China COSCO Holdings Co Ltd says it has received ship scrapping subsidies for about 3.96 billion yuan ($638.71 million).
It came through China Ocean Shipping, the controlling shareholder of the company, for the decommissioning and upgrading of vessels.
“The subsidy was recognized as non-operating income and will be included in the profit and loss of the company for the year ending 31 December 2015 to compensate the losses suffered by the company due to the advanced disassembling of the vessels,” Cosco said in a stock exchange filing.
The subsidies were received by Cosco on 30 June 2015. The brief statement by Cosco, however, did not mention the period of the ship scrapping and newbuilding activities covered by the subsidy.
In accordance with the China Accounting Standards for Enterprises, the Subsidy was recognized as non-operating income and will be included in the profit and loss of the Company for the year ending 31 December 2015 to compensate the losses suffered by the Company due to the advanced disassembling of the vessels.
The final accounting treatment will be subject to the audit results to be confirmed by its accountants after conducting the annual audit. It is expected that the Subsidy will have a positive impact on the operating results of the Company for the year ending.
The shipping company was very active in decommissioning of its older tonnage over the past two years.
In 2014, the company offloaded a total of 56 bulk carriers and container ships at 3.1 million dwt for scrapping, which resulted in government subsidies of RMB 1.4 billion. The scrapping spree resumed this year as well, with over 40 vessels dismantled, including 17 in January and 8 in February.
In line with the government support of fleet modernization efforts, China COSCO placed orders for a total of 117,960 teu of new tonnage.
Meanwhile, China’s National Audit Office announced earlier that Cosco was found to have falsified its earnings by under-reporting the revenue, expenditures and profit during the years from 2008 to 2013.
