The Straits Times / The Business Times News on Cosco

Cosco gains jump to $161m on record revenue

INCREASED demand for ship repairs sent Cosco Corporation Singapore's (Cosco Singapore) net profits up 150 per cent last year to a record $160.5 million.

Revenues at the company, a unit of China's biggest shipping company Cosco Corp, were also at record pace, rising more than seven times to an all-time high of $873.1 million.

While bulk carrying is a core business, Cosco Singapore has been expanding into ship and oil-rig repair. It bought 51 per cent of China's largest ship-repair company, Cosco Shipyard Group Co, from its parent last January.

Three new berths and a dry dock in China will become operational later this year. Its floating dock in Dalian, the largest in China, became operational last October.

About '75 to 80 per cent' of the group's ship-repair capacity has been contracted for the year, and the group is starting to see more shipowners send their vessels for repairs as freight rates decline, said Mr Ji Hai Sheng, vice-chairman and president of Cosco Singapore, yesterday.

'Ship-repair margins are expected to improve through...higher-margin repair jobs and cost controls,' he said.

Such work includes the conversion of single-hull tankers, fabrication work for oil rigs and modifying other floating vessels.

The group now derives 81 per cent of its revenues from marine repair, compared with just 3 per cent for the 2004 financial year. Shipping, which accounted for 96 per cent of turnover in 2004, now constitutes 17 per cent.

'The shipyards in China are still in demand; they're still the lowest shipyard operator in the world, in terms of price,' Kim Eng Securities analyst Rohan Suppiah told Bloomberg.

'Cosco Singapore has added additional capacity over the years. The expansion is going to translate into earnings from 2006 onwards.'

Cosco Singapore shares rose three cents to $1.30 before the earnings announcement.

The shares, which surged 88 per cent last year, have already risen 20 per cent this year, making it the third-best performer in the 50-stock Straits Times Index.