COSCO Shipyards, Like Most Others, Found 2013 Challenging

China shipbuilder and repairer COSCO group in its financial report for year ending 31, December 2013, informs that operating conditions for most of 2013 continued to be difficult. The Group’s turnover was $3.5 billion, lower by 6% from $3.7 billion for the year before. Excerpts from chairman Mr. Li Yung Peng' letter to shareholders follow:

"Gross profit amounted to $321 million, from $485 million in 2012. Net profit attributable to shareholders was $30.6 million, a decline of 71%. Diluted earnings per share was 1.4 cents. Group net asset value per ordinary share as at 31 December 2013 was 59.7 cents.

Tremendous efforts were made during the year to control cost and execute projects more effectively under more difficult conditions. As the new construction projects executed during 2013 were from contracts secured two years before, at a time when the shipping market was depressed, some margins were understandably lower. Similarly, cost pressures had also negatively compressed the margins in our offshore marine engineering contracts.

Offshore Marine Engineering Continues To Be Major Contributor
Shipyard operations continued to be the major contributor to overall turnover, at 98.4%. The offshore marine engineering segment accounted for 70% of the shipyard turnover.

During the year under review, a total of 24 projects were completed and delivered. They included one jack-up barge, one transportation barge, one Sevan 650 ultra deep-water cylindrical drilling rig, two tender rigs, two livestock carriers and 17 bulk carriers.

COSCO’s ship repair business continued to perform above industry level, as it maintained its leadership in the China market. During the year, this segment contributed 10% to total shipyard revenue.

An Improved 2013 Order Book
Despite the difficult market conditions, COSCO secured US$3 billion worth of contracts in 2013 compared to US$2 billion for the year earlier, including repeat orders for the offshore marine segment. The Group’s order book as at 31 December 2013 stood at US$7.8 billion.

Market Conditions Remain Challenging
Much has been reported in media about the improvement in world economic conditions since the second half of 2013, with sentiments indicating that growth should increase over the next two years."