Cosco Shipping

China Cosco to sell assets in fresh bid to avoid loss

The mainland's largest shipping company will offload commercial property to its parent firm

PUBLISHED : Friday, 30 August, 2013, 12:00am
UPDATED : Friday, 30 August, 2013, 3:55am

China Cosco is disposing of two more assets for 3.67 billion yuan (HK$4.65 billion) to its parent firm in a last-ditch attempt to avoid a third year of losses.

Earlier sell-offs failed to prevent the country’s largest shipping firm from posting a net loss of 990 million yuan yesterday for the first half of the year.

While the loss was lower than market expectations of 1.42 billion yuan and marked a big improvement from a deficit of 4.87 billion yuan a year earlier, analysts said a persistent slump in shipping would keep Cosco from returning to the black this year in the absence of further disposals of assets.

A firm that reports three consecutive years of losses is liable to be delisted from the Shanghai Stock Exchange.

In its latest exchange filing, Cosco said it would transfer a majority stake in three commercial properties – estimated to be worth a total of 3.67 billion yuan – to Cosco Group. They are Sunshine Plaza and Cosco Plaza phase II in Qingdao, Shandong province, and Cosco Plaza in Shanghai’s Hongkou district.

China Cosco said the disposal should improve its earnings for the year and allow it to remain on the A-share market. It said the proceeds would be used as working capital for its core shipping business and to repay some debt.

The firm booked a total gain of 3.13 billion yuan in the first half by selling a logistics unit and its stake in China International Marine Containers to sister company Cosco Pacific, but CCB International Securities analyst Winnie Guo said it was not a prudent move, because it reduced any future upside from the units, especially when they had contributed well to the bottom line.

The firm also trimmed its drybulk vessel fleet to 332 in June from 380 late last year in an effort to raise cash and cut costs. It placed orders for 15 new dry-bulk ships and 10 new container ships.

Its container shipping unit, Asia’s second-biggest, reported a net loss of 2.24 billion yuan, while its dry-bulk carrying arm lost 1.82 billion yuan.

Revenue from container shipping fell 1.4 per cent, despite an increase of 8.7 per cent in throughput, amid a continuous decline in average freight rates, especially on the Asia-Europe route.

The company’s share price has dropped 10 per cent this year. It closed 0.3 per cent lower at HK$3.43 yesterday before the statements were released.