COSCO Shipping today issued [ds_preview]a profit warning regarding 2016 annual results and blamed weak market conditions for losses in its container business.
As a result of the weak market, the growth of revenue generated from the container shipping business segment of the company was lower than the growth of the container shipping volume, and the increase in revenue was less than the increase in costs. In addition, a non-recurring loss was incurred due to the disposal of assets during the reporting period and a loss was recorded before the disposal of dry bulk shipping business.
Therefore, based on the preliminary estimation made by the finance department, the company is expected to record a net loss of approximately 1.44 bill. $ (9.9 bill. RMB) reversing the year-ago profit of 41 mill. $ (283.4 mill. RMB), according to a preliminary earnings report.
The losses came despite its efforts to achieve synergies generated from its business restructuring, and the improved performance compared to previous quarters, said COSCO Shipping.
Without taking into account the net loss incurred by demolition of vessels, the Company expects to realize a profit before interests and tax (EBIT) of approximately 100 mill. $ in the fourth quarter of 2016.
After the merger of COSCO and China Shipping, the container shipping business unit, commencing from 1 March 2016, completed the restructuring of its domestic network in an efficiency manner and consolidated its offices at nine major ports and over 400 outlets in China under one roof. The merger of its overseas offices was completed at the end of October as well. Meanwhile, the company started its IT system migration in May and completed five months later.
Looking ahead into 2017, the company will create greater synergies between container shipping and terminal operations so as to boost its competitive strengths in international market, according to the report.
