Cosco veers towards 37.4% surge in gains

It also enjoys a fat order book.

According to a company release, gross profit increased 37.4% from $83.8 million in Q3 2011 to $115.1 million in Q3 2012 mainly due to higher profit contributions from marine engineering projects.

Other income comprised gain from the disposal of scrap metal, interest income, net currency exchange gain/(loss) and others. Compared to Q3 2011, other income decreased by 55.3% to $31.3 million in Q3 2012 mainly due to lower sale value of scrap materials and a one-off compensation received from customers in Q3 FY 2011.

Administration costs decreased by 11.0% to $49.7 million mainly due to lower allowance for inventory write-down.

Interest expense increased by 92.5% to $25.7 million in Q3 2012 due to higher bank borrowings to fund shipyard operations.

The decrease in income tax expense by 40.7% to $8.9 million was mainly due to lower tax rate for shipyard operations. Under the recently approved local tax incentive scheme granted to some of the subsidiaries of COSCO Shipyard Group. Ltd (“CSG”), the concessionary tax rate was reduced from 25% to 15%.

Overall, net profit attributable to equity holders of the Company decreased 17.5% from $32.2 million in Q3 2011 to $26.6 million in Q3 2012 mainly due to lower contributions from other income.

Compared to the first nine months in 2011, net profit attributable to equity holders of the Company decreased 18.9% from $101.1 million to $82.0 million in the first nine months in 2012.

As at 30 September 2012, the Group’s order book stood at US$5.7 billion with progressive deliveries up to 2014. This order book is subject to revision from any new or cancellation of orders that may arise.

New orders received in first nine months 2012 amounting to US$1.2 billion include 1 wind turbine installation vessel, 1 jack-up drilling rig, 1 jack-up barge, 1 tender rig, 1 semi-submersible accommodation vessel, 2 pipelay heavylift offshore construction vessels, 2 tender barges, 3 bulk carriers and 4 platform supply vessels.

The Group successfully delivered 30 dry bulk carriers in the first nine months of 2012. Of these, COSCO Zhoushan shipyard delivered 13 bulk carriers, COSCO Dalian shipyard delivered 9 bulk carriers and COSCO Guangdong shipyard delivered 8 bulk carriers.

In addition, COSCO Nantong shipyard delivered 3 offshore marine engineering vessels - the Sevan Brasil, a cylindrical drilling unit, 1 shuttle tanker and 1 deep water semi-submersible drilling rig.

As the Group continues construction in 2012 on new ship building contracts that were secured in 2010 and 2011 at low contract values due to the slumping bulk carrier shipping market then, the Group expects operating margins on these new shipbuilding projects to continue to be under great pressure notwithstanding improving gains in efficiency and productivity.