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China Ocean Industry hit by $65m loss in 2015

China Ocean Industry hit by $65m loss in 2015
China Ocean Industry Group has been hit by a HKD500.8m ($64.6m) net loss in the year ended 31 December 2015 amid severe challenges in the shipbuilding market, prompting the group to diversify into the car parking business.

Hong Kong-listed China Ocean Industry reported that the 2015 loss narrowed from the deficit of HKD633.177m, due mainly to a huge finance cost of HKD201.85m.

The company posted a revenue of HKD157.64m last year, up 50.3% from 2014 mainly due to higher revenue from new shipbuilding orders, but recorded a gross loss of HKD157.9m due to increased cost of sales brought by the new orders.

The financial cost of the group in 2015 was HKD201.85m, primarily brought about by debts of its wholly-owned Jiangxi Union Shipbuilding converted into ordinary shares after negotiation with its debtors.

“During the year, the group placed great effort in encouraging early conversion of convertible bonds and debt restructuring to improve financial position and reduce financial cost,” China Ocean Industry explained.

It added that its shipbuilding business “still faced great pressure due to lower prices of new ships, tightened credit facilities to shipbuilding companies by financial institutions and rising labour cost.”

In October 2015, the group diversified into the car parking business but this segment has yet to make contribution to its 2015 financial year. “This business is crucial for the business transformation of the group, also will be the key business of the group in the coming years,” it believed.

Earlier this year, China Ocean Industry changed its name by dropping the word ‘shipbuilding’ from its previous name China Ocean Shipbuilding Industry Group to better reflect its new strategic business plan going forward.