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Depressed dry bulk and tanker markets sent pre-tax profits down 31 per cent at Braemar Shipping Services in the first half, as the shipbroking and marine services group said it planned a cost-cutting programme to improve profitability.
While the company held out no immediate prospect of a revival in the underlying shipping markets, it expected a stronger second-half performance than that for the six months to August, when revenues fell 9 per cent to £61.5m ($98.4m).
James Kidwell, finance director, said some ship deliveries – and payments of the related commissions – scheduled for the first half of the year had been postponed into the second half or until next year as owners sought to avoid taking ownership of new vessels amid the current weak markets.
“We’ve had a little bit of slippage from the first half into the second half and next year in terms of deliveries,” Mr Kidwell said. “That, of course, is reasonably common at the moment in terms of what owners are seeking to do with their newbuildings.”
The company also expected to see benefits in the second half from the first effects of cost-cutting measures – including closure of a desk dealing in the once popular forward freight agreements futures market – and the gains from two acquisitions.
Owners in both dry bulk and tanker markets ordered large numbers of ships at the height of the market boom in 2008. As the ships are delivered, fleets are expanding faster than shipping demand, driving down owners’ earnings and shipbrokers’ commissions.
“From a broker’s perspective, what we’ve been seeing is good transaction numbers in chartering,” Mr Kidwell said. “But, of course, the investment in new tonnage has actually outweighed the rising demand and so we have low freight rates.”
Outside shipbroking, Braemar’s environmental services business has been appointed to retrieve and clean containers and their contents from the container ship Rena marooned off New Zealand. The task is similar to those the division undertook after the beaching of the MSC Napoli in southern England in 2007, which helped to triple the division’s revenue that year.
Mr Kidwell said it was too early to say whether the Rena would produce an equally strong boost for the division.
The interim dividend was held at 9p. Earnings per share fell to 17.6p (25.99p). The shares rose 19p to 339½p.