Singapore-listed ship repair, marine engineering and dry bulk shipping company COSCO Corporation (Singapore) Limited has recorded a net loss of USD 11.7 million in the first quarter of 2016, compared to a net profit of USD 4.2 million in the corresponding quarter of 2015.
The deep is attributed mainly to the poor shipbuilding and dry bulk shipping businesses.The group booked lower revenues from shipyard operations and dry bulk shipping.
Revenue fell by 27% year-on-year to $716.6 million owing to lower contributions from shipbuilding and dry bulk shipping, partially offset by higher revenue from ship repair.
Turnover from dry bulk shipping and other businesses decreased 45.2% to $5.7 million in Q1 2016 on decreased charter rates.
“As the world shipping market continues to face tonnage overcapacity pressures, new shipbuilding orders have fallen to a low level in Q1 2016. The group will thus continue to face pressure in the shipbuilding segment,” Singapore-listed Cosco Corp said.
“Under such challenging circumstances, new orders started to decline in 2014 and this continued throughout 2015 and into Q1 2016. Some customers have delayed accepting delivery of projects upon completion and it is possible that more customers will seek to delay delivery of projects or seek deferment of payment schedules," the statement said.
It added: "Any rise in wages, prices of raw materials required for production as well as higher financing costs may exert even greater downward pressure on the operating margins of the Group’s shipyard operations. "
As at end-March 2016, the group’s orderbook stood at approximately $7.6bn with progressive deliveries up to 2018. These include modules of drillship and FPSO contracts for certain Brazilian customers amounting to around $1.4bn.
“This orderbook is subject to revision from any new, cancellation, variation or scheduling of orders that may arise,” Cosco Corp warned.
Already, the group announced last month that Sevan Drilling and Cosco Qidong shipyard agreed to exercise the second option to extend the delivery date of Sevan Developer for another six months up to 15 October 2016.
“Pressing forward, we must keep our fingers firmly on the pulse of the market, remain agile and leverage on our strengths and competitive advantages to tide through this difficult time,” Wu Zi Heng, Vice Chairman and President, said.