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Cosco anticipating first profit drop in six years

Singapore: Cosco Corp. Singapore, the shipbuilding unit of China's biggest shipping company has revealed that its 2008 profit may fall, reversing the upward trend it has seen over the past six years, reports Bloomberg.

Cosco Singapore said yesterday this year's profit will be lower than the record S$336.6m ($234m) in 2007 because several shipowners have asked for delayed payments for vessels being built. Earnings will also be eroded by higher costs as construction of several ships has exceeded the budget.

"In the wake of the credit crunch, smaller ship owners may have difficulties financing new ships as banks tighten lending," Serene Lim, an analyst at DMG & Partners Securities Pte in Singapore, is reported as having said in a note dated today. "We have previously expressed our concerns that a heavy concentration of bulk carrier newbuilds in its order backlogs are from smaller ship owners with weak balance sheets and poor financing means," she said, referring to Cosco Singapore's order book.

The company said in a separate statement yesterday it received a request from shipping lines in Europe and Asia to delay deliveries of seven bulk carriers by as many as three years. The announcement came after Cosco said on Dec. 4 that a client, whose identity it didn't disclose, cancelled orders for two bulk carriers and asked to postpone deliveries of three ships.

The order book stands at $8.1bn with deliveries stretching into 2011, Cosco Singapore said on Oct. 30, without giving a comparative figure. The company builds ships at its yards in Dalian, Nantong, Shanghai, Zhoushan and Guangzhou in China.

The company began winning orders to build bulk carriers from January last year after buying 51% in Cosco Shipyard Group Co. from its parent in January 2005.  [31/12/08]

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