Shanghai Hai Xing Shipping Co has become the first H-share company to report a loss since H-share listings were allowed three years ago. Hai Xing said it recorded a net loss of 84.49 million yuan (about HK$78.62 million) in the first half, compared with a profit of 50.5 million yuan in the previous period. It blamed over-expansion of capacity in a sluggish domestic market, higher depreciation costs and a significant rise in interest on loans for the disastrous results. The company said while efforts had been made by Beijing to regulate the excessive competition in the domestic shipping sector, 'the situation cannot be improved immediately'. Operating losses stood at 102 million yuan, against an operating profit of 3.23 million yuan a year earlier, despite a 17.2 per cent rise in turnover to 1.64 billion yuan. An exceptional gain of 17.5 million yuan from the sale of vessels failed to help the bottom line. There was an exceptional gain of 72.15 million yuan in the previous period. Loss per share was 3.4 fen, against earnings per share of two fen. No interim dividend will be paid. The share fell two cents, or 3.2 per cent, yesterday to close at 60 cents, with 8.46 million shares worth $5.05 million traded. Looking ahead, Hai Xing said it continued to face an uphill task given the environment it operated. Chairman Li Shaode said: 'The fluctuation of demand for domestic waterway transport remains high. There is still an imbalance between the company's increased shipping capacity and demand in the domestic market.' As a result, depreciation costs rose 50 per cent to 298 million yuan due to the significant increase in the number of new vessels in the first half. The highly-geared company said the high interest rate on long-term loans would continue to be a burden, with finance cost on loans at 271 million yuan, up 75 per cent on the year. To cut interest expense burden, the company said it was negotiating to secure foreign currency loans at lower interest rates to repay yuan-denominated loans which carried higher interest rates. It said it would take two years to reduce the current high proportion of loans and high interest rates. According to Credit Lyonnais Securities Asia's August China Monitor, Hai Xing would have a net debt of 3.62 billion yuan for the full year. The company was listed in 1994.