Hubline exits container shipping business

PETALING JAYA: Shipping company Hubline Bhd will discontinue its container shipping operations and exit the industry by the end of the financial year ending Sept 30, 2015, a move which will see it become a Practice Note 17 company.

The successful execution of its exit from the business is estimated to see the group take a one off hit of RM350 million to its income statement for the financial year ending Sept 30, 2015.

In a filing with Bursa Malaysia yesterday, Hubline said the container shipping division contributes some 79% to revenue and is deemed a major portion of the group's overall shipping business.

"(The move to exit the container shipping industry will push the group into PN17 status) despite the fact that the container shipping division is also the 'major' contributor to the groups cost of operations.

Therefore it should be seen that the group being classified as an 'affected listed issuer' is due to a technicality but should not be perceived as an indication of insufficient level of operations in accordance to the intent and purpose of the rules," it pointed out.

The group aims to remain in shipping, however, the focus will shift towards break bulk shipping.

Hubline told Bursa Malaysia in a filing yesterday that the losses in its container shipping division over the last few years has forced the board to reassess the group's financial and operational strategies.

"It has determined that continued participation in the container shipping market without immediate turnaround in the industry landscape, will eventually 'harm' our profitable operations of the break bulk division," it said.

The board of director of Hubline have therefore determined that now is the right time to sever the container shipping arm of the group, and instead focus its time and resources to what will maximise shareholder return.

It said the group's break bulk division has the potential to develop and grow without being challenged by the pressures of subsidising the container shipping division.

The exit process will involve withdrawal from various trade routes, termination of related service and operational contracts, as well as the disposal of container shipping related assets. Taking into account the operational and legal requirements, it is anticipated that the liner business will cease its operations by the current financial year ending Sept 30, 2015.

The exit is expected to impact various subsidiaries and agencies which are related to the liner business.