According to the Altman Z score of major operators, major liner bankruptcy is about to occur in the coming months. Global liner bosses are facing “bankruptcy” risks.
Splash reported at the end of February that in the 12 months ended September 30, 2019, the total Altman Z score of the 14 container shipping companies that issued financial reports dropped significantly.
The Z-score formula for predicting bankruptcy was first released by Edward Altman in 1968, who was then an assistant professor of finance at New York University. This formula can be used to predict the probability of a company going bankrupt within two years.
The Altman Z formula is mainly composed of the following data dimensions:
Z = 1.2 a + 1.4 b + 3.3 c + 0.6 d + 1.0e
o a = working capital / total assets, measuring current assets related to company size.
o b = retained earnings / total assets, measuring profitability that reflects the company ’s age and profitability.
o c = profit before interest and taxes / total assets. In addition to tax and leverage factors, operational efficiency is also measured.
o d = equity market price/book value of total liabilities. Add a market range that can display fluctuations in security prices as a possible red flag.
o e = sales / total assets. The standard measure of total asset turnover (varies by industry).
When Z> 2.99, the company is in a safe area, when 1.81 <Z <2.99, the company is in a gray area, when Z <1.81, the company’s risk of bankruptcy is extremely great, and it is in a dangerous area.
Alphaliner has now released new details on the troubled balance sheets of major operators.
According to Alphaliner’s survey of Altman Z scores of major carriers as of the end of 2019,
Altman Z scores between 1.72 and 1.92 include Hapag-Lloyd, Maersk, OOCL and Wanchai Shipping, which have the risk of bankruptcy;
Altman Z scores below 1.3 include CMA, Yixing Shipping, COSCO Shipping, Taiping Shipping, Evergreen Shipping, Yangming Shipping, and HHM, indicating that the possibility of potential bankruptcy is “very high”.
Alphaliner said in a recent weekly report: “The worsening global economic outlook has forced container shipping companies to withdraw unprecedented capacity in April and May, which will damage the carrier ’s operating cash flow and further weaken its fragile assets and liabilities. table.”
Alphaliner warned that carriers with higher leverage ratios are “particularly vulnerable”, especially those with higher short-term debt due this year. Of the 11 shipping companies surveyed, 6 have negative working capital (current liabilities exceed current assets), including CMA CGM, Hapag-Lloyd, HMM, PIL, Yang Ming, and Zim.
Alphaliner added that carriers with poor revenue track records are also particularly at risk. HMM, Yang Ming and Zim ’s Z scores are reduced due to undistributed profits.
COVID-19 has a huge impact on the global economy. Prior to this, the rating agency Moody’s Investor Services Moody’s lowered the outlook of the shipping industry from “stable” to “negative.”
It is worth mentioning that this is Moody ’s first downgrade of the shipping industry outlook in the past three years. The rating agency also warned that the shipping industry may usher in another “Hanjin moment.” (In 2016, Korea ’s largest container shipping company Hanjin Shipping declared bankruptcy and liquidation, and officially went bankrupt in February 2017)
Analysts headed by the agency’s vice president Maria Maslovsky said in the latest report that shipowners’ net profit may generally fall by 6% to 10% in 2020.
Up to 3 million TEU capacity is expected to be shut down
According to the latest research report of the well-known shipping consulting agency Sea-Intelligence, the number of suspensions has soared by 400% in the past week alone, and the number of suspensions of major east-west trade routes has increased from 45 to 212 flights. Up to 3 million TEU capacity will be shut down! On some routes, the number of container ships suspended for a week soared four times.
Although the world’s major shipping companies through the media revealed about 30% of the suspension data. According to Alphaliner’s analysts, the reduced container traffic will exceed 3 million TEUs for the first time, which means that about 13% of the world’s fleet cannot work.
In the context of global container shipping companies, large-scale reduction of capacity, and suspension of operations, Bestforworld must mention a route, that is, the route between China and the United States.
At present, major shipping companies reduce the losses caused by the coronavirus epidemic in the following ways:
1 Ships and capacity shipped from China to the US have shrunk by nearly 50%
2 However, for the limited 50% luck, major Chinese shipping companies use the robber model to make profits, because the reduced 50% capacity causes a large number of containers shipped from China to the United States to be unable to be shipped on time.
Many US importers ‘goods need to be placed in Chinese suppliers’ warehouses for longer periods of time.
Because these shipping companies require that if priority arrangements are made, an additional fee of 200-600 USD per container needs to be added. This is simply the operating mode of the bandit, although Bestforworld has a very large volume of support between China and the United States, with multiple The agreement price of the shipping company’s China and US routes, for importers who only have one or a few containers from China to the United States a month, Bestforworld feels very sorry.
In 2020, importers who import and ship from China need to reconsider some things. History has begun to change, and the time of ease has passed, bringing a brand new global procurement, suppliers, logistics, and transportation pattern.