Samudera Shipping slumps despite posting strong FY2022 results

SINGAPORE – Shares of Samudera Shipping closed at $1.19 on Tuesday, down by more than 11 per cent, despite reporting a strong set of results for 2022 after the market closed on Monday.

Samudera recorded an 88 per cent increase in revenue to US$990.6 million (S$1.34 billion) for the year ended Dec 31, 2022, as a result of improvements in demand and strong freight rates across all business segments, primarily container shipping.

While freight rates softened in the second half of the year, average rates for the full year were significantly higher than those for financial year 2021 as demand for shipping services outpaced supply, the company said.

Container volumes handled grew by 28.5 per cent to 1.9 million twenty-foot equivalent units (TEUs) in financial year 2022 and 30 per cent year on year to 964,000 TEUs in the second half.

As a result, Samudera’s net profit for financial year 2022 surged 148.4 per cent to US$323.1 million, despite rising costs.

The company proposed a special cash dividend of 24.25 cents per share, plus a final cash dividend of 0.75 cent per share.

Looking ahead, though, Samudera said global inflationary and recessionary risks could dampen consumers’ purchasing power, and this is expected to weigh on cargo demand and freight rates in 2023.

In addition, bunker costs are expected to remain high amid ongoing geopolitical conflicts and China’s gradual increase in economic recovery.

Meanwhile, easing port congestion in recent months has released more ships into the market, at a time when more new-build capacity is expected to come on stream in 2023 and 2024.

According to intelligence firm Maritime Strategies International (MSI), the global container ship fleet could expand by 7 per cent year on year in both 2023 and 2024. Fleet growth could be as high as 10 per cent a year if a high expected volume of scrapping does not take place, it added.

As a result, freight rates have fallen since the latter part of 2022 and are expected to fall further when shipping lines renew their contracts in the first half of 2023.

Contract rates for shipping are the agreed-upon rates between a shipper and a carrier for the transportation of goods over a specified period, and this is expected to be lower than before in 2023.

For these reasons, MSI analyst Daniel Richards told the media that smaller shipping lines are likely to come under earnings pressure sooner than bigger lines with more diverse routes and cargo. Lines with more contract versus spot cargo will also see more earnings longevity, he said.

Samudera will take delivery of four newbuild container vessels, on long-term charter, in the first half of 2023. It has also entered into an agreement to purchase two 1,900 TEU newbuild container vessels, which are scheduled to be delivered between 2024 and 2025.

The company operates a regional container shipping business that provides feeder services between Singapore, Indonesia and other ports in Asia and the Indian subcontinent.