ESSAR SHIPPING LIMITED
ANNUAL REPORT 2006-2007
Good Morning Ladies and Gentlemen,
It is with great pleasure that I welcome you to the Thirty-first Annual
General Meeting of your Company. The Report of the Directors and the
audited results for the year ended March 31, 2007 have been with you for
sometime and with your permission, I shall take them as read.
The spirit of entrepreneurship, mentorship and positive attitude of the
Company today is symbolic of the emerging India. This spirit has seen your
Company grow into a leading global shipping and maritime services provider,
with an enviable list of Indian and international clientele.
Shipping is an international business and closely related to world economic
growth and global demand and supply trends. As a consequence, though the
industry is subject to cyclical trends that bring an element of risk in
operations, it is heartening to note that your Company has overcome this
risk by providing integrated crude oil, petroleum products and dry bulk
cargo transportation and transportation management services. This has
enabled your Company to maintain a consistent track record of financial
The crude oil transportation segment was impacted on account of mild winter
and high crude stocks in the US, resulting in depressed freight rates for
crude oil tankers. The freight rates have fallen to new lows, whereas the
ship values are still firm.
On the dry bulk transportation segment, global steel demand is forecasted
to grow by 5-6% in the coming year, with China's steel exports alone
expected to increase by 10-15% and iron ore import expected to increase by
40-50 million tons. With a large number of coal fired power plants becoming
operational in China, India and Europe, coal trade is also expected to
increase. With all this, the dry bulk trade is expected to remain buoyant
in the near future. The buoyancy in the dry bulk market is evident from the
freight rates and vessel values which have reached alarming levels during
the last six months.
During the year under review, your Company achieved a total Income of
Rs.1,044.62 Crores as compared to Rs. 760.29 Crores during the previous
year, representing an increase of 37%. This has been achieved due to
increase in tonnage on account of acquisition of two VLCC's and due to
increased movement of cargo under the various Contract of Affreightments
(COA's) entered into during the year.
The Net Profit for the year has reduced from Rs. 185.22 Crores during the
previous year to Rs. 133.99 Crores in the current year. This is largely due
the fact that the Net Profit for the previous year included Profit from
sale of ships of Rs. 70.70 Crores as compared to Rs. 12.47 Crores during
the year under review. The freight markets continued to be robust during
the year under review.
The focus on providing value added logistics and supply chain management
services and constant initiatives towards reduction of operating costs has
enabled your Company to improve operating margins. During the year under
review, the Operating Margin on Time Charter Equivalent (TCE) basis has
increased from 48% during the previous year to 59%. Dry docking expenses
were Rs. 14.02 Crores during the year as against Rs. 30.20 Crores during
the previous year. Direct Voyage Expenses were Rs. 505.70 Crores as
compared to Rs. 310.85 Crores during the previous year, which is largely
due to increased chartering of vessels for servicing the COA's.
The Debt Equity Ratio is 0.48 : 1 as on 31st March, 2007, as compared to
0.51 : 1 as on 31st March 2006.
Quality, Safety and Environment:
Quality and safety of environment and life at sea are among the foremost
priorities of your Company. Your Company has put in place quality standards
and procedures that are best in the industry for which your Company has won
several accreditations. Your Company has been awarded the 'Safest Indian
Shipping Company' and the 'Most Quality Conscious Shipping Company in 2006'
by the Government of India. Apart from the awards for safety your Company
was also bestowed with the following awards:
a. Best Bulk Operator and Best Tanker Operator Award for Middle East /
Indian Subcontinent Region: Awarded by 'The Lloyd's List Middle East &
Indian Subcontinent Awards, 2006'.
b. Ship of the Year (Indian Flag in Foreign Trade) - Very Large Crude
Carrier 'M.T. Smiti': Awarded by 'The Director General of Shipping,
Government of India'.
Before I end, I thank each one of you for your co-operation, the employees
for their dedicated efforts, financial institutions and bankers for their
support and the colleagues on my Board for their guidance.
Date : September 25, 2007.
Source: Company Website