The Straits Times / The Business Times News on Cosco

Cosco to enter offshore rig-building

COSCO Corporation (Singapore) Ltd's AGM yesterday could have passed like most ordinary AGMs - except that the Chinese shipyard giant extended an invitation to this reporter, who had requested to attend as an observer. This is something not many companies do voluntarily and ungrudgingly, except for parties like DBS and OCBC.

On top of the invitation, the management also arranged a short interview after the AGM. During the interview, Cosco's vice chairman, president and executive director Ji Hai Sheng revealed that the company is looking to expand into the lucrative rig-building business while continuing to focus on its core yard operations.

'Our goal is to go into the offshore rig-building business to design and build whole rigs,' said Mr Ji. 'At present, there is a huge demand for oil rigs which SembCorp Marine and Keppel Corp cannot meet, so our plans will enable cooperation and expansion for the needs of the market.'

Mr Ji also pointed out that the shipping group has an advantage on labour cost, and their partner SembCorp would aid them in terms of technical expertise. These plans are expected to be finalised 'in a couple of months or more'.

'We recently secured contracts totalling S$148 million for the lower pontoons of two units of semi-submersible rigs, single to double-hull conversions and four specialised conversions,' said Mr Ji. 'The experiences accumulated from fabrication of these rig pontoons and rig accommodations will aid our position to build complete offshore rigs.

'We have plans for more expansions, but we will disclose these in the future,' he added.

Earlier, during the AGM, minority shareholders naturally wanted to know whether they would get higher dividends from Cosco, a company which has had spectacular results. In 2005, the company reported a net profit growth of 150 per cent to S$160.5 million and a turnover growth of 650 per cent to S$873.1 million.

Affectionately addressing the shareholders as 'my bosses', Wei Jia Fu, chairman and non-executive director of Cosco, replied: 'We always have our shareholders' interests in mind. But we must also focus on development, and the expansion of our business. We will discuss it and hopefully there will be good news next year!'

Capt Wei was formerly Cosco's CEO in Singapore. Now based in Beijing, he flew in for the AGM. He pointed out that as a result of an earlier stock split, Cosco's shareholders are actually receiving 4 cents for each of their shares. 'A 2-for-1 offer,' he quipped. This was met with hearty laughter and applause from the audience.

At the meeting, some shareholders also reaffirmed their support and appreciation of the company. From a commendation of their investor relations to their willingness to improve auditing measures, the overall mood was light-hearted as shareholders stood up to congratulate the company and urged them to continue their efforts.

Cosco's stock gained 10 cents to close at $1.34 yesterday. It has risen 24 per cent this year, compared with a 9 per cent rise in the key Straits Times Index.