China Shipping’s profit slumps 77% in 2006

China Shipping’s profit slumps 77% in 2006 China Shipping Container Lines today echoed the current liner shipping mantra of higher fuel prices and depressed freight rates as the cause of a 77 percent decline in its 2006 profit to RMB864.7 million ($111.9 million), compared to RMB3.58 billion in the previous year.
   Operating income for 2006 was down 64.7 percent to RMB1.67 billion ($216.2 million), from RMB4.73 billion in the previous year. China Shipping’s revenue improved 7.5 percent to RMB30.5 billion ($3.95 billion) after posting RMB28.37 billion in 2005.
   Operating costs jumped 21.7 percent to RMB28.39 billion ($3.67 billion) with fuel and oil prices rising 44 percent to RMB6.31 billion ($816.7 million).
   China Shipping’s containership fleet amounted to 398,974 TEUs as of Dec. 31, making it the world’s sixth-largest container line, and is expected to reach about 450,000 TEUs by the end of 2007.
   “Following the down cycle of the industry during the first half of 2006, the container shipping market began to recover since the beginning of the second half of 2006,” said Chairman Li Shaode in a statement to the Hong Kong Stock Exchange. “The group has achieved remarkable growth in its results as compared with the first half of the year by capturing business opportunities created by market recovery, making internal structural adjustments, carrying out meticulous management and transforming sales strategies.
   “However, the results were still lower as compared with the results for 2004 and 2005 when the shipping industry peaked ' due to factors such as rising fuel price and falling average freight rate.”
   The profit slump came despite a 23.1 percent increase in China Shipping’s global container volume to 5.66 million TEUs, up from 4.6 million TEUs in 2005. China Shipping’s average freight rate for the year decreased 12.5 percent to RMB5,295 ($685.36) per TEU.
   The carrier saw particularly strong volume gains in the Middle East and Americas trade lanes. The breakdown of China Shipping’s volumes and revenue by trade lane for 2006 was:
   * North America: 1.36 million TEUs, up 24.2 percent; RMB12.84 billion ($1.66 billion), up 16.1 percent.
   * South America: 75,908 TEUs, up 132 percent; RMB650.4 million ($84.2 million), up 131.2 percent.
   * Europe, Mediterranean: 1.35 million TEUs, up 10.8 percent; RMB8.60 billion ($1.11 billion), down 17.1 percent.
   * Australia: 181,526 TEUs, down 6.5 percent; RMB1.28 billion ($165.7 million), down 7.2 percent.
   * East and Southeast Asia: 604,164 TEUs, up 5.6 percent; RMB1.6 billion ($207.1 million), down 9.2 percent.
   * Middle East: 236,204 TEUs, up 2,285 percent; RMB1.01 billion ($130.7 million), up 1,300 percent.
   * China Domestic: 1.71 million TEUs, up 22.1 percent; RMB2.42 billion ($313.2 million), up 24.8 percent.
   * Others: 139,147 TEUs, up 86.6 percent; RMB2.02 billion ($261.5 million), up 34.1 percent.
   China Shipping said it is uncertain about its prospects for the year ahead, but said it will implement a number of strategy’s to improve its fortunes including exploiting emerging regional markets, optimizing its existing trade lanes and working to reduce trade imbalances with dedicated sales teams.
   “In 2007, world economy and trade is still expected to continue growing. However, there are still numerous uncertain factors such as fuel and steel price trends, the American economy and regional trade friction,” China Shipping said.
   “In addition, the successive delivery of new additional shipping capacity into the global shipping market will still bring pressure to the operation of each liner shipping company. Thus, although the operation during the beginning of year 2007 is better than that of the same period last year, the group remains cautious about the container shipping market in 2007.”