Singapore: COSCO Corporation Maintains Cautious Outlook for 2012

COSCO Corporation successfully delivered 20 dry bulk carriers in the first half of 2012. Of these, COSCO Zhoushan shipyard delivered 9 bulk carriers, COSCO Guangdong shipyard delivered 6 bulk carriers and COSCO Dalian shipyard delivered 5 bulk carriers. In addition, COSCO Nantong shipyard delivered 2 offshore marine engineering vessels – the Sevan Brasil, a cylindrical drilling unit, and a shuttle tanker.

As the Group continues construction in 2012 on new ship building contracts that were secured in 2010 at low contract values due to the slumping bulk carrier shipping market then, the Group expects the operating margins on new shipbuilding projects to be under even greater pressure notwithstanding improving gains in efficiency and productivity.

In offshore marine engineering operations, the Group aims to enhance its offerings. It is currently one of the largest marine engineering groups in the People’s Republic of China. Offshore marine projects in its order book as at 30 June 2012 include 1 deep-water drillship, 1 semi-submersible barge, 1 semi-submersible accommodation vessel, 2 wind turbine installation vessels, 2 semi submersibles, 2 jack-up rigs, 2 pipelay vessels, 2 Sevan 650 drilling units, 2 tender barge, 4 tender rigs and 4 platform supply vessels. However, as a relatively new entrant, the Group expects to incur higher costs during the execution of offshore marine engineering projects on new product types.

Progressively, the Group will gather expertise and capabilities to reach out to a broader customer base, laying a firmer foundation for long-term sustainable growth in offshore and marine engineering operations.

As at 30 June 2012, the Group’s order book stood at US$5.9 billion with progressive deliveries up to 2014. This order book is subject to revision from any new orders, cancellations or rescheduling of orders that may arise.

New orders received in 1st half 2012 amounting to US$1.0 billion include 1 wind turbine installation vessel, 1 tender rig, 1 semi-submersible accommodation vessel, 2 pipelay heavylift offshore construction vessels, 2 tender barges, 3 bulk carriers and 4 platform supply vessels.

The BDI started the year 2012 at 1,624 points and ended the first half at 1,004 points after reaching a 25-year low of 647 points on 6 February 2012. In the first half of 2012, the BDI averaged 942 points, which is a 31.3% decrease from the average of the corresponding period in 2011 of 1,371 points. Any rebound in BDI is likely to be subdued as expansion in the global bulk carrier fleet continues to outpace demand.

COSCO Corporation achieved net profit attributable to equity holders of $27.6 million on turnover of $975.3 million in Q2 2012 against the backdrop of a difficult business climate during the quarter. For 1H 2012, Group net profit attributable to equity holders amounted to $55.4 million on turnover of $2.0 billion.

The Group maintains a cautious outlook for 2012 as the state of global economy remains fragile with ongoing concerns over the economic situation in Europe, continuing geopolitical uncertainties and weakening global economic growth. With excess capacity in the shipping industry and the uncertain global economic conditions, shipowners may be reluctant to place new orders for vessels and the Group may experience a decline in new orders in ship building. Overall, the Group expects business and operating conditions for the rest of 2012 to remain difficult and challenging.

[mappress]

Shipbuilding Tribune Staff, August 1, 2012