The Straits Times / The Business Times News on Cosco

Cosco sails on ship repair boom to record $205.4m full-year net

COSCO Corp Singapore Ltd, the ship-repair and marine engineering unit of China's largest shipping company, reported a 28 per cent growth in net profit thanks to surging ship repair and conversion orders.

The group saw net profit climb to a record $205.4 million, or 9.3 cents a share for the year ending Dec 31, 2006, from $160.5 million, or 7.33 cents a share, the year before. Revenue also jumped nearly 40 per cent to a record $1.22 billion from $873 million the year before.

This marks the third straight year of record earnings for the Singapore group which began a shift away from bulk shipping and into the shipyard business just over two years ago when it purchased a 51 per cent stake in the five-yard China-based Cosco Shipyard Group.

The group's dry bulk shipping business, which provides 12 per cent of turnover, grew marginally due to lower average freight rates for 2006.

While confirming no new vessels have, or will be, ordered since 2003, Cosco Corp vice-chairman and president Ji Hai Sheng told reporters that there was as yet no timetable for the widely anticipated phasing-out of the bulk shipping business.

The ship repair business on the other hand contributed 85 per cent of total revenue for the period. It saw 45 per cent growth, due to increased capacity at two of its key shipyards - Cosco Dalian and Cosco Zhoushan - and higher value repair and conversion work.

The group will further boost its capacity by 28 per cent by the end of H107, bringing its capacity up to 1.73 million deadweight tons by end-June from 1.35 million at the end of last year.

'In 2007, new facilities and significant capacity increases coming on-stream will allow the company to further penetrate into the niche market of high value offshore marine engineering work,' Mr Ji said.

The group recently won its first ever vessel new building orders and its first offshore contracts for a semi-submersible oil rig.

Cosco currently enjoys a record order book worth more than $1.3 billion - of which $982 million was secured in the first month and a half of this year. Shares of Cosco Singapore gained 0.4 per cent to close at S$2.89, before it announced earnings. The shares have advanced 26 per cent this year, making them the second-biggest gainer in the Straits Times Index.