Beijing: Against the backdrop of H1 profit attributable to shareholders that was 65% down on the 2005 first half at RMB 978m, Cosco was unusually fulsome in its breakdown of results and explanation of Group strategy this week.
The core container shipping business showed volumes up 12.5% for the half at 2.42m teu shipped but profits from the sector declined 74.1%. Excluding the impact of fuel, costs per teu were actually down 6% from the same period of 2005, the company pointed out, due to 'stringent cost controls'.
However, a decline of freight rates on most routes (except Asia-Europe) meant revenue per teu was down 13.8%, while a massive 70% increase' in bunker costs - despite 'the use of futures contracts and energy-efficient practices' - meant operating costs were up 17% to RMB 16.6bn. Additional capacity from an influx of newly chartered vessels also increased vessel costs.
In mitigation of the reduced container shipping results came improved profits from container leasing of RMB771m ( 28.5%), and a 23.5% increase in the number of boxes handled - through Cosco Pacific - at Group container terminals (14.9m teu) which yielded a profit of RMB 111m.
'The decline in overall earnings reflects market pressures in container shipping, one key area of the Group's business,' commented chairman Wei Jiafu. 'As an integrated shipping and logistics service provider,' however, the Group has been able to hedge risk through occupying businesses across the container shipping value chain. The Group has successfully developed its integrated business model in order to balance the cyclical interplay of trends in (the) market.'
Hence the recent proliferation of Cosco's new terminal joint ventures - such as at Tianjin, Ningbo and Quanzhou - and the Group's plan to continue raising its market share in container leasing where it already owns and manages a fleet of 1.1m teu, the world's third largest collection of boxes.
At end June the Group's orderbook stood at 27 container vessels totalling nearly 176,000teu in capacity, compared to an operated fleet of 139 vessels of 381,000teu, which ranked it as the world's fifth largest container shipping company. [21/09/06]
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