Friday, March 29, 2024
 
Columnist
Martin Hennecke
 
CHINA COSCO
HKEx Stock Code : 01919 
 
Corporate Profile
The Group is engaged in providing container shipping, dry bulk shipping, logistics, managing and operating container terminals and container leasing businesses.

Business Review - For the year ended December 31, 2012

Container shipping

Revenue from container shipping and related business amounted to RMB48,425,195,000, representing an increase of RMB7,019,219,000, or 17.0%, as compared to the corresponding period of the previous year. In 2012, container shipping volume amounted to 8,016,241 TEUs, representing an increase of 16.0% as compared to the corresponding period of the previous year. Average container freight rate amounted to RMB5,003.30 per TEU, representing an increase of 4.2% as compared to the corresponding period of the previous year. The increase in revenue from container shipping and related business was attributable to the increase in capacity and average freight rate. Higher capacity and average freight rate of Asia-Europe and trans-Pacific routes as compared to the corresponding period of the previous year boosted the increase in their revenue by 30.7% and 21.5%, respectively.

As at 31 December 2012, 14 new container vessels were delivered for operation with an aggregate capacity of 94,986 TEUs. As at 31 December 2012, the Group operated 174 container vessels with a total capacity of 756,979 TEUs. Excluding the chartered-out capacity, the shipping capacity operated by the Group increased by 13.3% as compared to last year. There was no new vessel order placed in 2012.

As at 31 December 2012, the Group had 18 container vessel orders, representing a total of 149,330 TEUs.

Dry bulk shipping

Revenue from the dry bulk shipping and related business amounted to RMB16,026,866,000, representing a decrease of RMB7,323,247,000, or 31.4%, as compared to the corresponding period of the previous year. In 2012, the average level of the BDI was merely 920 points, representing a drop of 40.6% as compared to 1,549 points in 2011. In addition, the shipping capacity decreased from 374 vessels as at the end of 2011 to 332 vessels. The further decline of freight rates and the decrease in shipping capacity, has resulted in a significant decrease in the revenue from dry bulk shipping and related business as compared to the corresponding period of the previous year.

During the year under review, the shipping volume of the dry bulk shipping business reached 224.56 million tons, representing a decrease of 14.55% as compared with the corresponding period last year. Dry bulk shipment turnover was 1.13 trillion ton-nautical miles, representing a decrease of 14.31% as compared with the corresponding period last year, of which the shipping volume of coal, iron ore and other cargoes amounted to 82.62 million tons, 97.26 million tons and 44.68 million tons respectively, representing a decrease of 9.29%, 16.62% and 18.9% as compared with the corresponding period last year, respectively.

As at 31 December 2012, the Group operated 332 dry bulk vessels (30,073,395 DWT). As at 31 December 2012, the Group had 16 dry bulk vessel orders, representing a total of 1,510,000 DWT.

Logistics

Revenue from logistics business amounted to RMB20,311,971,000, representing an increase of RMB3,119,460,000, or 18.1%, as compared to the corresponding period of the previous year. The increase was mainly attributable to the increase in revenue from third party logistics. Of which, the revenue from logistics business increased by RMB2,459,857,000 to RMB5,419,084,000 due to the expansion of supply chain logistics business. Business volume of the logistics business is set out in below table.

Terminal and related business

Revenue from the terminal and related business amounted to RMB2,322,654,000, representing an increase of RMB575,960,000, or 33.0%, as compared to the corresponding period of the previous year. The throughput of Piraeus Terminal in Greece and Guangzhou South China Oceangate Terminal were 2,108,090 TEUs (2011: 1,188,148TEUs) and 4,230,574 TEUs respectively (2011: 3,914,348 TEUs), and resulted in an increase in revenue of RMB193,540,000 and RMB 138,886,000 as compared to the corresponding period of the previous year, respectively

Container leasing business

Revenue from the container leasing business amounted to RMB1,225,516,000, representing an increase of RMB293,459,000, or 31.5%. The revenue from container leasing as a result of container fleet expansion increased by RMB140,227,000 to RMB949,649,000. During the year, the number of returned containers sold upon expiry of lease amounted to 32,000 TEUs (2011: 10,000 TEUs), leading to an increase of RMB151,011,000 in revenue.

Business Outlook - For the year ended December 31, 2012

Container shipping business

The Group will adjust the routes structure and optimize the product design based on various factors including market condition and its strategic targets in order to resist and mitigate the fluctuations in the conventional market. It will allocate more shipping capacity to emerging markets and continue the construction of feeder service routes and pivotal ports to enhance the services of its global network. In addition, the Group will expand its port coverage and reduce the network operating cost by consolidating and expanding alliance cooperation to further maximize its competitive edges.

