CSAV is living an extreme version of container shipping’s recent ups and downs. The Chilean carrier underwent a financial rescue in 2009, embarked on a rapid expansion, and now is retrenching amid heavy losses.
The company, which has pushed into the top 10 in the world in terms of fleet size, lost $525 million in the first half of this year, compared with a $30 million profit a year earlier, and now expects to finish 2011 with “very significant losses.” CSAV is trying to raise capital while seeking a “strategic partner” for its container shipping business.
For shippers and the rest of the shipping world, CSAV’s abrupt turn toward hardship provides an ominous signal of the fragile finances across the industry less than a year after a rebound in demand sent volume and prices soaring and restored carrier confidence. But carrier balance sheets are another question, and CSAV’s woes show the earlier profits weren’t long-lived enough to make full repairs.
Shareholders are scheduled to vote this week on a $1.2 billion capital injection through the issuance of new stock, and on a new corporate structure that would split CSAV’s container shipping line from its ports, tugboat and shipping services unit, SAAM, “with the objective of propelling the growth of the latter.”
The announcement of plans to seek a strategic partner raised questions about whether CSAV was seeking to sell its container shipping unit or merely seeking operating alliances. The carrier in recent months has suspended several routes and entered vessel-sharing agreements with CMA CGM and Mediterranean Shipping.
The new stock would leave CSAV’s largest shareholders, Chile’s Luksic Group and the Claro family controlled Marinsa Group, with more than two-thirds of the company’s shares. The groups now have a combined 41.2 percent share.
Luksic pledged in September to contribute $1 billion of the $1.2 billion the new share offering will raise. Marinsa will contribute $100 million.
The two groups agreed to cooperate at the shareholder and board levels and to give each other the right of first refusal on any disposal of their shares. They also recently agreed to bolster CSAV’s liquidity by providing an additional $350 million in credit through the end of the year.
CSAV has been bleeding red ink. Its losses widened to $323 million in the second quarter. The company cited deteriorating rates on most routes and rising fuel prices, and said more losses were expected in the third quarter.
The company said restructuring of its services and new vessel-sharing agreements with other carriers are expected to yield profits next year, “assuming that the market conditions remain the same.”
CSAV lost $656 million in 2009 and was bailed out when owners of its chartered vessels agreed to accept lower payments. It then went on an expansion spree that boosted fleet capacity 61 percent in the first half of 2010 and moved the carrier from 16th to sixth place in global container ship capacity.
Most of the added tonnage was chartered, but CSAV also placed orders for new vessels with capacity of 12,000 20-foot equivalent units.
The line’s U.S. containerized imports jumped 145.5 percent year-over-year to 168,390 TEUs, 16th in PIERS’ carrier rankings. Export volume soared 180.4 percent to 168,390 TEUs, good for 20th place among carriers.
CSAV reported a $171 million profit in 2010 as cargo volume rose to 2.9 million TEUs from 1.8 million TEUs in 2009. Losses resumed in the fourth quarter of 2010, when the carrier’s average freight rates plummeted 14 percent.
With losses accelerating in 2011, Jaime Claro, brother of the late CSAV Chairman Ricardo Claro, resigned suddenly in February and was replaced by Guillermo Luksic. Quinenco SA, the investment arm of the Luksic family’s Chilean mining conglomerate, took a large stake in the carrier.
The company raised $500 million in July, mostly from the Luksic group, and has been returning chartered vessels and trimming services in an effort to shore up its finances. CSAV ranked 10th in Alphaliner’s most recent capacity rankings.
Contact Joseph Bonney at email@example.com.