COSCO Corporation (Singapore) Limited, a leading ship repair, shipbuilding & marine engineering and dry bulk shipping group, announced that it had continued to register strong growth in Q1 2008 on broad-based solid expansion across all key businesses supported by buoyant order book.
Group net profit attributable to equity holders doubled to $83.9 million in Q1 2008 on 102% growth in turnover to $717.7 million.
Ship repair, ship building and marine engineering operations delivered a robust 113% jump in turnover to $653.1 million in Q1 2008. This was on the back of progressive revenue recognition for the Group's healthy stream of high-value offshore marine engineering and ship conversion projects, as well as contribution from the ship building segment which began recognizing revenue for its first dry bulk carrier in Q3 2007.
The 2 new dry docks which became operational at COSCO Zhoushan in 1H 2007 also contributed considerably to the increase in revenue. Turnover from dry bulk shipping business jumped 36% to $59.2 million in Q1 2008 boosted by higher charter-hire rates.
Ship repair, ship building & marine engineering business remained the largest revenue contributor, representing 91% of Group turnover in Q1 2008. Dry bulk shipping and shipping agency and others accounted for the remaining 9%.
Gross profit surged 117% to $200.6 million in Q1 2008, lifted by higher turnover and gross margin improvement from 26.0% to 28.0%. Other gains fell 63% to $6.0 million mainly due to foreign exchange loss resulting from the weakening of United States Dollar ("USD") against Singapore Dollar ("SGD") and Chinese-Yuan. Despite this and higher operating expenses due to growing business volume, overall net profit attributable to equity holders of the Company jumped two-fold to $83.9 million in Q1 2008 on successful business expansion Mr. Ji Hai Sheng, Vice Chairman and President of COSCO Corporation said, "Our Group has proven again that our sound and well-diversified business model has placed us in good stead to deliver growth even in the toughest of business environment, which was characterized by rising steel and labor costs and depreciating USD. Set on an even keel with our multiple key earning pillars of offshore engineering, ship repair & conversion and ship building, our Group is cautiously optimistic of our ability to sustain growth and profitability in 2008 even against the challenging backdrop."
The Group has a healthy year-to-date order book of US$7.085 billion for progressive delivery up to 2011. The Group will continue to focus on building its strong order book and expand its shipyard capabilities and efficiencies, while keeping a vigilant eye on the rapidly changing operating environment and ensuring prompt and decisive actions where necessary.
For example, to tackle increasing labour and steel costs, the Group will factor such rising costs in its pricing for future projects. To diversify foreign currency exposure, the Group seeks to quote future contracts in Chinese-Yuan or Euro-Dollars in addition to US Dollars. Customers would have the option of settling Yuan-denominated contracts in US Dollars at the exchange rate prevailing at the time of payment.
Mr. Ji added, "To support our growing order book, our capacity expansion is on track. Our new 60%-owned joint venture ("JV") -- COSCO Lianyungang Shipyard Co., Ltd -- with the Port of Authority of Lianyungang set up in January 2008 had started its ship and offshore repair and conversion operations in Lianyungang, Jiangsu and is expected to contribute to Group earnings in FY2008. Contributions from the two new Zhoushan dry docks with total capacity of 380,000 dwt (that commenced operations in the 1H FY2007) will increase as they begin their first full-year contributions in FY2008."
On 16 January 2008, the Group announced that through Cosco (Nantong) Shipyard, it had acquired a piece of land at Qidong, Jiangsu province for the expansion of the offshore construction base of COSCO (Nantong) Shipyard. When fully developed in 4 phases by 2011, it will have 8 new berths for ship repair, conversion and offshore operations. Barring unforeseen circumstances, the Board of Directors is confident of the Group's prospects in FY2008.
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