China demand puts Norwegian transporter on couse for big profit
LONDON (Bloomberg) -- Record car shipments to China and a rebound in cargoes from Japanese automotive companies recovering from last year's natural disasters will mean the most profit ever for Wilh. Wilhelmsen, the world's largest vehicle transporter.
European sales to China rose 42 percent to an average of 53,500 vehicles a month this year, according to data from China Automotive Information Net, a government researcher.
The company's net income will reach $316.8 million this year, from $143 million in 2011, according to the mean of 10 analyst estimates compiled by Bloomberg.
Profit is predicted to keep advancing for at least another two years.
Shares of Lysaker, Norway-based Wilhelmsen, with 23 percent of the global fleet, will rise 31 percent in the next 12 months, the average of seven analyst estimates compiled by Bloomberg shows.
While the company is handling more cargo to Asia, it's also earning more because it has more cars to bring back from the region.
Japanese exports to the United States, the industry's biggest trade route, rose 25 percent in June after companies from Toyota Motor Corp. to Honda Motor Co. reopened factories, Japan Automobile Manufacturers Association data show.
Wilhelmsen is also carrying more construction and mining machinery, according to CEO Jan Eyvin Wang.
More per cubic meter
Wilhelmsen vessels earned $67 a cubic meter (35 cubic feet) of cargo in the second quarter, little changed from a year earlier, according to RS Platou Markets.
Rates were last higher in the first three months of 2009, when the ships earned $69, the Oslo-based investment bank estimates.
More cargoes to and from Asia mean the ships are less likely to sail empty on either leg of the journey, boosting revenue.
China's appetite for European cars is growing after the nation's gross domestic product expanded more than fivefold in a decade, making it the second-largest economy.
Deliveries of passenger vehicles may rise 11 percent to 16.09 million units this year, with sales accelerating in the second half, the China Association of Automobile Manufacturers predicted July 26. The country is the world's biggest vehicle market.
Japan, the largest car exporter, shipped 6.2 percent fewer vehicles to Europe in June, data from the Japanese association show. Deliveries to all destinations rose 7.2 percent, reflecting a recovery from a collapse in output after the magnitude-9 earthquake and subsequent tsunami that struck the country March 11, 2011.
Shipments are still 7.4 percent below the four-year average. Toyota said Aug. 3 it expects sales to increase 23 percent to a record 9.76 million units this year, from a previous prediction of 9.58 million. Honda reiterated July 31 it expects to sell a record 4.3 million vehicles in itscurrent fiscal year.
Benefited from the slump
Car carriers are profitable partly because owners scrapped ships when seaborne trade in vehicles dropped 40 percent in 2009. The fleet contracted by about 7 percent to 646 vessels, Clarkson data show.
Wilhelmsen, which operates 141 carriers, took advantage of the slump to hire other companies' vessels on long-term charters, CEO Wang said by phone Aug. 8.
As well as owning the ships, it also operates others through joint-venture partnerships. The bigger fleet is now boosting profit after rates rebounded, he said.
The cost of chartering in a ship for a year fell as low as $12,000 a day in 2009 and is now at about $25,000, according to Platou, which anticipates $28,000 in 2013.
The carriers need about $10,500 to cover running costs, excluding fuel, and pay interest on debt, the bank estimates.
Nippon Yusen K.K., based in Tokyo, operates 121 car carriers, representing about 3.5 percent of its total capacity, according to data on its Web site. Mitsui O.S.K. Lines Ltd., also located in the Japanese capital, has 72 carriers in a fleet of 512 vessels, Clarkson data show.
Wilhelmsen plans to improve the fuel efficiency of its fleet, with an anticipated daily saving of about $3,300 at current prices, Wang said.
The new ships will also be wider, allowing them to carry more cargo, because of the broadening of the Panama Canal.
The $5.25 billion expansion of the waterway between the Atlantic and Pacific oceans is scheduled to be completed in late 2014. Demand for the vessels will increase by 7 percent to 8 percent this year, exceeding fleet growth of 5 percent, according to DVB Bank SE, a transportation lender.
Global car sales rose to 6.5 million units in June, the highest for the month since at least 2009, according to Bloomberg Industries data. "They are filling up the ships both ways: from Asia into Europe and back again," said Frode Moerkedal, an analyst at Platou Markets in Oslo. "Demand for car-carrier services is higher than supply growth."Contact Automotive News