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HK Bourse: Results Announcement From Cosco International Holdings Ltd. -8-

23 Mar 2017 4:21 am
 
 
 
                                                                                                646,337 
 
     For sale of coatings, marine equipment, spare parts, marine fuel, asphalt and other products, the majority of sales are 
     on credit terms from 30 days to 90 days. Other than those with credit terms, all invoices are payable upon 
     presentation. 
 
12   TRADE AND OTHER PAYABLES 
 
     As at 31st December 2016, trade and other payables include trade payables amounting to HK$247,302,000 (2015: 
     HK$291,744,000). 
 
     The ageing analysis of trade payables (including amounts due to related parties which are trading in nature) based on 
     invoice date is as follows: 
 
                                                                                                                      2015 
                                                                                                  2016 
                                                                                               HK$'000             HK$'000 
 
     Current - 90 days                                                                                              253,298 
                                                                                                198,968 
     91-180 days                                                                                                     32,842 
                                                                                                 28,894 
     Over 180 days                                                                                                    5,604 
                                                                                                 19,440 
 
                                                                                                                    291,744 
                                                                                                247,302 
 
 
 
 
                                                          - 14 - 
13   EVENT AFTER THE REPORTING PERIOD 
 
     On 28th November 2016, the Company entered into a share purchase agreement with COSCO SHIPPING Financial 
     Holdings Co., Limited and China Merchants Hoi Tung Trading Company Limited in relation to the acquisition of 
     100% equity interest of CSHT Marine Machinery Suppliers Limited ("CSHT Marine") at a cash consideration of 
     HK$118,400,000. CSHT Marine is principally engaged in trading of marine equipment, spare parts, ship supply and 
     general merchandise. 
 
     Upon completion of all condition precedents set out in the share purchase agreement, the acquisition was completed on 
     1st January 2017 and CSHT Marine has then become a wholly-owned subsidiary of the Company. A cash 
     consideration of HK$118,400,000 was fully paid for in January 2017. Up to the date of this announcement, the 
     Company is still finalising the fair value of the assets acquired and liabilities assumed as well as the completion 
     account as at the acquisition date, and has not concluded on the financial impact of this business combination. 
 
 
 
 
                                                         - 15 - 
OVERALL ANALYSIS OF RESULTS 
 
In 2016, there was a downturn in the market of international shipping industry and the industry 
continued to wallow in the doldrums. Also weighing on the market were the lingering oversupply. 
Facing such severe business environment, the Group leveraged on its advantages in terms of 
professionalism and scale and proactively edged up its marketing effort. Nevertheless, the financial 
results of the Company weakened, due to adjustment of fleet structure, continued slowdown in 
transactions of new build vessels, ongoing downward pressure on vessel prices, and depressed prices of 
container coatings as a result of fierce market competition. In 2016, profit attributable to equity holders 
of the Company was HK$237,205,000 (2015: HK$335,763,000), representing a decrease of 29% as 
compared to 2015. The basic earnings per share was 15.47 HK cents (2015: 21.91 HK cents), 
representing a decrease of 29% as compared to 2015. 
 
FINANCIAL REVIEW 
 
Revenue 
 
The Group's revenue in 2016 increased by 24% to HK$7,430,297,000 (2015: HK$5,999,646,000) as 
compared to 2015. Revenue from the core shipping services business increased by 29% to 
HK$6,661,910,000 (2015: HK$5,163,022,000) and accounted for 90% (2015: 86%) of the Group's 
revenue. Segment revenues of ship trading agency, insurance brokerage and marine fuel and other 
products increased by 16%, 3% and 71% respectively as compared to 2015. Revenue of general trading 
segment decreased by 8% to HK$768,387,000 (2015: HK$836,624,000) and accounted for 10% (2015: 
14%) of the Group's revenue. 
 
Gross Profit and Gross Profit Margin 
 
 
The Group's gross profit for the year decreased by 21% to HK$544,246,000 (2015: HK$690,722,000) 
while overall average gross profit margin dropped to 7.3% (2015: 11.5%). The decrease in overall 
gross profit was mainly attributable to the decrease in price and volume of container coatings as well as 
the increase in revenue from the low-gross-profit-margin marine fuel and other products. 
 
