China Cosco Posts First-Quarter Loss on Cooling Economy, Rates

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30 Apr 2009

China Cosco Holdings Co., the world’s largest operator of dry-bulk vessels, posted a quarterly loss and said accumulated first-half profit may more than halve from last year as a slowing economy pummels commodity-shipping demand and rates. The 3.35 billion yuan ($491 million) net loss compared with a profit of 6.14 billion yuan a year earlier, the Tianjin, eastern China-based company said in a Hong Kong stock exchange statement yesterday, citing domestic accounting standards. Sales fell 63 percent to 10.8 billion yuan.
China Cosco is in talks to delay or cancel orders for new vessels as it anticipates a 44 percent drop in dry-bulk traffic this year. The Baltic Dry Index, a measure of commodity-shipping rates, tumbled 80 percent in the year ended March as China pared iron-ore imports and new vessels entered service.
“Since the current global economic crisis has seriously affected the import and export trade of the People’s Republic of China, the shipping market experienced drastic changes,” the company said in the statement. “The group expected that the accumulated net profit from the beginning of the year to the next reporting period would decrease over 50 percent as compared to the same period last year.”
The shipping line’s container fleet, China’s biggest, has also suffered as U.S. and European consumers cut spending on Asian-made goods amid rising job concerns and housing market slumps. China Shipping Container Lines Co., ranked second, similarly posted a first-quarter loss.
FFA Gain
China Cosco had a 1.1 billion yuan gain in the period from forward freight agreements after rates doubled in the quarter. FFAs are contracts used to bet on changes in shipping or chartering costs. Rates are still below profitable levels even as the Baltic Dry Index has recovered from its Dec. 5 low.
China Cosco’s first-quarter dry-bulk volumes fell 7.4 percent to 62.9 million tons, according to the statement. Total container cargo fell 29.7 percent to 994,498 TEUs.
The shipping line rose 5.4 percent to HK$6.21 in Hong Kong yesterday, extending gains for the year to 15 percent.
Cosco Pacific Ltd., China Cosco’s container-terminal unit, reported a 34 percent drop in first-quarter profit. The unit, which owns or has stakes in 20 terminal companies, handled 8 percent fewer cargo-boxes in the period as the global recession hammered demand.

Source: Bloomberg