Shipper Golden Ocean warns on profit, supply chains due to coronavirus (updated)
18/02/2020 09:42
* Shipping firm is major transporter of coal, iron ore
* Virus outbreak to hit short-term profit
* Unlikely normal operations will quickly resume
* Shares drop 3.2%, are down 20% year-to-date
(Adds quote, share price, background)
By Terje Solsvik
OSLO, Feb 18 (Reuters) - Shipping group Golden Ocean
GOGL.O GOGLT.OL warned on Tuesday its profit would be hit by
a slowdown in demand due to the coronavirus outbreak in China,
sending its shares down more than 3% in early trade.
The world's second-biggest economy has seen business
activity curtailed in recent weeks as it battles to combat the
spread of the virus, pushing down shipping rates for commodities
such as coal and iron ore used in Chinese factories.
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"The market is currently presenting a challenging scenario
that will impact our results in the near term," Ola Lorentzon,
Golden Ocean's chairman and interim chief executive, said.
Controlled by Norwegian-born billionaire John Fredriksen,
Golden Ocean specialises in dry bulk commodities such as coal or
iron ore and operates most of its fleet - 66 out of 79 vessels -
in the spot market or on similar short-term contracts, thus
quickly feeling the impact from any ups or downs in the market.
The Oslo- and New York-listed firm said: "It is too early to
forecast the potential impact of the coronavirus beyond the
short term and information being released from China does not
provide a complete view of its current impact."
On Monday, the Chinese central bank cut the interest rate on
its medium-term lending and the country has also announced plans
to cut taxes and fees to help soften the impact on the economy.
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However, Golden Ocean said normal business operations were
unlikely to quickly resume. "As a result, commodity-related
supply chains may become disrupted, with some taking longer than
others to return to normal."
In case of persistent market weakness, the shipping industry
is likely to increase the scrapping of older, less
fuel-efficient, vessels as a way to rebalance the market, it
added.
In the final three months of 2019, Golden Ocean earned a net
profit of $41 million, up 74% year on year and beating an
average forecast of $37 million in a Refinitiv poll of analysts.
The company cut its fourth-quarter dividend to $0.05 per
share from $0.15 in the third quarter, missing an average
analyst forecast of $0.14.
"As the current market dynamic continues to unfold, our
focus remains on maintaining efficient operations and a strong
balance sheet and liquidity position," Lorentzon said.
Golden Ocean's Oslo-listed shares traded 3.2% lower at 0858
GMT, underperforming a 0.4% drop in the Oslo benchmark index.
The company's shares have fallen by 20% year-to-date.
(Reporting by Terje Solsvik
Editing by Edmund Blair and David Holmes)
((terje.solsvik@thomsonreuters.com; +47 918 666 70))