COSCO Corporation Sinks to Loss

COSCO Corporation (Singapore) Limited, a shipbuilding, marine engineering and dry bulk shipping group, suffered a net loss of SD 570 million (USD 423 million) compared to net profit of SD 20.9 million for the previous year.

According to Wang Yu Hang, the Group’s Chairman, the significant net loss is mainly attributable to the continuing “depressed state of crude oil prices that has severely affected the global offshore marine industry, the slump in the shipbuilding market that has negatively impacted the company’s shipyards; and the languid dry bulk shipping market that has put great pressure on the company’s dry bulk fleet business.”

The group said that higher administrative and finance costs also contributed to the loss.

The company posted a gross loss of SD 214.8 million (approx. USD 159 million) in 2015  plunging from gross profit of SD 291 million in 2014. Group turnover for the year declined 17.4 per cent to SD 3.5 billion from SD 4.3 billion in the previous financial year.

In the year under review, shipyard operations contributed to 98.9 per cent of revenue. 60.7 per cent of the shipyard revenues were derived from offshore marine projects.

Against the challenging situation in the oil industry that brought about massive cost cutting measures from oil majors, the company delivered a total of 21 projects, comprising nine bulk carriers, six platform supply vessels, two semi-submersible accommodation vessels, two anchor handling tug supply vessels, one floating accommodation unit and one oil tanker.

Global order book for newbuilds declined significantly in 2015. In spite of the declining operating environment, COSCO managed to secure USD 820 million of new orders in 2015 compared to USD 1.6 billion a year ago.

Turnover from dry bulk shipping and other businesses decreased by 25% from SD 52.5 million in 2014 to SD 39.4 million in 2015.

“Looking ahead, we expect global economic activity to remain subdued,” Wang Yu Hang said referring to the International Monetary Fund’s estimates on global economic growth to be at 3.1 per cent in 2015.

“Without any clear signs of recovery in sight, we continue to tread with great caution, be more determined to improve cost control, streamline production efficiency, augment risk management and win orders.”

The company said that its shipyard group is currently exploring various options to support its business operations, including expansion of its sources of funding and optimising its assets structure.

“Owing to severe difficulties and challenges facing the group, no dividend has been recommended by the board,” the company added.