Cosco sticks to its acquisition strategy
Cosco International, the marine fuel, paint and ship-trading subsidiary of the mainland's largest shipping company, is targeting acquisitions to boost the profitability of its shipping services division.
This comes as talks continue over the possibility of acquiring a 50 per cent stake in China Marine Bunker (PetroChina) from parent company China Ocean Shipping (Group).
Wang Xiaodong, Cosco International managing director, avoided mentioning specific takeover targets yesterday, but said the firm aimed to become a global marine fuels supplier by initially strengthening its business in Southeast Asia. The company already owns Singapore-based Sinfeng Marine Service, which generated revenue of HK$3.63 billion from marine fuel sales in the first half. This was a 20 per cent increase compared with the same period last year, although the actual sales volume fell 7 per cent to 767,104 tonnes.
Asked why the planned acquisition of marine fuels company Chimbusco, a 50-50 joint venture between Cosco Group and PetroChina, was taking so long, Wang replied that as Cosco was a state-owned enterprise there were regulatory and governmental approvals and procedures that still needed to be completed.
'It's a substantial acquisition, and discussions are ongoing between Cosco and PetroChina,' he said.
Wang did not give a timeframe for the completion of the purchase, although speaking earlier this year financial controller Tony Lo Siu-leung said Cosco International planned to make a potential HK$3 billion investment in its shipping services operation this year. Wang was commenting after Cosco International posted a 32 per cent drop in net profit to HK$234.1 million for the first six months of this year, against HK$341.8 million a year earlier. He said last year's interim result included a HK$219.39 million profit contribution from Sino-Ocean Land Holdings, which was sold last December. If this was excluded net profit would have risen 91 per cent year-on-year, Wang added.
Revenue climbed 38 per cent to HK$5.7 billion between January and June, up from HK$4.1 billion a year earlier. The shipping services division contributed HK$5.26 billion to the total, while revenue from general trading rose 51 per cent to HK$441.2 million or 8 per cent of the total.
Within the shipping services business, the paint and ship-trading operations were the most profitable. Wang said higher oil prices squeezed profit margins in the marine coatings business but this decline was offset by a profit surge in the container paints business.
The firm's share price rose 2.86 per cent to close at HK$3.58 after the results were announced.