On the occasion of
A-share listed companies releasing their first quarter reports, investors have
focused their concerns on the recovery of the shipping industry performance,
which suffered the greatest losses in 2012 according to the annual reports of
the listed companies.
Recently some "State-owned" shipping companies
have also shown their "report cards" of the first quarter this year.
Reports indicate that China Cosco achieved its revenue of RMB15.234 billion
Yuan in the first quarter, decreased by 2.9 percent year on year with a net
profit loss of RMB1.98 billion Yuan, down 26.9 percent year on year.
China Shipping Container Lines (CSCL) achieved revenue of
RMB7.93 billion Yuan in this period, increasing 22.9 percent year on year with
a net profit loss of RMB690 million Yuan, decreased drastically by 52.6 percent
year on year. While China Shipping Development (CSD) reported a loss of RMB484
million Yuan for the first quarter, COSCOL reported a loss of RMB45.0731
million Yuan. Overall, signs of thawing begin to emerge in shipping industry
with an appearance of turnarounds.
Different sub-business performance
Zhang Xilin, an analyst at Shenyin & Wanguo
Securities said that on the whole there were no significant improvements in
shipping industry fundamentals in this year and the vast majority of companies
were still at a loss. At the moment, the shipping capacity utilization was
still at a low level, some problems such as excess of overall supply still
exited, and the imbalances between industry supply and demand needed to be
improved.
From sub-business performance, reports show that, China
Cosco has realized container shipping business up to 1.9389 million TEU,
increased 10.9 percent compared with the same period of previous year, with
revenue increased 14.3 percent to RMB9.2 billion Yuan in the first quarter of
this year. For dry bulk shipping business, the company has shipped 55.87
million tons, only 0.56 percent higher year on year.
"Since the first quarter, demand in container
shipping market has recovered to some extent, and also the rates of the freight
to Europe have also risen, so the freight performance has been slightly
better." Su Baoliang, an analyst at CITIC Securities said.
For the dry-bulk shipping, the whole market is still
ailing. "In 2012, the Baltic Dry Index (BDI) was only 920 points on the
average in the whole year, down 40.6 percent year on year. This year, BDI still
remained below 900 points." Zhang Xilin said, in the current domestic and
international environment of weak economic recovery, the capacity utilization
rates of the whole shipping industry were not expected to go down, however, it
would take time to absorb the surplus for the industry in the coming time.
In fact, due to lease ship operation downsizing and
decline in fuel costs, China Cosco has reduced certain losses in dry bulk
business on year-on-year basis. According to industry estimates, with the fall
in fuel price this year, the shipping cost is expected to be further reduced,
which will help shipping companies to reduce losses and achieve profits.
While in those businesses including logistics, terminals
and container leasing accounting for smaller revenue shares, performance of
China Cosco was relatively stable in the first quarter. In logistics business,
apart from achieving growth in E-logistics and other chemical logistics as well
as shipping agencies, there was an increase of 8.4 percent in terminal business
over the same quarter last year.
The road for profit realizing is still long
How to get rid of the title of the Biggest Loss and
achieve profits is a problem facing the shipping companies at present. On April
26, China Cosco said the sale of 100 percent stake in Cosco Logistics had been
approved by general meeting of shareholders, which would result in a one-time
pretax gain of RMB1.96 billion Yuan. CSCL, specializing in container shipping,
has also recently said that it will build 5 18000TEU container ships to take
advantage of its low-cost boxes and low fuel consumption so as to reduce
losses.
"Since the shipping industry is still in an
adjustment period and there is no detection of any points indicating
fundamentals turning better, it is estimated that there is difficulty for the
whole industry in achieving fundamental improvement in the second quarter in a
short time." Su Baoliang said.
According to Zhang Xilin, implementation of related
policies would be the concerns of the shipping industry for making up deficits.
First, the implementation of "BT (business tax) to VAT (value added
tax)" plan would help to eliminate double taxation of shipping companies
and reduce the burden of the companies. Second, the policy of subsidies for
dismantling old ships was expected to introduce this year, which could partly
alleviate the financial stress of the companies.
From the point of business segments, Zhang Xilin believed
that, with the recovery of the freight rates in the first quarter this year and
the use of ultra large container ships, container shipping business was
expected to take the lead in improving and cut down the industry break-even points,
which will bring great plus to the leaders of the domestic shipping industry.
"At present, shipping industry has slipped to the
bottom and the industry capacity growth is greater than the market demand. With
the gradual recovery of demand, overcapacity will be digested and the industry
prosperity extent will be expected to be above the break-even line again over
the next two or three years." Su Baoliang said.
Source : CE.cn, SN-TR, 25.05.13.