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China COSCO Adapting To Tough Market

by Mary Swire,, Hong Kong

30 August 2013

In a bid to ease the Group's losses, China's largest shipping group, China COSCO has reduced the size of its fleet, divested some assets, and looked to diversify outside its traditional flagship offerings to post significantly lower losses during the first six months of the year.

For the first six months of the year, the revenue of the Group declined only marginally by 0.4 percent year-on-year, to HKD4.461bn (USD575m). Revenue from the Group's shipping services segment declined by 7 percent however, to HKD3.933bn, accounting for 88 percent of the total revenue of the Group. This was largely offset however by revenue from the general trading segment, which increased by 117 percent year-on-year to HKD527m.

The Group reported: "During the first half of 2013, the shipping market remained depressed and the oversupply of shipping capacity was serious, leading to a deteriorating operating environment for shipping enterprises and shipyards. Ship owners continued to postpone the delivery of new-build vessels and tighten cost controls over ship repair and maintenance. In addition, the volume of new build vessels deliveries decreased year on year and competition in the coatings market intensified, which brought great negative impact on COSCO International, whose major customers included ship owners, shipyards and container manufacturers."

Ma Zehua, Chairman of China COSCO, explained: "The Group is well aware that it can no longer rely on strengths in a particular area to stand out from competition in the international market as the globalization of trade moves forward. China COSCO has to increase its overall strengths. For this reason, the Group stepped up efforts to enhance management and to create an integrated business structure in the first half. Sticking to the principle of lean management, it reinforced marketing and business collaboration, implemented measures to improve budget control, receivables management, centralized procurement and supply chain management. These efforts produced satisfactory results."

Ye Weilong, Chairman of the Board of COSCO International outlined the Group's transformation plans: "Through utilizing our global network, offering high quality services and products with core competitiveness, COSCO International will gradually transform from an agent to a one-stop shipping services provider... At the same time, we will actively study the exploration into the upstream and downstream along the value chain of [our] existing businesses."

“Rare opportunities are always hidden in crisis. We believe there are more opportunities for existing and new businesses of COSCO International in related areas of shipping service. The Group will push forward the development of existing and new businesses steadily, [taking into account] operational risks. For our existing businesses, we will utilize our position of being the sole agent of COSCO fleet, and leverage our scale and expertise. We will increase our business volume within COSCO Group and secure favorable terms from more manufacturers at the same time, thus developing more markets outside COSCO Group. Meanwhile, we will further promote business transformation and upgrade of shipping service business segments."

TAGS: marine

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