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HK Bourse: Results Announcement From Cosco International Holdings Ltd. -10-

23 Mar 2017 4:21 am
 
 
 
registration not later than 4:30 p.m. on 23rd May 2017. 
 
For the purpose of ascertaining shareholders' entitlement to the proposed final dividend and special 
dividend, the Register of Members will be closed from 7th June 2017 to 9th June 2017, both days 
inclusive, during which no transfer of shares of the Company will be registered. In order to qualify for 
the proposed final dividend and special dividend for the year ended 31st December 2016, all transfer 
documents accompanied by the relevant share certificate(s) must be lodged with the Branch Share 
Registrar at Level 22, Hopewell Centre, 183 Queen's Road East, Hong Kong for registration not later 
than 4:30 p.m. on 6th June 2017. 
 
 
 
 
                                                 - 21 - 
REVIEW OF BUSINESS OPERATIONS 
 
In 2016, amidst the continuous in-depth adjustment of the global economy, the economic recovery was 
sluggish. The growth of international trade remained weak, together with the frequent occurrence of 
black swan events and the rising protectionism in trade, leading to an increasingly fragile global 
economy. The economy of the PRC was in the path of overall stable slowdown, and was expected to 
accelerate gradually. However, there were conflicts between the overcapacity and the upgrading in 
demand structure and the endogenous dynamics of economic growth was still insufficient. In the 
respect of the shipping industry, the international shipping market still faced with an imbalance 
between supply and demand. The Baltic Dry Index (BDI), the Shanghai Containerized Freight Index 
(SCFI) and the China Containerized Freight Index (CCFI) dropped to a historical low in 2016 
respectively. 
 
During the year, the Company's overall working principle was "steady growth, ensuring profits and 
enhancing quality and efficiency". It actively coped with market changes, spared no effort to improve 
marketing services and safety management, increased income and reduced expenditure, continued to 
strengthen and optimise the existing businesses, enhanced service awareness and endeavoured to 
maximise its profit. At the same time, it further pushed forwards the project development of the 
Company, expanded the influence of its existing businesses, speeded up the establishment of "shipping 
services industrial cluster". In terms of business expansion, with an aim to further integrate the Group's 
marine equipment and spare parts business, the Company completed the acquisition of CSHT Marine at 
the beginning of January 2017. The acquisition will on one hand expand the size of the existing 
relevant business, and on the other hand facilitate synergy creation through economies of scale and cost 
reduction, bringing more benefits for the Group. 
 
     Core Business -- Shipping Services 
1. 
 
     The Group's shipping services mainly include ship trading agency services, marine insurance 
     brokerage services, supply of marine equipment and spare parts, production and sale of coatings, 
     and trading and supply of marine fuel and related products. 
 
     During the year, with the delay of vessel delivery schedule by some shipowners, the increase in 
     vessel scrapping volume reduced the need of replacement of marine equipment and spare parts. 
     And the sales volume and prices of container coatings declined due to fierce price competition 
     among suppliers in view of the decrease in output of new containers in China amid sluggish global 
     trade demand. During the year, revenue from the Group's shipping services was HK$6,661,910,000 
     (2015: HK$5,163,022,000), representing an increase of 29% as compared to 2015. The increase 
     was mainly due to the increase in revenue from marine fuel and other products. Profit before 
     income tax from shipping services was HK$275,235,000 (2015: HK$372,400,000), representing a 
     decrease of 26% as compared to 2015, mainly attributable to the marked decrease in profit before 
     income tax from coatings segment as compared to 2015. 
 
 
 
 
                                                  - 22 - 
1.1 Ship Trading Agency Services 
 
    COSCO SHIPPING (Hong Kong) Ship Trading Company Limited (formerly known as 
    COSCO International Ship Trading Company Limited), a wholly-owned subsidiary of the 
    Company ("COSCO SHIPPING (Hong Kong) Ship Trading"), is principally engaged in the 
    provision of agency services relating to ship building, ship trading and chartering for the fleet 
    of  (China COSCO Shipping Corporation Limited*) ("COSCO 
    SHIPPING") and its subsidiaries ("COSCO SHIPPING Group"). COSCO SHIPPING (Hong 
    Kong) Ship Trading also provides similar services for shipowners and shipping enterprises 
    outside COSCO SHIPPING Group. COSCO SHIPPING (Hong Kong) Ship Trading mainly 
 
    derives its revenue from agency services. In the case of new build vessels, commissions are 
    paid by shipbuilders according to the work progress specified in the relevant contracts. For the 
    trading of second-hand vessels, commissions are paid to COSCO SHIPPING (Hong Kong) 
    Ship Trading according to the contracts after the vendors have delivered the vessels to the 
    buyers. 
 
