Singapore-listed Cosco Corporation’s profits tank in first quarter
Singapore-listed Cosco Corporation posted a loss of $14.4m (£10m) in the first quarter of 2016.
The figures
The corporation, which is a subsidiary of the Chinese state-owned Cosco shipping firm, reported a loss of $14.4m compared with a profit of $800,000 in the same period of last year.
Group turnover fell 27 per cent to $722.3m, while shipyard operations were also down 27 per cent year on year, at $716.6m.
The company said 2016 would be another "challenging" year for the group, due to difficult global trade conditions.
The company's turnover in its dry bulk shipping and other businesses fell by 45.2 per cent as it was affected by a general fall in chartered rates, from $10.4m this time last year to $5.7m.
Why it's interesting
Cosco Corporation has said that it's global order book stood at around $7.6bn, including progressive deliveries up to 2018. Although these figures appear strong, the company has said that the weak global economy and low contracting rates will continue to have an impact on its results.
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Shipping is often a bellwether for the global economy and, with Cosco Corp warning that it is facing tough times ahead, the company's results show that there are few expectations growth will pick up soon.
Moody's changed its outlook for the global shipping sector to negative in March, attributing the downward move to its expectations that supply growth will outpace demand across 2016 by more than two per cent, which will also suppress freight rates.
What Cosco Corporation said
Wu Zi Heng, vice chairman and president, said:
Pressing forward, we must keep our fingers firmly on the pulse of the market, remain agile and leverage on our strengths and competitive advantages to tide through this difficult time.
What others said
"Cosco Corporation's second quarter results will be better in the second quarter as a pickup in Chinese steel production led to a muted recovery in the Baltic Dry Index and charter rates in recent months, but this rally will only be temporary," Daniel Richards, shipping analyst at BMI Research said.
"The fact the figures are so low at the moment, however, suggests that overcapacity is still a problem in dry bulk shipping. If the Baltic Dry Index is tanking, that's generally an indication that China and the rest of Asia aren't firing on all cylinders. It would be a savvy move for them to move more into port services if they wanted to mitigate dry bulk losses.
"There has to be a much more concerted scrapping and idling of ships before charter rates will go up significantly, given that demand likely won't rebound strongly."