The Straits Times / The Business Times News on Cosco

Cosco S'pore Q1 profits surge 46% to $37.6m

COSCO Corp Singapore Ltd, a ship repair and bulk carrier unit of China's biggest shipping company, had its 11th straight quarter of profit growth on record sales, boosted by increased orders to repair and convert vessels.

Net income in the three months to March 31 rose 46 per cent to $37.6 million or 1.7 cents a share, Cosco Singapore said yesterday. Sales increased 63 per cent to a record $267.6 million.

Cosco Singapore has been posting record annual profit the last two years, taking advantage of China's surging trade which has spawned more demand for vessels and energy resources. The company has been expanding into vessel and oil rig repairs after completing in January last year the acquisition of a 51 per cent stake in Cosco Shipyard Group Co, China's largest ship-repair company, from its parent.

Earnings 'growth is going to continue because they're getting more revenues from the capacity they've added', said Rohan Suppiah, analyst at Kim Eng Securities, with a 'buy' recommendation on Cosco Singapore. 'Earnings will remain strong as long as China remains the most cost competitive for ship repairs.' Revenue from ship repair operations, making up 77 per cent of the total in Q1, rose 53 per cent to $203 million.

Cosco Singapore shares ended at $1.42 yesterday, down 1 cent from Friday. The shares surged 30 per cent this year, making them the ninth-best performer in the 50-member key Straits Times Index.

At the end of last month, Cosco Singapore secured rig building as well as ship repairs and conversions that totaled a combined $219 million, it said.

'We are optimistic of our prospects in 2006 given the buoyant international ship repair and conversion market and oil and gas sector,' Cosco Singapore's president Ji Hai Sheng said.

Cosco Singapore has said it plans to win more contracts to provide oil rig parts as well as repairs and conversions of vessels that give higher profit margin.

An increasing number of shipowners are converting their single-hull tankers to double-hull vessels as the UN shipping body, the International Maritime Organisation, agreed in 2003 to phase out by 2010 most single-hull tankers. Single-hull tankers, with one layer of steel separating cargo tanks from the sea, are more likely to cause oil spills in a collision.

Cosco Singapore has been increasing its ship repair capability by expanding its shipyards in China. The group operates five major shipyards in China. SembCorp Marine, Singapore's second-largest oil rig maker, owns 30 per cent of the enlarged Cosco Shipyard Group. - Bloomberg