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Yang Ming’s massive loss prompts recapitalisation concerns

Yang Ming’s massive loss prompts recapitalisation concerns

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With troubled Taiwanese containerline Yang Ming Marine Transport reporting a doubling of its net loss for 2016 yesterday, speculation is once again mounting on what the future holds for the world’s eighth largest liner company.

Yang Ming, which has not been profitable since 2013, posted a NT$14.91bn ($492m) loss last year, more than double 2015’s NT$6.46bn loss.

The future of Yang Ming, 33% state-owned, has been the subject of intense speculation in recent months, even debated in parliament.

Splash readers in a poll carried in the last three months on this site have labelled the line as the most likely next candidate in container shipping’s ongoing massive round of consolidation.

A report in January from Drewry Financial Research Services pointed out that Yang Ming had now taken the slot vacted by bust Hanjin Shipping as the containerline with the most leverage balance sheet in the industry.

Yang Ming senior officials have, however, consistently denied any merger rumours, and are adamant that a recapitalisation plan will go ahead shortly.

Yang Ming’s recapitilisation move includes a stock consolidation as well as the injection of fresh capital from unspecified new investors. The first stage of this injection of capital will be from various government and private entities, including banks and financial institutions in return for new stock.

Analysts are now urging Yang Ming to move ahead fast with this financial aid move, which has been on the drawing board for months.

Commenting on Yang Ming’s annual results via LinkedIn, regular Splash contributor Lars Jensen, the CEO of SeaIntelligence Consulting, pointed out that Yang Ming’s $492m loss was very poor when compared to rivals such as Maersk Line, which though six times larger than the Taiwan line, registered a $384m loss, or CMA CGM, four times bigger than Yang Ming, with a $452m loss by its name for 2016.

“It is clear that major changes must be implemented within 2017 in Yang Ming if the recapitalisation plan from January is to be more than a temporary salvation in the face of competition from the very large carriers – a competition not only focused on scale but also on the transformation into a digitised and transparent marketplace,” Jensen wrote on LinkedIn.

Rahul Kapoor, a director at Drewry Financial Research Services, did provide some hope for the beleaguered line, telling Splash today: “Yang Ming’s 4Q16 results were a marked improvement on a sequential basis as the freight market improved and the losses narrowed.”

Kapoor added: “For us, what matters is how the company mends the highly stretched balance sheet. We are awaiting actions from the company and the Taiwanese government on when that recapitalisation process starts.”

Satruday sees Yang Ming, whose fleet boasts some 570,000 slots, start operating in a new grouping, THE Alliance, with Hapag-Lloyd, NYK, MOL and K Line.

Yang Ming officials did not respond to questions sent by Splash earlier today.

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Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.

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