COSCO Braces for Rough Fourth Quarter

Singapore Exchange mainboard-listed COSCO Corporation (Singapore) Limited has recorded a 17.1% increase in turnover in Q3 2014 compared to Q3 2013 on the back of increases in shipyard and dry bulk shipping revenues, the company said in a release.

Turnover from shipyard operations increased 17.2% in Q3 2014 mainly due to growth in revenue from marine engineering segment which offset the lower revenue contribution from ship building and ship repair segments. COSCO delivered 1 bulk carrier, 1 livestock carrier and 1 jack-up rig in Q3 2014.

Turnover from dry bulk shipping and other businesses increased 11.2%, as most of the current short-term charter rates were higher than those received in Q3 2013, COSCO said.

Gross profit decreased 22.6% mainly due to lower profit contributions from shipyard operations. Other income comprised gain from the disposal of scrap metal, interest income, net currency exchange gain/(loss) and others. Compared to Q3 2013, other income decreased by 17.7%, mainly due to the absence of one-off compensation received from customers in Q3 2013.

Interest expense increased by 12.5% in Q3 2014 due to higher bank borrowings used to fund shipyard operations.

Overall, net profit attributable to equity holders of the company increased 69.2%. Compared to first nine months in 2013, net profit attributable to equity holders of the company increased 31.0% in the first nine months in 2014.

Captain Wu Zi Heng, Vice Chairman and President of the Company, said: “Our Group has performed steadily in yet another testing quarter for the industry. For the remainder of 2014, our Group maintains a cautious outlook given the persistent weaknesses in the state of the global economy and global economic growth.”

As at September 30, 2014, COSCO’s order book stood at USD 8.9 billion with progressive deliveries up to 2016.

New orders received in first 9 months of 2014 include 9 bulk carriers, 8 platform supply vessels, 4 emergency response/rescue/field support vessels, 4 subsea supply vessels, 2 livestock carriers, 1 jack-up rig, 1 accommodation barge, 1 floating accommodation unit and 1 module carrier.

As COSCO continues construction in 2014 on new ship building contracts that were secured in recent years at low contract values due to the slumping shipping market at the time, the company expects operating margins on these new shipbuilding projects to continue to be under great pressure notwithstanding improving gains in efficiency and productivity.

In dry bulk shipping, the company expects the positive impact from any rebound in BDI to be subdued as expansion in the global bulk carrier fleet continues to outpace demand. COSCO continues to expect difficult and challenging business and operating conditions to persist for the rest of 2014.

Press Release