Cosco Shipping

China Cosco dips 5pc after raising profit alarm

PUBLISHED : Monday, 28 January, 2013, 2:43pm
UPDATED : Tuesday, 29 January, 2013, 3:19am

Shares in China Cosco, which operates the largest bulk shipping vessels in the world, fell as much as 7 per cent yesterday after it flagged a profit warning for last year and faced a potential delisting in Shanghai.

China Cosco closed at HK$4.08 yesterday, 5.1 per cent down from the previous trading day.

The Beijing-based company, which has the sixth-largest container ship fleet in the world, warned it would experience a significant loss for last year, extending the 10.4 billion yuan (HK$12.81 billion) loss in 2011, due to poor dry bulk demand and falling freight rates.

The Baltic Exchange Dry Index, which gauges various rates on bulk vessels, averaged 920 points last year, down 40 per cent from 1,549 points in 2011.

The container shipping market rebounded moderately last year but the business was still unsatisfactory, Cosco said.

China Cosco's A shares will be delisted if the company stays in the red this year.

Before that, it will warrant a "special treatment" label on the Shanghai Stock Exchange, an arrangement to warn individual investors of the risk.

"Cosco and the government are reviewing various options to restructure the business to bring it back to profitability," said Davin Wu, a transport analyst at Credit Suisse.

"We think the possible options include the sales of loss-making assets and recapitalisation."

The value of its fleet stands at more than US$6 billion.

That would provide a buffer to 2013 losses when Cosco sold and leased back a portion of its fleet, an analyst said.

Credit Suisse forecast the shipping company would register a net loss of 8.7 billion yuan for last year. CLSA forecast a net loss of 7.8 billion yuan.

The consensus estimate was for a 6.5 billion yuan loss.

Cosco operated 171 container vessels and 337 bulk vessels at the end of September.

It also operates terminals in mainland China and Europe through its Hong Kong-listed subsidiary Cosco Pacific.