The Group will strengthen the marketing and sales and solidify the base of cargo source to restore the freight rate steadily. It will endeavour to maintain the balance between inflow and outflow of cargos, expand the base of high value cargos and improve the quality of cargo source. The Group will also expand its customer base by acquiring more global key accounts, basic customers, direct customers and FOB customers through specialized marketing. In addition, it will focus on the development of emerging markets and new customers so as to improve the structures of markets, cargo flow, cargo source and customers.

The Group will establish an integrated platform for value-added services to improve its land transportation capability. IT construction for value-added services will be pushed forward to improve its data management. It will also strengthen the development of supplier management system to further regulate the qualification and assessment mechanism of suppliers and reduce cost, so as to improve the service quality of the suppliers.

The procedural control will be enhanced to ensure the all liners run on schedule, so as to consolidate and strengthen the leading position of the Company among major shipping companies around the world in terms of punctuality. Slot management will be implemented to secure the quality of customer service. The Company will fully leverage on the innovation of service through its information system to improve the differentiated competitiveness of the Company and expanded the e-commerce business so to provide customers with more comprehensive and convenient services.

The shipping volume of the Group's container shipping in 2013 is expected to be 8.90 million TEUs.

Dry bulk shipping business

To cut losses and maintain the sustainability of operation under adverse conditions, the Group will focus on reducing loss, preparing for further expansion, adjustment and innovation in 2013. With the emphasis on reducing losses, the Group will improve its efficiency for maintaining steady growth and strengthening its capacity for future development. It will adjust and optimize its key segments and structure to ensure efficient operation. Further innovation will be carried out for its development mode, sales strategy and management system to reinforce its competitiveness.

The Group will streamline its operation management and refine its development measures in strict compliance with its practical implementation plans in order to significantly reduce its loss for the year.

1. to closely monitor the long-term market development and recent operation conditions, in particular the economic development of China, the US, Europe and Japan, in order to have better prediction of the future economic development; to estimate the future price and demand of commodities through market research on the operation of ports, steel makers, power plants and food suppliers; to better understand the market development through studies of the operation data of relevant upstream and downstream industries in shipping industry.

2. to expand the domestic and overseas sales networks and to strengthen the relationship with major suppliers under the philosophy of ¡§value sales¡¨, i.e. to secure cargo and customers by excellent services; to provide customers with tailor-made value-added services to establish long-term stable business relationship; to carry out differentiated operation and identify strategic target customers for securing long-term contracts and more sources of cargo.

3. to strategically arrange the shipping routes to improve operation efficiency; to proactively allocate the shipping capacity in accordance with market changes; to rearrange the allocation of shipping capacity to meet different demand of different routes; to develop new shipping routes for different cargos; to further enhance the specialized coastal transportation service in order to gain more market share.

4. to implement low cost development strategy which focuses on fulfilling demands of major customers and realising sustainable development of the dry bulk shipping business of China COSCO; to promptly adjust the fleet structure so as to maintain the sustainable development of the Group.

5. to strictly control the scale of chartered-in vessels and operation risks based on market demand and the requirements of cargo owners in an efficient manner.

6. to reduce cost and improve efficiency through enhancement in management, corporate transformation and supervision.

The estimated turnover volume of the Group's dry bulk shipping business in 2013 is 869.6 billion tons-nautical miles.

Logistics business

1. Logistics business

The electronic product and chemical logistics businesses will be further expanded. Its business into upstream and downstream industries will also be diversified by providing value-added services and supply chain management services. The management of nuclear power projects will be centralized through system integration and enhancement in management. It also intends to develop logistics services for the aviation industry.

2. Shipping agency

The Group will further consolidate and expand its agency market. The Group will focus on the development of new port agency services and provide vessels and special vessels agency and related services at ports with necessary facilities.

3. Freight forwarding

The Group will expand its business beyond the existing sectors and regions. The Group will also modify its sales method and system and improve the synergy effect of the overseas and domestic business sectors by providing a wide range of logistics solutions. The Company will expand its core direct international customer base and establish strong and stable relationship with customers. It will also strengthen the management of logistics suppliers and sub-contractors and accelerate the establishment of overseas branches and sales teams.

4. Air-freight forwarding

The Group will focus on slot procurement, direct customers and core airports to enhance competitiveness and profitability.

Terminal business

The Group will continue to focus on sales and improve its operation management, in order to retain customers with high quality services. Long-term strategic planning of terminal projects will be implemented for further business diversification. The annual operation capacity in 2013 is expected to increase by 2,800,000 TEUs.

Source: China COSCO (01919) Annual Results Announcement
Chairman Ma Zehua Issued Capital (shares) 2,581M
Par Value RMB 1 Market Capitalisation (HKD) 8,542M
 
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