Cosco H1 profit dives 98pc despite revenue increase
CHINA's Cosco Shipping Holdings said it had eked out a profit attributable to equity holders of the company of CNY40
CHINA's Cosco Shipping Holdings said it had eked out a profit attributable to equity holders of the company of CNY40.8 million (US$6 million) in the first six months of this year compared with a profit of CNY 1.86 billion in the same period last year, a 98 percent drop.
The decline in profit came despite an increase in revenue to about CNY45 billion in the first half of this year compared to CNY43.5 billion in the first half of 2017.
Cosco called the profit a 'hard-won' result and attributed it to an operating performance of its container shipping business 'which was better than the industry average and the profit contribution of the terminal business.'
The company's terminal business handled 2.8 million TEU in the first half of 2018, 35 per cent more than in first half of 2017. Revenue from the terminal business was up 67.5 per cent to CNY3.18 billion, while revenue from container shipping was up just 1.3 per cent to CNY42.4 billion.
The company noted that in the first half of the year, demand for container transportation grew moderately and global cargo volume increased by 6.2 per cent as compared to the same period of last year. The company itself achieved a shipping volume of 11.24 million TEU, representing an increase of 12.4 per cent as compared to the same period of last year, American Shipper reported.
'However, due to the concentrated delivery of large container vessels during the same period, the growth in global capacity exceeded the growth in demand, which put downward pressure on the market price.
'In the first half of the year, the average of the China Containerised Freight Index (CCFI) was 797 points, representing a decrease of 3.8 per cent as compared to the same period of last year, while the average CCFI for the second quarter recorded a decrease of 4.6 per cent as compared to the first quarter of this year.'
Cosco also said that surging bunker prices resulted in the increase of the cost of liner companies.
Looking ahead to the second half of 2018, Cosco predicted the 'world economy will remain on the path of recovery. Although trade protectionism is on the rise and Sino-US trade frictions may inhibit the growth of the global economy to a certain extent, it is expected that the global economy will continue its growth since 2017, thus providing guarantee for the growth of container shipping volume.'
Cosco noted its acquisition of the parent company of Orient Overseas Container Line was completed at the end of the July and said COSCO 'will soon open a new chapter of developing 'dual brands''.
The front desk sales and customer service systems of Cosco and OOCL 'will remain unchanged to ensure the continuity of customer services; while middle and back desk functions such as cost control will be gradually optimised to improve operation efficiency and service standards, which is expected to result in obvious synergies in areas such as route networks, information systems, container fleets and supplier procurement'.
At the end of June, Cosco said its container fleet reached 393 vessels with carrying capacity of 2.04 million TEU, 15.8 per cent more than a year earlier. With the acquisition of OOCL and new ships on order, Cosco's capacity now exceeds 3 million TEU, which it says now makes it the third largest in the world, ahead of CMA CGM, and behind only Maersk and MSC.
Most of its new capacity was put in emerging markets, which it says had growth of 27 per cent, 'which was significantly higher than the routes in Europe and America'.
The company noted that 60 per cent of its capacity is along routes that are part of China's 'Belt and Road' initiative that aims to connect China with trading partners in Asia, Europe and Africa.