Other Income and Gains 
 
The Group recorded other income and gains of HK$34,646,000 (2015: HK$85,933,000). Other income 
and gains included fair value gains on investment properties of HK$7,524,000 (2015: HK$4,585,000) 
and reversal of provision for impairment of trade receivables (net of provision) of HK$6,702,000. Other 
income and gains for 2015 primarily included reversal of provision for impairment of other receivables 
(net of provision) of HK$18,574,000 and government subsidy income of HK$50,471,000 recognised in 
respect of a specific subsidy granted by the Shanghai Municipal Government and the Baoshan District 
Government. Such subsidy was a compensation for the relevant costs and expenses incurred by COSCO 
Kansai (Shanghai) in relocating the plant and settling the impacted staff. 
 
 
 
 
                                                  - 16 - 
Selling, Administrative and General Expenses 
 
In 2016, selling, administrative and general expenses decreased by 17% to HK$447,434,000 (2015: 
HK$537,489,000). The decrease in selling expenses was mainly attributable to the significant decline in 
the sales volume of coating as compared to 2015, while the decrease in administrative and general 
expenses was attributable to the continuous and enhanced effort on cost control imposed by the Group. 
 
Other Expenses and Losses 
 
The Group recorded other expenses and losses of HK$18,046,000 (2015: HK$44,458,000). Other 
expenses and losses primarily included provision for impairment of inventories (net of reversal) of 
HK$10,312,000 and net exchange losses of HK$7,434,000 (2015: HK$41,818,000). Other expenses and 
losses for 2015 also included provision for impairment of trade receivables (net of reversal) of 
HK$2,189,000. 
 
Operating Profit 
 
Due to the factors stated above, the Group's operating profit decreased by 42% to HK$113,412,000 
(2015: HK$194,708,000). 
 
Finance Income 
 
Finance income, which primarily represented interest income on the Group's bank deposits, decreased 
by 21% to HK$90,960,000 (2015: HK$115,163,000) as a result of the decrease in interest rate of cash 
deposit as compared to 2015. 
 
Finance Cost 
 
Finance cost, which mainly represented interest expenses on short-term borrowings and other financial 
charges, increased by 16% to HK$4,414,000 (2015: HK$3,795,000). 
 
Share of Profits of Joint Ventures 
 
The Group's share of profits of joint ventures decreased by 18% to HK$89,930,000 (2015: 
HK$110,171,000). This item primarily represented the share of profit of Jotun COSCO of 
HK$88,236,000 (2015: HK$107,333,000) which was included in the coatings segment. 
 
Share of Profits of Associates 
 
The Group's share of profits of associates decreased by 12% to HK$10,202,000 (2015: 
HK$11,577,000). This item primarily comprised the share of profit of Double Rich of HK$9,094,000 
(2015: HK$10,237,000) which was included in the marine fuel and other products segment. 
 
 
 
 
                                                - 17 - 
Income Tax Expenses 
 
The Group's income tax expenses for the year decreased to HK$63,590,000 (2015: HK$65,760,000). 
The ratio of income tax expenses to profit before income tax, excluding the share of profits of joint 
ventures and associates, however increased from 21% in 2015 to 32% as a result of increase in 
withholding tax. 
 
Profit Attributable to Equity Holders 
 
Profit attributable to equity holders of the Company during the year decreased by 29% to 
HK$237,205,000 (2015: HK$335,763,000). 
 
CAPITAL STRUCTURE, LIQUIDITY AND FINANCIAL RESOURCES 
 
The Group adopts a prudent but flexible approach towards financial management which aims at 
maintaining a healthy balance sheet, a relatively low level of borrowings and adequate liquidity. The 
Board believes this approach ensures sufficient financial resources available for merger and acquisition 
opportunities that fit in well with the Group's strategic direction, therefore is in line with the Group's 
long term development. 
 
The Group's main sources of liquidity comprised cash, bank balances and non-committed unutilised 
banking facilities. The liquidity is primarily for financing of general working capital requirements, 
dividend payments and future capital expenditure. As at 31st December 2016, deposits and cash and 
cash equivalents held by the Group accounted for 82% (2015: 77%) of the Group's total current assets. 
 
 
 
 
 

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