COSCO International Profits Drop as Fuel Prices Fall

Board Chairman Ye Weilong said there are opportunities to be found in the tough climate

COSCO International Holdings Limited [HKG:0517] (Cosco International), the marine fuel, paints and ship trading offshoot of China Ocean Shipping (Group) Company (COSCO), said its profits dropped 44% year-on-year to HK$130.9 million ($16.9 million) in the first half of 2013 as it struggled with a depressed and oversupplied shipping market.

“During the first half of 2013, the shipping market remained depressed and the oversupply of shipping capacity was serious, leading to deterioration of the operating environment of shipping enterprises and shipyards,” the company said.

“Ship owners continued to postpone delivery of new build vessels and tighten cost controls over ship repair and maintenance.”

Bunker trading subsidiary Sinfeng Marine Services Pte. Ltd. (Sinfeng) increased its sales of marine fuel products 3 percent to 562,323 tonnes, but falling fuel prices pushed its revenues down 6 percent to HK$2.8 billion ($361 million).

Profits for COSCO International’s marine fuel and other products segment dropped 69 percent to HK$12.6 million ($1.6 million), but that was mainly due to a one-time gain in the first half of 2012, without which the segment’s profits would have risen 17 percent.

Overall, the company’s revenues for the six months fell 0.4 percent to HK$4.5 billion ($580 million).

The company predicts slow global economic growth and continuing trouble for the shipping industry.

“It is anticipated that the overall market conditions will remain grim, with persisting imbalances between supply and demand and limited upside freight rates,” the company said.

“Facing a sluggish and uncertain market, the operations of companies in the shipping, shipbuilding and relevant industries are subject to varying degrees of impact and constraint, which will put enormous pressure on the profit growth of COSCO International’s existing businesses in the future.”

Nonetheless, Board Chairman Ye Weilong said the company has opportunities for existing and new shipping service businesses.

“Rare opportunities are always hidden in crisis,” he said.

“The Group will push forward the development of existing and new businesses steadily, on the basis of strict control on various operational risks.”

He said the company will “gradually transform from an agent to a one-stop shipping services provider.”

The company said in February that it was considering moving into the ship leasing market.