The Straits Times / The Business Times News on Cosco

13th straight quarter of profit growth for Cosco

Q3 net jumps 26% and group sales rise 35% on robust ship-repair orders

MAINBOARD-LISTED Cosco Corporation Singapore Ltd (Cosco), the ship-repair and bulk-carrier arm of China's largest shipping company, yesterday posted its 13th straight quarter of profit growth thanks to robust ship-repair orders for its Chinese yards.

Net profit for the third quarter ended Sept 30 rose 26 per cent year-on-year to $71.5 million, or 3.23 cents a share, from $56.6 million, or 2.58 cents a share.

Group sales rose 35 per cent to $317.8 million from $235.1 million a year earlier fuelled by its core ship-repair and marine-engineering business.

Also helping was a one-time $19.4 million gain from the sale of its three remaining bulk carriers, up from a one-time gain of $16 million in the previous Q3.

Cosco, which owns a majority stake in the largest shipyard group in China, saw its repair sales grow 46 per cent from $189.2 million to $276 million on the back of higher value contracts. Ship repairs constituted 87 per cent of the group's revenue for the quarter.

'We are pleased with the set of results for the third quarter of 2006 and note with satisfaction that net profit attributable to the shareholders of the company for the first nine months of FY2006 came close to net profit of the same amount achieved for the 12 months of FY 2005,' said Cosco Corp vice-chairman and president Ji Hai Sheng.

Mr Ji said he expects that higher-yielding orders, particularly ship conversions and oil-rig repairs, driven by rising energy demand and new shipping regulations will boost revenue.

Cosco said in August that its 51 per cent-owned Cosco Shipyard Group received US$74.8 million worth of contracts for the conversion of vessels and a storage facility of an oil rig.

That same month, the shipyard group also secured its first order to build a 52,000 deadweight-tonne floating storage and offloading unit worth US$27.5 million with delivery expected in January 2007. The company will also convert six single-hull tankers to double hulls, it said.

'These higher-yield contracts will not only further strengthen the group's order book and returns but will also give us greater confidence in executing technically complex and demanding projects,' Mr Ji said in a statement to the Singapore Exchange yesterday. 'In 2007, new facilities and significant capacity increases coming on-stream will allow the group to further penetrate into the niche markets of high-value offshore marine-engineering work.'

Cosco Singapore has been increasing its ship repair capability to meet demand by expanding its yards in China including Zhoushan, 100 km from Shanghai.

SembCorp Marine owns 30 per cent of the enlarged Cosco Shipyard Group.

Cosco shares fell six cents, or 3.1 per cent, to close at $1.86 ahead of the earnings announcement.