COSCO Posts Higher Profit Due to Subsidies

China COSCO Holdings Company Limited reported a net profit of CNY 363 million (around USD 58.5 million) in its annual results for 2014, rising 54% year-on-year.

 “During the period, the international shipping market did not see substantial improvement amidst the imbalance of supply and demand, with the overall freight rates still fluctuate at low levels. To address the challenges currently facing the industry, the Group adopted proactive measures of increasing revenue and cutting cost and made a notable progress in the reduction of losses incurred by its major shipping business with the cash flow from operating activities improved significantly,” COSCO said.

The company saw its loss narrowed 81% y/y to CNY 1.4 billion due to slump in fuel costs and contraction of its chartered-in fleet, as indicated in its stock filing on 27 March.

The shipping company said it would have made a loss of CNY 1.38 billion if it had not been provided with state subsidies and money raised from a share sale.

The company saved 521,900 tons of bunker fuel by adopting fuel-saving technologies, slow steaming and optimizing the network of shipping routes.

China COSCO accelerated the replacement of old vessels and ordered energy-efficient new ones placing orders for a total of 117,960 teu.

In 2014, the company offloaded a total of 56 scrapping of bulk carriers and container ships at 3.1 million dwt, which resulted in government subsidies of CNY 1.4 billion.

Commenting on the outlook for 2015, COSCO said that despite expected demand recovery the sector will remain under pressure of oversupply. For the dry bulk sector, COSCO anticipates “severe” market condition this year as well also due to the plaguing oversupply.