National Shipping Company of Saudi Arabia reported a strong Q1 profit after a bad 2011 and with recent contracts the expansion of the company's aluminium transport business looks promising.
NSCSA, which leases out oil tankers, reported to the Saudi stock exchange that its profit for all of last year fell 30.6% to 287.8 million riyals. However, the company has staged a rebound this year with first-quarter profit 41% higher than in the previous 3 months. Q1 profit surged to SAR 160.1 million from SAR 59.7 million for the same period last year, YoY increase of 168%.
Mr Redwan Ahmed an equity research analyst at EFG Hermes said that "It is a quite spectacular rebound in earnings. I didn't think there would be such a strong recovery."
Mr Saleh Nasser Al Jasser CEO of NSCSA said that solid growth was helped by the higher lease rates the company was able to charge for oil tankers. Higher rates may not always be a possibility however as they fluctuate with demand for oil.
Mr Al Jasser said that the profit was achieved despite 23% increase in the company's costs for fuel storage containers. Shareholders have been rewarded. Earnings per share from net profit for the Q1 totalled SAR 0.51 up from SAR 0.19 for the same quarter last year.
EFG Hermes has a sell rating on NSCSA, mainly because the stock has risen 49% so far this year to SAR 18.15 and the analysts believe it will not go higher without a significant increase in the lease rates the company charges on its oil tankers. EFG-Hermes believes such an increase is unlikely.
However last month NSCSA signed 1 year contract with Qatar Aluminium, known as Qatalum, to transport aluminium from Qatar to the United States. The contract is worth about SAR 50 million. The award of the contract followed a successful trial.
NSCSA said that it was also possible it would move aluminium for Qatalum to Turkey and Italy. The aluminium shipping venture could be a shrewd way for NSCSA to hedge against volatility in oil tanker shipping rates. This strategy could benefit NSCSA's shareholders.
Source - The National.ae