COSCO posts $ 371 m loss, analysts see 2015 profit

Monday, 1 September 2014 00:00 - - {{hitsCtrl.values.hits}}

REUTERS: State-backed shipping firm China COSCO Holdings Co Ltd. posted a first-half loss as expected, citing weak demand and a global oversupply of ships, although analysts say its fortunes could change next year. COSCO, China’s top shipping line, late on Thursday reported a first-half loss of 2.28 billion yuan ($ 371.2 million), compared with a loss of 990 million yuan in the previous year. Revenue fell 0.9% to 29.94 billion yuan Three analysts polled by Reuters before the results said they expected a loss of 2 billion to 3.2 billion yuan. COSCO sold its logistics unit last year, which reduced its comparable 2013 first-half losses.

The global shipping industry has been stuck in its longest slump in three decades after too many ships were ordered in the years before the global financial crisis, leaving a capacity glut that pulled down freight rates and hit carriers’ earnings. But observers say the market is getting back into balance and may be nearing a recovery thanks to a slower influx of new vessels and an uptick in global trade, as evidenced by recent stronger-than-expected results from smaller carriers such as Orient Overseas International. “The supply and demand’s behaving better, there’s been less ships being delivered this year,” said Jefferies analyst Bonnie Chan before the results. “Demand’s actually holding up pretty well on both dry bulk and container.” Analysts on average expect COSCO, with China’s largest dry bulk fleet, to report net income of 1.02 billion in 2015 and 2.36 billion yuan in 2016. The company squeezed out a slim profit in 2013 by selling properties to its parent, enabling it avoid a delisting. China Shipping Container Lines Smaller rival China Shipping Container Lines on Thursday posted a first-half profit of 460.3 million yuan, moving into the black from a 1.27 billion yuan loss in the previous year. It cited improved container demand amid the global economic recovery and its own efforts to improve route efficiency. While overcapacity is still an issue, global fleet growth has slowed thanks to falling deliveries from China, which makes most of the world’s ships. Companies such as COSCO have also been taking advantage of a government program that offers incentives for scrapping ships, allowing them to restructure fleets. COSCO sent more than 20 ships to the scrap yard in the first half of the year. Any rebound in China’s real estate market may also benefit COSCO because it would drive up import demand for iron ore used in steel. Factors such as rising fuel prices could derail the recovery, however. “At the beginning of the year everyone had an optimistic outlook for dry bulk shipping,” said UOB Kay Hian analyst Lawrence Li before the results. “But freight rates, particularly in the second quarter, have been substantially below expectations. There is a lot of noise around the sector.”