5 percent in Q2 to 6.3 percent in Q1, declining every year. Overall, Carrier Company is to see bright outlook in the year 2015. It should keep a sharp focus on operating cost base to deliver great profits with cash flows which are necessary for guaranteeing debt repayments on time.

More Profits to Loom

If Hanjin shippers and forwarders group continues to maintain with H1 results, it will definitely generate profits in a range of 350 million dollars to 400 million dollars with core operating earnings this year. Suppose assume 100 million dollars revenue got from non-cash items with no working capital changes during the period, excluding operating cash flow will range around 500 million dollars. Whereas interest costs in H1 are 115 million dollars or 230 million dollars for an annual year. It is known from a source that its gross cash position including short-term securities is 400 million dollars which are enough to net debt position of 1.2 billion dollars. Although all the sales of container bulk and terminal are remaining sluggish, its projected Ebit margin is expected for a growth of 5 percent with low bunker prices and efficiency measures keeping in mind. So it became mandatory for the group to generate high cash flow into it to meet the majority of debt repayments laid on it. Although it has the ability to expand its fleet capacity and mega-ship capacity, the group was not in favor for it, due to the fear of loss of competitiveness.

Tough Times

Last year, earnings of the container business are expected ‘to be in black’ and bulk carrier business ‘to stay soft’ for some time. But observed its bulk operations are still in red in Q2 of 2015, though quarterly trends are somewhat encouraging, said by Martin Song, was an analyst at NH Investments and Securities.  Due to continuous losses seen year over year, shareholders are going through tough times from last 2 years. Kim Young Min, previous chief executive of Hanjin group resigned at the end of 2013 taking responsibility of losses and for not getting financial support from creditors. It is seen in Q4 13, bankruptcies of Tongyang and Woongjin which acting as an urgent and critical task for improving financial status. Hanjin said in annual results that it had reduced debt by more than KRW1tr and is secured now with KRW300 billion through liquidation of long-term contracts based bulk and LNG business. Overall, the financial profile of Hanjin does not look bad this year, compared to last year, although faced exogenous shocks stopping its growth.

Source From: http://theloadstar.co.uk/analysis-hanjin-back-to-black-in-q2-but-is-it-enough-for-smooth-sailing/