The Straits Times / The Business Times News on Cosco

Cosco Corp posts record earnings, turnover for '05

Results reflect acquisition of a 51% stake in Cosco Shipyard

COSCO Corporation (Singapore), the local bulk-shipping and ship-repair arm of China's largest shipping group, reported record earnings and turnover for 2005 following the acquisition of a 51 per cent stake in the Cosco Shipyard Group from its parent in January last year.

Net earnings attributable to shareholders jumped 150 per cent to $160.5 million. Including minority interest of $46.65 million, net profit more than tripled to $207.14 million for the year ended Dec 31 from $64.99 million in 2004, while turnover rose seven-fold to $873.11 million from $116.35 million as a result of the shipyard purchase.

Earnings per share rose from 5.92 cents to 14.7 cents. However, based on the current number of shares outstanding following a two-for-one split, Cosco's earning per share will amount to 7.35 cents for 2005.

Again based on the split, net asset value per share amounts to 23.65 cents. This compares with yesterday's closing price of $1.30 per share, up 3 cents after 23.2 million shares had changed hands between $1.27 and a high of $1.32.

The shares have more than doubled in price in a year and this year's advance of 20 per cent has made it the third-best performer on the Straits Times Index list of 50 stocks.

Ship repair, with turnover of $707.8 million, brought in more than 81 per cent of total sales, the company said.

However, dry bulk shipping contributed 53 per cent of gross profits of $282.08 million as gross margins were compressed to 32 per cent compared to 49 per cent in 2004.

Gross margins for ship repair amounted to 26 per cent last year while the bulk shipping business yielded gross margins of 63 per cent.

There was a net exceptional gain of $12.8 million, largely as a result of last August's sale of a jointly operated vessel.

Although income tax expenses rose to $18.4 million due to the increase in profits from ship repair, the effective tax rate last year was 8.17 per cent, much lower than the normal 20 per cent corporate tax here due to a preferential tax rate of 12.5 per cent for the group's shipyards and the tax exemption for shipping income.

The company expects ship-repair work to continue to grow this year based on capacity expansions at its shipyards, which are 30 per cent owned by SembCorp Marine.

Additional capacity coming onstream includes a modified 150,000 dwt dry dock at its Zhoushan Shipyard. At the same time, Zhoushan is building three new berths to be ready in the second half of this year.

It will also have two dry docks of 80,000 dwt and 300,000 dwt. The first will be operational by year-end while the second, China's largest, will be ready in mid-2007.

The capacity expansion will be funded partly through an equity injection of 750 million yuan ($154.55 million), with Cosco's share of $78.82 million to be funded internally and progressively paid through April next year.