PB Towage asset sale tipped

The tug operator’s Australian operations are struggling amid high costs and low revenue per vessel.

By Brett Cole

An asset sale of Pacific Basin Shipping Ltd’s Australian tugs, whose value is between $2.5 million and $3 million per vessel, is more likely than the sale of PB Towage by Citigroup Inc as the tug operator’s efforts to garner local port market share has resulted in low fees and uninspiring profits.

Maersk Group’s tug company Svitzer, PB Towage’s biggest Australian competitor, told DataRoom through its Australian spokesman it has “no interest” in acquiring its rival. PB Towage’s return on shareholders equity was zero in the six months to June 30 this year. In contrast, Svitzer’s Australian operations are highly profitable, analysts say. Svitzer declined to comment on earnings.

In the six months to June 30, PB Towage, which also has operations in Asia and the Middle East, made a net profit of $12.6 million on earnings before interest, tax, depreciation and amortisation of $US19.8 million. Revenue from each of its 44 vessels, which include barges, was $US1.7 million on average in the first six months of this year, no increase year-on-year. Costs per vessel were $1.2 million.

PB Towage owns 27 of its 32 tugs that operate in Australia, charging on average between $2,500 and $3,000 per ship. Analysts say the volume of shipping in the ports of Melbourne, Port Botany, Newcastle and Brisbane does not warrant two tug operators. The company’s foray into Newcastle has been loss making, analysts say.

Moreover, PB Towage has been hampered by the high costs of Australian crews. A tug crew of three will cost a company about $600,000 annually.

“A number of people have run the ruler over the PB Towage business over the years but have decided not to buy it,” says one analyst. “I think there will be an asset sale.”

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