Shanghai, August 30, 2023 – COSCO Group, a prominent player in the shipping industry, has reported a remarkable surge in profits during the second quarter, attributed to strategic cost-cutting measures. The company’s net profit for its container shipping operations surged to an impressive RMB 9.2 billion (US$1.26 billion), positioning COSCO as the sole major shipping entity to record a substantial earnings upswing in comparison to the previous quarter.
Contrastingly, COSCO’s Q1 2023 net profit stood at RMB 7.6 billion, marking a significant progression. This performance showcases COSCO’s adaptability and resilience amid challenging market dynamics, given the contrast with a net profit of RMB 44.6 billion in the same period the previous year. The group, headquartered in Shanghai, exhibited robust financials, achieving an Earnings Before Interest and Tax (EBIT) of RMB 20.8 billion for the first half of this year, with its stringent cost-reduction initiative playing a pivotal role in this success.
COSCO’s financial report underscores its aggressive cost-containment strategy, culminating in a 37% reduction in operating expenses across the group. Within the container shipping division, the same level of cuts was mirrored. A comprehensive analysis reveals the most significant savings were realized through optimizing equipment and freight expenditures, followed by prudent reductions in travel and ancillary business costs.
A boost in finance income further propelled COSCO’s performance, with a substantial 85% increase reaching RMB 3.4 billion in the six-month period. This financial vigor emboldened COSCO’s board of directors to recommend a cash dividend of RMB 0.51 per share for the half-year timeframe. This projected payout, anticipated to amount to a substantial RMB 8.247 billion (US$1.1 billion), approximately equates to 50% of the net profit allotted to stakeholders.
Notably, COSCO SHIPPING Corp, the parent company, has urged its subsidiary, COSCO Shipholdings, to expedite a previously agreed-upon share buyback program. The initiative mandates the repurchase of up to 10% of both A and H shares, a move initially sanctioned at the 2022 Annual General Meeting. While neither firm has furnished reasons for the delay or sudden urgency, COSCO Shipholding’s share price touched a 52-week low in late June, potentially offering a ripe opportunity for buybacks. Despite a subsequent rebound – as evidenced by Monday’s closing share price of HK$7.58 – the value remains 41% below its year-long peak.
COSCO SHIPPING Corp, reflecting its confidence in the subsidiary’s potential, augmented its stake in COSCO Shipholding twice in 2021 and 2022. However, COSCO SHIPPING Corp clarified that it has no intentions of full acquisition, an outcome that would be triggered should buybacks result in an ownership increase of over 2% within a 12-month span.
For its part, COSCO Shipholding revealed plans this week to repurchase between 30 to 60 million Class A shares at a capped price of RMB 12.29 per share. This strategic move underlines the company’s commitment to capitalizing on advantageous market conditions and solidifying its fiscal standing in the industry.
