Cosco sinks deeper into the red for Q2, warns of worse days ahead

SLUGGISH marine engineering and shipping markets sunk net losses at Cosco Corporation for the quarter ended June 30 by close to seven times deeper when compared to the same period a year ago, even as it expects even choppier waters in the months ahead.

In a filing to the Singapore Exchange after trading closed on Friday, Cosco reported losses of S$36.8 million for the second quarter of FY2016. This is 673 per cent deeper than the S$4.8 million loss in Q2 FY15.

Cosco's revenue fell by a smaller margin at 11 per cent. This was at S$762.9 million, down from S$853.5 million a year ago. This was due to lower shipyard and shipping revenues, said the group.

Diluted loss per share thus went deeper to 1.64 Singapore cents, from a loss of 0.21 cents per share in Q2 FY15.

The worst is yet to come, said Cosco.

"With the macroeconomic headwinds at the forefront of its concerns, the group expects these difficult and challenging business and operating conditions to persist or even worsen. As such, 2016 will remain a very difficult year for the group," it said.

The poor showing in Q2 was due to external weaknesses beyond the company's control, said Wu Zi Heng, president of the China-based, ship repair and conversion firm.

This includes weakness in the offshore marine industry due to persistently low crude oil prices. Over-capacity also weighed on the shipbuilding industry. Subdued global economic conditions led to depressed shipping rates.

Cosco's counter closed 0.5 Singapore cent, or 1.85 per cent higher at S$0.275 on Friday.

Cosco's results come a day after China-based, Singapore-listed shipbuilder Yangzijiang's results, which also saw a plunge in profits, though it remained in the black for the second quarter ended June 30.

Yangzijiang's net profit sank 60 per cent to reach 415.4 million yuan (S$83.8 million) compared to a year ago. Total revenue fell by 48 per cent at three billion yuan.