    During the year, some shipping companies delayed delivery of dry bulk vessels under 
    construction due to the depressed shipping market, especially in the downturn of dry bulk 
    shipping market. The delivery of new build vessels ordered through COSCO SHIPPING 
    (Hong Kong) Ship Trading was 22 (2015:17), aggregating 1,686,000 dead weight tonnages 
    (2015: 2,428,000 dead weight tonnages). Facing the tough business environment, COSCO 
    SHIPPING (Hong Kong) Ship Trading actively increased marketing efforts, and paid several 
    visits to internal and external customers of COSCO SHIPPING Group to strengthen exchanges 
    and communication. Such measures have achieved positive results. A total of 17 (2015: 30) 
    new build vessels ordered through COSCO SHIPPING (Hong Kong) Ship Trading were 
    recorded during the year, aggregating 4,138,000 dead weight tonnages (2015: 3,793,000 dead 
    weight tonnages). For second-hand vessels, the sale and purchase of a total of 48 (2015: 45) 
    second-hand vessels through COSCO SHIPPING (Hong Kong) Ship Trading were recorded, 
    aggregating 2,822,000 dead weight tonnages (2015: 3,710,000 dead weight tonnages). 
 
    As of 31st December 2016, the amount of new build vessels ordered through COSCO 
    SHIPPING (Hong Kong) Ship Trading and pending delivery reached 12,360,000 dead weight 
    tonnages, which were scheduled for delivery in the coming two to three years. 
 
    During the year, revenue from the ship trading agency segment increased by 16% to 
    HK$98,921,000 (2015: HK$84,983,000) as compared to 2015. Segment profit before income 
    tax was HK$69,632,000 (2015: HK$61,610,000), representing an increase of 13% as 
    compared to 2015. The increase in segment profit before income tax was mainly due to the 
    increase in new build vessel commission income and second-hand vessel commission income 
    during the year as compared to 2015. 
 
 
 
 
                                             - 23 - 
1.2 Marine Insurance Brokerage Services 
 
    COSCO (Hong Kong) Insurance Brokers Limited, a wholly-owned subsidiary of the Company, 
    and  (Shenzhen COSCO Insurance Brokers Limited*), a non- 
    wholly owned subsidiary of the Company (collectively "COSCO Insurance Brokers"), are 
    primarily engaged in the provision of insurance intermediary services including risk 
    assessment, designing insurance programmes, placing insurance coverage, loss prevention and 
    claims handling for the insured (including their various vessels) worldwide for service 
    commissions. 
 
    During the year, COSCO Insurance Brokers completed renewal of the hull and machinery 
    insurance, increased value insurance, war risks insurance and protection and indemnity 
    insurance for the fleet, and actively explored other non-marine insurance brokerage business, 
    including credit insurance, directors' liabilities insurance, terminal related insurance and group 
    medical insurance, achieving satisfactory results. In respect of marketing services, COSCO 
    Insurance Brokers actively explored new customers and successfully renewed the hull and 
    machinery insurance and protection and indemnity insurance with a number of large state- 
    owned enterprises. Moreover, it provided professional insurance advices for the existing 
    customers based on the customers' business situation and needs. In addition, COSCO 
    Insurance Brokers also maintained a WeChat public account to publish timely updates on 
    important insurance information, which helped keep in touch with the customers and further 
    improved brand image of the Company. 
 
    During the year, revenue from insurance brokerage segment was HK$94,411,000 (2015: 
    HK$91,889,000), up by 3% as compared to 2015. Segment profit before income tax was 
    HK$69,112,000 (2015: HK$67,291,000), representing an increase of 3% as compared to 2015. 
 
1.3 Supply of Marine Equipment and Spare Parts 
 
    COSCO Yuantong Operation Headquarters, which are composed of Yuantong Marine Service 
    Co. Limited, a wholly-owned subsidiary of the Company, and its subsidiaries (including 
     (Shin Chung Lin Corporation*), Xing Yuan (Singapore) Pte. Ltd., Hanyuan 
    Technical Service Center GmbH, () (Yuantong Marine Trade 
    (Shanghai) Co., Ltd.*), () (COSCO (Beijing) Marine 
    Electronic Equipment Limited*) and Yuan Hua Technical & Supply Corporation). In addition, 
 
 
 
 

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