BT: Cosco reports 147% jump in Q3 net profit

Business Times - 04 Nov 2010


Cosco reports 147% jump in Q3 net profit

Firm expects new contracts in Q4; sees 2010 earnings being better than 2009's

By LYNN KAN

COSCO Corporation (Singapore) yesterday announced a heartening third-quarter performance. It maintains a cautious outlook for the remaining quarter but expects 2010 earnings to be better than 2009's.

The Chinese shipbuilder recorded net profit attributable to equity-holders of $55.1 million, a jump of 147 per cent from $22.3 million a year ago. Earnings per share rose to 2.46 cents from one cent.

The profit surge was despite a $27.6 million provision for future losses to construction projects, compared with $8.9 million previously. The provision, said Cosco Singapore's management, was based on 'worst case scenario' projections on on-going and completed work on heavy lift carriers, a vessel which the group is new to building.

Revenue for Q3 climbed 27 per cent to $952.7 million, of which 96 per cent came from its ship repair, ship building and marine engineering operations and 3 per cent from its dry bulk shipping operations.

Turnover in Cosco's ship building and marine engineering activities rose 27.4 per cent year-on-year to $918.7 million on progressive completion of projects. Cosco's Zhoushan, Dalian and Guangdong shipyards each delivered two bulk carriers in the third quarter alone.

Currently, the group's ship building productivity stands between 14 and 16 months, with 14 months being the average time to build 57,000 deadweight ton (DWT) vessel. It is setting its targets at 12 months for future builds to further improve productivity.

Although dry bulk shipping operations makes up a slim 3 per cent of group revenue, these activities showed a 13.7 per cent increase in revenue contribution because of higher charter rates secured by the group.

Also helping the results was a 42.8 per cent rise in 'other income' to $40.4 million, due mainly due to higher sales value of scrap materials and higher net currency exchange gain.

As at 30 Sept, Cosco's order books showed US$6.1 billion worth of projects that would keep Cosco's seven shipyards busy until Q1 2013.

On Nov 1, Cosco added contracts for three bulk carriers worth US$87 million to its books.

While Cosco expects FY2010 to be a profitable year, it sees next year as still beset by uncertainty. For one thing, Cosco foresees the dry bulk carrier market in 2011 being weaker with problems of oversupply in bulker capacity creeping in.

Despite this grey outlook for next year, it said that the fourth quarter looks likely to see some new contracts, as interested parties are in talks with Cosco for more bulk carriers.

Cosco shares added five cents to close at $1.94 yesterday.