Update | Mixed fortunes for Chinese shipping firms
China Cosco and China Shipping Development could face difficult fourth quarter
China’s two shipping giants China Cosco and China Shipping Development announced contrasting third quarter results, as analysts warned of a darker fourth quarter.
China Cosco, the flagship division of state-owned China Ocean Shipping Group (COSCO), swung to a net loss of 1.7 billion yuan (HK$2.07 billion) in the third quarter of calendar 2015, versus a profit of 1.6 billion yuan a year earlier, dragged by the continuous weak performance of its core container and dry bulk shipping sectors. Revenue fell 19 per cent to 14.1 billion yuan.
“The result is lower than our estimates as the downtrend of the global economy is faster than expected, ” said CLSA equity analyst Daniel Meng.
China Cosco’s net profit for the first nine months stood at 188 million yuan. The bottom line was bolstered by a 4 billion yuan government subsidy to scrap old vessels in the first half. The company will not receive government subsidies in the second half of the year.
“It is very likely China Cosco will report a full year loss,” Meng said. “The third quarter is traditionally peak season for container shipping, [but] the freight rate will decline further in the fourth quarter.”
Slowing global trade and an oversupply of shipping capacity have weighed negatively on the China Containerized Freight Index (CCFI), which tracks spot and contract rates from Chinese ports to the world.