COSCO clinches US$470 million in deals for Dalian yard

After reporting stellar financials.

COSCO Corporation Limited announced that its 51% subsidiary, COSCO (Dalian) Shipyard has secured contracts worth USD470m from Maersk Supply Service (MSS) to build four subsea supply vessels. MSS has the option for two additional subsea supply vessels, scheduled for delivery in 4Q16 & 1H17.

In a media release, the Group reported that it had achieved net profit attributable to equity holders of $14.3 million on turnover of $1.1 billion in Q2 2014. For 1H 2014, Group net profit attributable to equity holders amounted to $26.9 million on turnover of $2.2 billion.

Group turnover increased by 28.8% to $1.1 billion in Q2 2014, from $890.3 million in Q2 2013 owing
to increase in shipyard revenue.

The Group maintains a cautious outlook for 2014 with continuing uncertainty over the state of the global economy and global economic growth.

Moreover, the availability and cost of credit may tighten, particularly with the unwinding of monetary policy stimulus which may adversely affect the ability of customers to meet their financial obligations.

Any further strengthening of the Chinese Yuan against the United States Dollar and potential rise in general Chinese wages, prices of raw materials required for production as well as higher financing costs, and the entry of new players especially in the offshore marine segment, may exert even greater downward pressure on the operating margins of the shipyard operations of the Group

Overall, the Group continues to expect difficult and challenging business and operating conditions in 2014.

Here’s more from COSCO:

Turnover from dry bulk shipping and other businesses decreased by 6.1% from $13.1 million in Q2 2013 to $12.3 million in Q2 2014 as the current short-term rates were lower than the more favorable charter rates received in Q2 2013. The Baltic Dry Index (BDI), which is a measure of shipping costs for commodities, started Q2 2014 at 1,316 points and ended the quarter lower at 850 points. In Q2 2014, the BDI averaged 982 points which is a 10.6% increase from the average of Q2 2013 of 888 points. The Baltic Exchange Supramax Index(BSI) averaged 859 points in Q2 2014, a decrease of 3.6% from the average of 891 points in Q2 2013. Currently, the Group’s dry bulk shipping fleet comprises Panamax and Handymax carriers.

Shipyard business remained the biggest revenue contributor, forming 98.9% of Group turnover in Q2 2014.

Due to new tonnage accumulation in the past years, any possible market recovery in the dry bulk shipping segment will be a slow process with uncertainty. The Group may thus continue to face pressure in ship building which may lead to excess shipyard capacity.