HONG KONG: Mainland shipping conglomerate COSCO International Holdings saw its net profit plummet 81 percent to HK$491 million in 2008. The company's management attributed the setback to the absence of one-off income during the period.

In 2007, COSCO International registered HK$1.9 billion in revenue by disposing of part of its stake in Sino-Ocean Land Holdings Ltd (SOLHL) while the group's property arm went public in Hong Kong.

COSCO International Chairman Zhang Fusheng yesterday told reporters that there were no such windfalls in 2008, which led to a backsliding in the company's profitability. Stripping off special income, the company's net profit was HK$172 million, a 1 percent decrease year-on-year.

Despite a worsening export market, the company's core shipping businesses enjoyed notable growth last year.

Turnover of ship trading agency services grew 77 percent to HK$130 million. Marine insurance brokerage services turnover gained 25 percent to HK$66 million and sales of marine equipment advanced 30 percent to HK$455 million. Hit by falling demand in marine coatings, sales of coatings dropped 13 percent to HK$1.38 billion.

COSCO's vice chairman Wang Futian said that the downward economic spiral hurt sales of container coatings significantly but sales of other coatings products such as marine coatings and industrial anti-corrosion coatings remain healthy.

Zhang was confident that the business will not slide into the red this year given the company currently has 14.8 million TEU yet-to-be-booked shipbuilding orders. The profit is expected to realize over the next two to three years.

Looking ahead, he said the company will press ahead with its restructuring plan.

"The parent group will gradually inject its shipping assets into the company. At the same time, the company will continue to dispose of non-core businesses. The change facelifts COSCO International into a shipping-focused vehicle."

The company has about HK$1.01 billion of cash reserves. Zhang gave no details whether the company will use this war chest to purchase properties from its parent this year.

He said the company has no intention of offloading its remaining stake in SOLHL in the near future. Zhang noted that now is not an appropriate timing for the disposal but the company will review its business model when the long-term economic picture becomes clearer. He added that the company might look for acquisition opportunity overseas.

Shares in COSCO yesterday closed at HK$2.18, up 1.86 percent.

(HK Edition 03/28/2009 page5)