The Straits Times / The Business Times News on Cosco

Cosco hauls in 12% rise in quarterly gain

Orders for ship repair, conversion propel revenue up 33% to $356m

COSCO Corp, the ship-repair and bulk-carrier arm of China's largest shipping firm, yesterday reported a 12 per cent rise in earnings as ship-repair and conversion orders surged.

Net profit for the three months ended March 31 jumped to $41.9 million, up from $37.6 million for the same period last year.

A burgeoning shipyard order book boosted group turnover by 33 per cent to $355.8 million for the first quarter of this year.

The ship-repair, shipbuilding and marine engineering segment - which contributes the bulk of group turnover - expanded further due to strong project flow. As a result, the segment's turnover rose 49.6 per cent to $306.9 million.

During the quarter, the group completed several high-value conversion projects, and secured more high-value contracts for ship-conversion as well as new offshore and shipbuilding projects, it said.

These contract wins include the repair of large crude carriers, and the construction of jack-up oil rigs, semi-submersible vessels and heavy lift vessels.

While the number of ships repaired in the first quarter fell from 149 to 116, the average revenue per ship repaired rose from 5.1 million yuan (S$1 million) to 7.8 million yuan.

This underscores the group's successful move up the value chain in the ship-repair and marine engineering business, Cosco said.

Turnover for dry bulk shipping of raw materials rose 10.9 per cent to $43.6 million for the three months ended March 31, as charter-hire contracts were renewed at better rates.

Navigating up value chain STRONG project flows attest to Cosco's success in securing high-value contracts, especially for ship repair, shipbuilding and marine engineering. In the first quarter, this segment alone brought in $306.9 million in revenue, up 49.6 per cent. Revenue per ship repaired averaged 7.8 million yuan (S$1.5 million), up 53 per cent. Cosco also won deals to repair large crude carriers, and build jack-up oil rigs and heavy lift and semi-submersible vessels.

Distribution and administrative costs rose in line with expanding volumes for the ship-repair and marine engineering business, while interest expenses fell as there were less bank borrowings.

Cosco's vice-chairman and president, Mr Ji Hai Sheng, said it had been another exciting quarter as the group continued to win contracts from international oil and gas customers.

He noted that this was evident in the many 'high-value and technically demanding offshore engineering contracts' awarded.

He said additional shipyard upgrading work is still under way, namely the construction of an additional dry dock capacity in Zhoushan that is expected to be completed in the second quarter of this year.

Mr Ji was confident the firm's 'strategic shipyard capacity and capability expansion' would act as a springboard for 'further expansion in the thriving offshore marine markets'.

Cosco shares fell four cents to $2.83 yesterday. The firm reported its earnings after trading closed.