China Cosco Holdings, the container unit of China Cosco Shipping, has recorded strong financial results amid brightened industry outlook while taking 74 vessels on its balance sheet in an intra-group deal.
The Shanghai and Hong Kong-listed company posted net profits of CNY 3.86bn ($577m), up 82.4% compared with the same period last year. Revenues increased to CNY 118bn from CNY 112bn.
Although the coronavirus pandemic has hit container volumes globally, Cosco Holdings was able to take advantage of healthy freight rates.
Its container shipping volume reached 18.9m teu, a decrease of 0.92% from the level seen between January and September 2019.
But total freight income amounted to CNY 107bn, up 7.48%.
Cosco Holdings said it experienced higher earnings from Asia-Europe, intra-Asia and transpacific routes but lower income in the Chinese domestic trade.
Separately, the company’s terminal business recorded container throughput of 91.1m teu between January and September, down 1.16% on the corresponding period of 2019.
Subsidiary Cosco Shipping Ports saw revenues down 6.5% at $723m, but net profits rose by 13.5% to $249m due to one-off gains totalling $61.5m from stake sales in several Chinese ports.
Intra-group deals
Some analysts have maintained a bullish outlook for Cosco Holdings for the short run, with the peak demand season in the coming months.
The company would be well positioned in negotiating term contracts for next year amid the firm outlook, HSBC said as it raised the target price for Cosco by HKD 1 ($0.13) to HKD 7. Jefferies also adjusted the target from HKD 5.8 to HKD 6.3.
Cosco Holdings has agreed to bareboat charter 74 containerships from affiliate Cosco Shipping Development for $4.62bn.
The vessels have a total capacity of 581,603 teu and an average age of 12.2 years. Cosco Holdings said the charter period will last from next January to the date on which the ship is 25 years old.
Previously, the company fixed those ships on period charters that will expire in early 2021. Following the contractual changes, Cosco Holdings will recognise the vessel leases — which have a total value of CNY 23.5bn — as assets on its balance sheet.
“The vessels would be managed as the group’s self-owned vessels [from January], and therefore, the self-owned vessel capacity of the group in the fleet will be greatly increased,” Cosco Holdings said in an exchange filing.
“The group can take advantage of the expanded size of its self-owned fleet and the resulting advantage of bulk purchase bargaining to further reduce the fleet’s operating costs and realise economies of scale and synergy, thus further reducing route network costs while enhancing route market competitiveness.”
As of end-September, the company operated 537 vessels with 3.07m teu via Cosco Shipping Lines and Orient Overseas Container Line. It is the world’s third-largest boxship operator, Alphaliner data shows.
