Financial Times

Aitken Spence to buy two more cargo ships
Aitken Spence Shipping Limited, the shipping arm of the Aitken Spence conglomerate, is going to acquire two more cargo ships under its plans to expand its small fleet which is making a growing contribution to group profits.

The group said last week that earnings from its ships, buoyed by soaring charter and freight rates, helped it increase profits before taxation by 42 percent to over Rs 1.3 billion for the nine months ended 31 December 2004.

"We're buying two more ships through our joint venture with Ceyline Holdings," Aitken Spence Shipping chairman and chief executive officer Parakrama Dissanayake said, "we're on the verge of finalising procurement of these two ships." One ship will have a capacity of 600 TEUs (Twenty-foot Equivalent Units or containers) and the other is a multi-purpose vessel that can carry break bulk cargo and 500 TEUs. Aitken Spence said in a statement that its recent investments in the group's shipping sub-sector have paid dividends, contributing to the growth in profits of the cargo logistics sector.

"Following the successful operations of the two ships that were acquired by the company in the second quarter, the company intends to expand the fleet with the acquisition a few more vessels in the near future," a statement said. It said the growth in profitability in the cargo logistics sector was "a promising" 48 percent.

Total revenue generated by this sector grew to Rs 1,588 million in the nine months ending December 2004 from Rs 1,262 million the year before while profit from operations grew to Rs 240 million from Rs 133 million.

Aitken Spence operates the ships through its joint venture with Ceyline Holdings, a group of companies with interests in different shipping activities such as ship agency, crewing, bunkers and freight forwarding.

Dissanayake said the company paid almost $7 million (about Rs 700 million) for its two existing ships, the 1,300 TEU Indonesian Star and the Sea Pioneer, 10,000 DWT multi-purpose vessel that can carry 250 TEUs.

These are deployed in cross trades, one on the Korea-China sector and the other plying between the Indian subcontinent and the Red Sea. "These two ships have been fairly profitable. If not, we would not have gone for two more."

The new ones would also be given on time charter with Aitken Spence's involvement being from an asset management point of view. "The market is currently fairly strong from a ship owner's point of view," Dissanayake said. "Now, demand is well above supply of capacity so the timing is right to go in for ship owing."

The company found it difficult to find ships in the market because demand is so high. "We feel by 2007 the market could take a mild dip because of new buildings coming on stream, especially the new ultra-large container carriers," Dissanayake said. "But equally, we're confident that demand from trade would also be there."

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