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Cosco Corp hit by loss in Q1 amid tough shipbuilding and bulk market

Cosco Corp hit by loss in Q1 amid tough shipbuilding and bulk market
Cosco Corporation (Singapore) Limited has been hit by a deep loss in the first quarter of 2016 as against a profit in the year-ago period due mainly to the poor shipbuilding and dry bulk shipping businesses.

Net loss for the quarter ended 31 March 2016 was registered at SGD14.39m ($10.59m) as against the gain of SGD766,000 in the previous corresponding period.

Revenue fell by 27% year-on-year to SGD722.29m owing to lower contributions from shipbuilding and dry bulk shipping, partially offset by higher revenue from ship repair.

“As the world shipping market continues to face tonnage overcapacity pressures, new shipbuilding orders have fallen to a low level in Q1 2016. The group will thus continue to face pressure in the shipbuilding segment,” Singapore-listed Cosco Corp said.

On dry bulk shipping, the company commented that the difficult market conditions of excess tonnage and overall weak macroeconomic conditions mean that any recovery in the segment will be slow and fraught with uncertainty.

As at end-March 2016, the group’s orderbook stood at approximately $7.6bn with progressive deliveries up to 2018. These include modules of drillship and FPSO contracts for certain Brazilian customers amounting to around $1.4bn.

“This orderbook is subject to revision from any new, cancellation, variation or scheduling of orders that may arise,” Cosco Corp warned.

Already, the group announced last month that Sevan Drilling and Cosco Qidong shipyard agreed to exercise the second option to extend the delivery date of Sevan Developer for another six months up to 15 October 2016.

Last year, the group experienced delivery date extensions and order cancellations for several of its projects.

“Some of the group’s customers may ne unable to meet their contractual payment obligations to the group, either in a timely manner or at all, or mat otherwise default on these obligations.

“Moreover, any tightening of the availability and cost of credit in a market that is already under considerable stress could also adversely affect the ability of customers to meet their financial obligations. These will adversely impact the group’s financial position,” Cosco Corp said.

The group expects the difficult and challenging business and operating conditions to persist an even worsen, making 2016 a tough year ahead.