Cosco Pacific profits up 81pc on higher trade volume and bank stake sale

TERMINAL operator Cosco Pacific increased 2007 profit 81 per cent year on year to US$279.3 million, a rise attributed to a 26 per cent increase in exports from China and a $90.7 million sale of its stake in Chong Hing Bank.

Full-year net income rose 47 per cent to $427.8 million, Cosco Pacific said in a Hong Kong stock exchange statement. That was lower than the $453.4 million median of five analysts' estimates compiled by Bloomberg.

Cosco Pacific said it plans to more than double investments in new terminals to $605 million this year, though it will focus on the dry-bulk sector in response to a 40 per cent annual increase in the Baltic Dry Index, a measure of rates for shipping iron ore, coal and other bulk cargo.

Drewry Shipping Consultants ranked Cosco Pacific as the fifth largest operator with a 5 per cent global market share, representing a year-on-year increase of 1.3 percentage points.

"The company will have to make more acquisitions to keep up its growth rate," Jimmy Lam, a Hong Kong-based analyst at BOC International Holdings told Bloomberg. "The rate of trade growth may slow slightly this year."

Cosco Pacific's 19 container terminals worldwide increased volume 22 per cent last year to 39.8 million TEU, helped by the addition of ventures in the Chinese ports of Ningbo and Guangzhou, as well as Egypt. Traffic growth slipped to 19 per cent in the first two months of this year.

"The US subprime problems are having an effect," said Cosco Pacific managing director Xu Minjie. "Shipments to the US are slowing, but exports to Europe are still growing."

Profit from container leasing and sales have dropped 36 per cent to $118 million. "Container sales were just so-so," said Stella Kei, a Hong Kong analyst at UOB Kay Hian, adding that they are expected to fall again because of the US economic downturn.

China export growth fell to 6.5 per cent in February, the slowest pace in almost six years.

In China, the rapid economic growth, the continuous improvement of cargo transportation system and the increasing cargo containerisation rate were driving the ports achieving strong container throughput growth for the past few years.

The company has interests in 27 terminal companies located at 18 ports in China and overseas and involved in the investment, operation and management of 140 berths, among which 87 were container berths in operation, with an annual handling capacity amounting to 47.4 million TEU.

In 2007, throughput totalled 39.8 million TEU, a 21.5 per cent increase over 2006; among which, the throughput of 16 domestic terminal joint venture companies in mainland China reached 36 million TEU, a 20.6 per cent increase over 2006. The profit contribution for terminal division rose by 27.5 per cent to US$128 million.

Separately, Cosco Shipping announced its first quarter net profit was CNY357.13 million (US$50.9 million), while operating revenue was CNY1.58 billion, said in a statement to the Shanghai Stock Exchange. In the first quarter of 2007, the company had an audited net profit of CNY151.4 million and operating revenue of CNY1.3 billion.