China COSCO posts strong Q2;
market continues to recover
HONG KONG - China COSCO Holdings, flagship of the country’s premier shipping firm, swung into to the black with second-quarter profit on recovering trade, but overcapacity and a possible global slowdown may drag.
China COSCO shrugged off its worst-ever losses last year to post its second straight quarterly profit, as container ship earnings rebounded sharply and its bulk cargo shipping business posted gains.
However, shipping rates for bulk cargoes, from iron ore to fertilizer, have fallen from a peak in May due to overcapacity, and exports to the United States and Europe are likely to fall during the typically quiet fourth quarter, analysts said.
China COSCO said that although the world economy faces risks and uncertainty in the second half, overall the shipping market this year should be better than 2009.
A.P. Moller-Maersk, the world’s largest container ship operator, lifted its 2010 outlook after posting higher-than-expected profit last week.
China COSCO, which operates the world’s largest bulk cargo fleet and is the No. 7 container shipping firm globally, makes more than half of its profit from dry bulk shipping.
The Baltic Exchange’s main sea freight index for rates to ship dry commodities rose to an average of 3,306 points in the second quarter from 3,026 in the first quarter.
But the index has been volatile, largely dictated by China’s demand for iron ore, coal and other commodities. It lost nearly 60 percent from May’s peak level to a low of 1,700 in June before recovering to 2,841 on Aug 23.
China COSCO reported a profit of 2.64 billion yuan for the April to June quarter, based on Chinese accounting standards, reversing a net loss of a restated 1.3 billion yuan a year ago. The results were in line with an average forecast of 2.61 billion yuan from four analysts polled by Reuters.
China COSCO made a profit of 3.53 billion yuan for the first six months versus a restated net loss of 4.65 billion yuan a year ago.
Analysts said China COSCO has a large order book and is expected to take delivery of 28 new vessels in 2010 comprising 13 dry bulk vessels and 15 container ships.
Shares of China COSCO closed Wednesday down 0.7 percent before the results were announced, against a 0.1 percent fall on the broader market. They have eased 10 percent so far this year after rebounding 77 percent in 2009. – Reuters