The Shanghai-and-Hong Kong-listed flagship unit of China Ocean Shipping Group, China Cosco Holdings Co Ltd says that its 2014 net profit went up 54 percent y/y at 362.5 million Yuan ($58.37 million), on government subsidies for scrapping old tonnage.
Excluding one-off gains, its loss narrowed 81% y/y to 1.4 billion Yuan due to slump in fuel costs and contraction of its chartered-in fleet, according to the company's stock filing on 27 March.
China Cosco said it would have made a loss of 1.38 billion Yuan without factors such as the subsidies and money raised from a share sale. "With the market still remaining subdued, the outlook for the shipping market in 2015 is not optimistic," it said in its statement.
China Cosco, along with China Shipping Development and China Shipping Container Lines (CSCL) have received at least 2.4 billion Yuan ($359 million) in subsidies over 2014, a five-fold increase compared to the previous year, according to Reuters calculations
based on company filings.
The statement says: "During the period, the international shipping market did not see substantial improvement amidst the imbalance of supply and demand, with the overall freight rates still fluctuate at low levels. To address the challenges currently facing the industry, the Group adopted proactive measures of increasing revenue and cutting cost and made a notable progress in the reduction of losses incurred by its major shipping business with the cash flow from operating activities improved significantly."
In 2014, China Cosco sped up offloading of old tonnage with a total of 56 scrapping of bulk carriers and container ships at 3.1 million dwt, which resulted in government subsidies of CNY1.4 billion.
In 2014, the company's operating box-ship fleet expanded 7% y/y to 840,692 teu for 175 box ships. It also chartered out five box ships with a capacity of 42,476 teu. Its orderbook for new container ships totaled 117,960 teu. China COSCO's bulker tonnage shrank 17% y/y to 23.4 million dwt as of end of 2014. It had 40 bulk carriers with a combined 3.5 million dwt capacity on order.
On the outlook for the container shipping sector, the company pointed out that although demand will continue to recover this year, the capacity oversupply pressure will not ease. The dry bulk shipping market, on the other hand, will see “severe” market condition this year also due to the oversupply situation.