The Straits Times / The Business Times News on Cosco

Cosco Singapore Q1 net profit up 12%

Earnings rise to $42m on strong ship repair, marine engineering orders

COSCO Corp Singapore Ltd, the ship repair and bulk carrier unit of China's largest shipping group, saw first-quarter net profit rise 12 per cent, thanks to a strong ship repair and marine engineering order book that saw higher value projects undertaken.

Boom time: Cosco's shipyard in Dalian. The firm holds a 51% share in its China-based Cosco Shipyard Group which operates 5 major shipyards in China.

Net profit rose to $42 million, or 1.9 cents a share, for the three months ended March 31, from $37.6 million, or 1.7 cents a share, the company said in a stock exchange statement.

Turnover increased 33 per cent to $355.8 million from $267.6 million a year earlier. The rise in turnover was attributed to an increasing focus on high-yield ship repair and marine engineering contracts.

Turnover from this division rose 49 per cent to $307 million in the first quarter thanks to work now underway on high-value rig repair, major ship conversion and new building work, Cosco said.

The higher value nature of this work could be seen in the average revenue for each ship repaired which jumped from 5.1 million yuan (S$1 million) in the first quarter last year to 7.8 million yuan this quarter.

Noting the group continues to win 'high value and technically demanding', offshore engineering contracts from its international oil and gas customers, Cosco vice-chairman and president Ji Hai Sheng said the group is 'committed to further scale our business to take advantage of the booming demand'.

The new contracts include very large crude carrier (VLCC) repairs, single-to double-hull, jack-up and cylindrical oil rigs, dry bulk vessel, semi-submersible oil rig vessel and various configurations of floating drilling production, storage and offloading (FDPSO) vessels. Cosco Corp holds a 51 per cent share in its China-based Cosco Shipyard Group which operates five major shipyards in China. SembCorp Marine Ltd, Singapore's second-largest oil rig maker, owns 30 per cent of the enlarged Cosco Shipyard Group.

Its capacity increased 6 per cent to 1.43 million deadweight tons (DWT) when it began operations of an 80,000 DWT dry dock last month at its Zhoushan Shipyard which will be the primary shipyard for the group's new offshore engineering focus.

Further shipyard upgrading is underway including the construction of an additional 300,000 DWT dry dock that will boost the group's overall capacity from 1.43 million DWT to 1.73 million DWT, by the second quarter this year.

Sales from operating bulk carriers that carry iron ore, coal, grain and other dry bulk items gained 11 per cent to $43.6 million, accounting for 12 per cent of total revenue. Shares of Cosco Singapore fell 1.4 per cent to close at $2.83, before the earnings announcement. The shares have advanced 23 per cent this year, compared with a 13 per cent rise in the Straits Times Index.