Cosco Pacific nets US$1.2b from sale

Cosco Pacific boosted its war chest to bid for a stake in a state-owned terminal in Greece after pocketing US$1.2 billion from selling its container manufacturing associate to its parent firm Cosco Group.

Shares in Cosco Pacific rose 4.07 per cent to HK$11.24 yesterday after it announced the deal on Monday night.

The sale of a 21.8 per cent stake in China International Marine Containers (CIMC), the world's largest box manufacturer, was estimated to produce a pre-tax paper gain of US$490 million for Cosco Pacific, a report by Credit Suisse said yesterday.

However, the port operator will lose a major income source. CIMC posted net profit of 219 million yuan (HK$277 million) in the first quarter, equivalent to 12 per cent of the earnings of Cosco Pacific, which reported US$66 million in net profit in the quarter. The sale is subject to shareholders' approval.

Cosco Pacific said the proceeds would be invested in new terminals and container units.

Tasos Vamvakidis, a deputy commercial director of Piraeus Container Terminal, a subsidiary of Cosco Pacific, said last month in Athens that they were interested in furthering investment at the port in order to enhance its position in the area.

An official from Cosco Pacific declined to comment yesterday.

The Greek government intends to sell some of its shareholdings in the listed Piraeus Port Authority, which operates two berths at Pier 1 in Piraeus. Cosco Pacific operates four berths at Pier 2 and is building two berths at Pier 3.

Pier 1 is not a lucrative asset as its shipping customer base is narrow while the pier workers are union members, making it vulnerable to strikes. It is reportedly serving two to three shipping lines. It also operates international cruise ship terminals.

Pier 2 saw throughput jump 77.4 per cent to 2.1 million 20-foot equivalent units last year. In the first four months of this year, its throughput grew 10 per cent.

"With the heads of government in both countries (China and Greece) successfully striking a number of important deals on shipping and logistics recently, we think Cosco Pacific's positioning in the bid has been improved," said Davin Wu, a transport analyst at Credit Suisse.

"However, the investment could have a negative implication for the company's near-term cash flow and profitability."