The Straits Times / The Business Times News on Cosco

Cosco sells four ships as it rationalises fleet

Buyers of ageing vessels are units of its parent China Ocean Shipping

COSCO Corporation (Singapore), the local bulk-shipping and ship-repair arm of China's largest shipping group, has agreed to sell four ageing vessels worth US$34 million from its current fleet of 15 vessels as part of its fleet rationalisation plan.

Cosco Corp, through wholly owned subsidiary Cosco (Singapore) Pte Ltd, has entered into four memorandums of agreement for the sale of M/V Sea Phoenix, M/V Sea Crane, M/V Jurong Sea and M/V Cos Angel to Shenzhen Ocean Shipping Co and Cosco International Trading.

The two buyers are subsidiaries of Cosco Corp's parent China Ocean Shipping (Group) Company, as is the seller.

The sale, which will earn Cosco Corp a profit of nearly US$14.2 million, will enable the group to renew its fleet of vessels 'in order to maintain its market presence and competitiveness within the regions where the group operates', it said in a statement.

As part of the rationalisation, Cosco Corp's subsidiary Cos Prosperity Shipping Inc will also be adding a new handymax dry bulk carrier, M/V Cos Prosperity, which is the second of two newbuilds contracted in 2003. The vessel was built by Nantong Cosco KHI Ship Engineering Co Ltd, a 50 per cent-owned associate of Cosco Corp's parent.

The delivery was originally slated to be in the third quarter of 2006. Cosco Corp said its early delivery will enable it to charter out the vessel ahead of schedule with additional contribution to the group's earnings.

Following the rationalisation exercise, Cosco Corp will operate a fleet of 12 vessels with a total tonnage of 700,000 dead weight tons (DWT) and an average age of 4.5 years compared to nine years previously.

'This fleet rationalisation exercise will optimise earning streams from our assets,' according to Cosco Corp president and vice-chairman Ji Hai Sheng.

'We believe a young fleet will be advantageous in enhancing the profitability and reducing maintenance and repair costs of our bulk carrier operations,' he said.

Cosco Corp recently 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.