Bond offer shelved on fears over share policy
China Shipping shuns uncertain results of state share reform in bid for funds
China Shipping Development (CSD), the mainland's largest coastal energy shipper, has put a two billion yuan convertible bond issue on hold because of a recent government policy change.
Announcing the company's interim results to the end of June, chairman Li Shaode said the bond issue faced uncertainties following the state share reform, which required companies to make all state and legal-person shares tradable on exchanges.
On Wednesday, CSD said that the board of directors had decided not to proceed with the bond issue 'after taking into account all factors including the current state of the market and the approval requirements of the relevant PRC governmental/regulatory authorities'.
On Wednesday, Jiangxi Copper, the locally listed arm of China's largest copper producer, also said it would postpone its two billion yuan convertible bond issue for the same reason.
Mr Li also said the delay in CSD's plan to spin off its dry bulk business in a separate listing in Hong Kong was due to a discouraging response from investors.
The stock's value fell 19.4 per cent to $5.20 in a month after news of the proposed spin-off surfaced in analysts' reports on June 10.
CSD's bulk-shipping operations accounted for 42 per cent of its operating revenue last year, or 2.7 billion yuan. It is also active in oil procurement and transport.
Last month, the company moved to calm minority shareholders and nervous investors by saying it would keep more than 50 per cent of the dry-bulk shipping subsidiary it plans to spin off.
Mr Li yesterday said the bond issue postponement meant the company needed to seek other sources of finance, including loans.
Reviewing performance, Mr Li said fuel accounted for 30 per cent of operating costs. 'We have been studying different ways to reduce the impact of oil price rises on our costs. For example, we are refilling our tankers at places where oil prices are lower,' he said.
The group had 77 tankers, totalling 2.91 million deadweight tonnes (dwt), at the end of June. It said 12 ships were being built, with four, totalling 234,000 dwt, to be ready by the end of the year.
CSD said it would increase the number of its bulk carriers by two, to 91, at the end of the year.
Capital expenditure would amount to 2.5 billion yuan this year, 800 million yuan next year and 1.2 billion yuan in 2007, said chief financial officer Wang Kang-tian. Mr Wang added that the company had four billion yuan cash on hand and a gearing ratio of 14.7 per cent.
CSD's net profit jumped 81 per cent to $1.6 billion in the first half of this year, from $885.8 million in the same period last year.
Turnover reached $4.2 billion in the first half, representing an increase of 35.4 per cent from the $3.1 billion posted in the same period last year.