Asia/Pacific News
COSCO Revenue Slides on Reduced "High Risk, Low Margin" Marine Fuel Activities
COSCO International Holdings Limited's decision to reduce its relatively high-risk marine fuel business activities has led revenues to drop by over a third, the company announced in its 2015 mid-year report.
According to the company, its marine fuel and related products businesses had relatively low profit margins, which meant they were high risk although typically counted for a large share of revenues.
Revenues dropped to HKD 3,028 million ($390.6 million) in the first six months of the year from HKD 4,740 million ($611.5 million) in 2014, with revenues stemming from the bunkers and related products segment specifically having plunged 54 percent.
Gross profit margins grew to 12 percent from 9 percent, while gross profit also fell to HKD 369 million ($47.6 million) from HKD 424 million ($54.7 million).
COSCO said that its bunkering subsidiary, Sinfeng Marine Services Pte. Ltd., had been actively "reducing certain businesses of relatively high risks and carrying out business with reputable customers," leading to a 21 percent decline in sales volume compared to this time last year.
The company's stake in a Hong Kong-based bunker business also yielded weaker results than the year before, with COSCO's share of the profits down 37 percent.
The global economic recovery has also been slower than expected this year, while overtonnaging remained "serious" problem, the company added.
The state of the shipping industry has reportedly meant that COSCO has felt pressure from clients who have tightened cost controls.
The company said that it has therefore had to adjust its business strategy, "leveraging on its expertise and experience in the industry and acute responses to the market changes, so as to minimise the negative impacts brought by the depressed shipping market."
This month has also been one of rampant speculation as reports emerged that COSCO and China Shipping Group were in talks to merge.
Earlier this month, it was reported that large portions of the two companies have reportedly ceased share trading “pending an announcement.”
