China COSCO’s profits succumb to weaker container market

China COSCO’s profits succumb to weaker container market    China COSCO Holdings Co. Ltd., parent company of COSCO Container Lines and majority owner of port operator COSCO Pacific, said “a decline in freight rates and increase in bunker prices” in the liner shipping industry saw its first half 2006 net profit drop 64.7 percent to RMB 978 million ($123.4 million), from RMB 2.77 billion a year ago.
   Operating profit in the first six months of the year was down 53.2 percent to RMB 1.87 billion ($236 million), from RMB 4 billion. China COSCO’s revenue was flat at RMB 18.5 billion ($2.3 billion).
   “The decline in overall earnings reflects market pressures in container shipping, one key area of the group’s business,” said Chairman Wei Jiafu.
   COSCO Container Lines transported 2.42 million TEUs in the first half of 2006, up 12.5 percent over the previous year.
   Volume in the Asia/Europe route, including the Mediterranean, increased 11.7 percent to 551,431 TEUs. The revenue in that market slumped 12.2 percent to RMB 4.1 billion ($517.2 million).
   The transpacific volume increased 11.2 percent to 612,881 TEUs with revenue up 5.9 percent to RMB 6.15 billion ($776 million).
   The Intra-Asia trade, in which COSCO includes Australia, saw an increase in volume of 15.3 percent to 760,218 TEUs. Revenue for that trade was down 2.5 percent to RMB 2.83 billion ($357 million).
   Volumes for mainland China improved 11.7 percent to 376,023 TEUs with revenue decreasing 8.2 percent to RMB 735.5 million ($92.7 million).
   COSCO’s volumes in the other international trades, including the transatlantic, were up 8.8 percent to 126,150 TEUs. Revenue in those combined markets dropped 8 percent to RMB 1.2 billion ($151.3 million).
   COSCO Pacific, of which China COSCO owns about 52 percent, previously reported a 36.5 percent dip in net profit for the first half 2006 to $136.4 million, from $214.8 million a year ago, despite a 23.5 percent rise in throughput to 15 million TEUs.
   “During the second half of the year, the group expects freight rates for container shipping to improve with the advent of the peak season,” Jiafu said.
   “We observed that the international container shipping business is still facing challenges due to the combined effects of several factors including the increase in fuel price. Despite the aforementioned challenges, we are confident that the ‘China factor’ should continue to stabilize and drive the market.
   “Looking ahead, the group will continue to implement its operating strategy via system integration, enhancement in market strategy, continuous lean management and stringent risk control,” he said.