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CIMC issues profit warning for 2016

CIMC issues profit warning for 2016
The botched Sino Pacific Offshore & Engineering (SOE) deal and weak economic conditions continue to haunt enlarged container manufacturing group China International Marine Containers (CIMC) issuing a profit warning for the full-year 2016.

The group said in a stock market announcement that it is expected to record a substantial decrease in net profit compared to the previous corresponding period. Profit is expected to be either flat or come in at RMB9987.0m ($144m) at most, resulting in a drop of 50% to 100% from RMB1.97bn in 2015.

CIMC blamed weak economic conditions and impairments from the failed SOE deal for the poor performance.

"In 2016, the international trade was shrinking; the economic growth of China continued to slow down with sluggish exports and increased volatilities in the RMB exchange rate. The market downturn had different degree of impact on each of the group’s principal businesses. In particular, affected by the depressing global container-transportation trade, the imbalance of demand and supply in the market and other factors, the sales volume and operating income of our container business recorded substantial decline as compared with those for the corresponding period of the previous year, which resulted in declining profitability of the group," CIMC said.

Meanwhile its CIMC Enric Holdings unit made a provision for impairment of about RMB1.21bn for the paid/provided amount of consideration, consideration pre-paid, loans and guarantee in its 2016 half-yearly report due to the failed deal.

CIMC added that it expected a relatively large amount of provision for impairment will have to be made to the full-year figures which will ultimately affect net profits.