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Cosco COSL integration: how to achieve both efficiency and effectiveness (with photos)


Dec 26 2015

Guide: The integration of the two major groups of COSCO and China Shipping has greatly increased the scale of each business segment.
The integration of the two major COSCO and COSCO Group companies has significantly increased the scale of each business segment. With scale, economies of scale are not necessarily achieved; only by improving efficiency can we truly achieve the goals we want to achieve through integration.

The direct correlation between shipping industry and international economic and trade development is very significant, and it is driven and restricted by it. In recent years, the world economy has been undergoing in-depth adjustment. According to Drewry's data, the global economic growth this year was 3.1%, and the volume of sea freight increased by 2.2%. According to data from the EIU (The Economist Intelligence Unit), total global trade has increased by 2.2% this year, and the world economy has maintained a limited recovery and weak growth. The world trade pattern is undergoing profound changes, from globalization to a pattern of parallelization of globalization and regionalization.

In the first three quarters, China's GDP growth rate dropped to 6.9%, and the total value of foreign trade imports and exports was 17.87 trillion yuan, a year-on-year decrease of 7.9%. According to the forecasts of the World Bank and the Development Research Center of the State Council, the average annual growth rate of China's economy from 2015 to 2020 is 7%, and the economy has ended its rapid growth and entered a "new normal." Affected by the general environment, the shipping industry is undergoing a pattern of in-depth adjustment and transformation and development, and the importance of regional markets and emerging markets has increased.

The integration of the two groups, COSCO and China Shipping, which started in this context, has a tragic meaning from the beginning. For the two groups, merging similar items and taking the path of scale and specialization is the first choice. In addition, in order to improve the performance of listed companies and care for the interests of investors, the loss-making dry bulk shipping business was sold back to the parent. The company is happy.

Integration is still underway. Such a complex asset integration is bound to take a lot of time and careful arrangements. The final effect is yet to be tested by the market.

Shu Sheng, a commentator of Shanghai International Shipping Information Center, believes that scale alone is not enough. All companies must be interviewed by the market for "efficiency". Only by improving efficiency can we truly achieve the purpose of integration.

China's ocean-going losses narrow

After the transaction was completed, in the first three quarters, China COSCO's net profit attributable to the parent company decreased from 188 million yuan to 50 million yuan, mainly because Zhongshan Group received nearly 2.4 billion yuan of government financial subsidies in the same period, turning its net profit into profit. ; Florent Leasing Co., Ltd. achieved a net profit of 449 million yuan in the first three quarters. Therefore, after the Zhongshan Group and Floren Leasing Co., Ltd. were placed, China COSCO's current net profit attributable to the parent company declined. After deducting non-recurring gains and losses, China COSCO's net profit attributable to the parent company in the first three quarters decreased from a loss of 3.814 billion yuan to a loss of 1.30 billion yuan, the operating situation improved, and the loss narrowed significantly.

China COSCO said that after the reorganization, in terms of container shipping business, it will continue to optimize its fleet and route layout, continuously improve its overall business marketing capabilities, continue to optimize its cargo source and customer structure, and dig deeper into the development potential and profit growth points of emerging and regional markets. Profitability. At the same time, we will promote the cross-border integration of traditional industries and e-commerce, strengthen business innovation and increase service products; give full play to the advantages of alliances, and continue to promote international development strategies; fully optimize operating costs and vigorously enhance the comprehensive competitiveness of the fleet. In terms of terminal business, efforts will be made to achieve business synergy with container transportation in terms of investment and operation, accelerate the layout of overseas outlets, strengthen the construction of hub ports, and increase the proportion of terminal shares.

Insiders of the China Shipping Group stated that the two groups of COSCO and China Shipping and their subsidiaries have many years of cooperation as the leading companies in the Chinese shipping industry. After reorganization and integration, New China Ocean Shipping will have the fourth largest container ship in the world with a container shipping service chain as its core. The fleet and the world's second-largest terminal operator in terms of container throughput and throughput will greatly improve network coverage, capacity arrangement, and internal control, and the overall service level will also be improved. After the reorganization, New China Ocean Shipping will comprehensively promote the implementation of four strategic dimensions, including anti-cyclicality, profitability, globalization, and scale growth, and strive to continuously enhance corporate value.

CSCL changed from loss to profit

After the transaction was completed, in the first three quarters, various financial data of China Shipping Container Lines changed significantly. The total assets increased significantly from 57.452 billion yuan to 100.1 billion yuan, an increase of 74%; the net asset ratio attributable to the parent company decreased from 41.51% to 2.69%, which also indicates that Xin Zhonghai Container Line will be mainly asset-light; operating income It basically maintained the same level, from 23.859 billion yuan to 23.485 billion yuan, a slight decrease of 374 million yuan; the net profit attributable to the parent company changed significantly, from a loss of 1.075 billion yuan to a profit of 894 million yuan.

CSCL said that after the reorganization, the “shipping + finance” industry-finance integration business model will fully take advantage of the synergies between the financial business sectors, and provide capital support and substantial returns for the development of the main leasing industry and the group's main shipping industry. At the same time, it will carry out financial equity investment based on its own advantages, and choose opportunities to carry out medium- and long-term strategic investments to achieve a deeper combination of industry and finance. In addition to providing operating leasing services, New China Shipping also provides high-quality services such as crew / ship management, maintenance, and logistics networks to build the world's leading ship and container leasing business. In addition, New China Shipping Container Lines will also actively carry out foreign cooperation, steadily expand the proportion of foreign business, and lay a solid customer base for expanding the business field; vigorously develop ship bond financing, and flexibly use financial means such as securitization to attract low-cost funds.

Jiang Ming, an analyst at Jiao Xinxin Securities, believes that for Xinhai Shipping, the biggest advantage brought by the reorganization is to obtain stable profitability. On the one hand, the scale and modernization of the container, tanker, bulk carrier and container fleet of the new group are a long-term trend, and the Group's overall leasing, investment and financing platform has stable demand; Probability will expand the leasing business for third parties, and it is not limited to the leasing of ship assets. Shipping-related yards, ports, and emerging areas such as medical and education are potential targets, and long-term space will be further opened.

China Shipping Development's net profit surges

After the completion of the transaction, China Shipping Development's debt scale and asset-liability ratio did not change significantly. Total assets from 67.564 billion yuan to 69.337 billion yuan, total liabilities from 41.045 billion yuan to 44.483 billion yuan, and the asset-liability ratio increased slightly from 60.75% to 64.15% (see Figure 3). After receiving the transfer price of the assets to be sold and the debt settlement due to the implementation of internal bulk consolidation, and paying the transfer price of the assets to be purchased, China Shipping Development is expected to obtain a net cash of more than 5 billion yuan. China Shipping Development said that if it used part of the cash obtained in the transaction to return the loan, it would effectively reduce the company's debt scale and asset-liability ratio.

Through this transaction, China Shipping Development will divest the bulk shipping business and inject assets related to the oil transportation business and LNG transportation business, becoming the world's largest oil tanker company with a fleet-controlled capacity, and its profitability will be significantly improved. According to the unaudited simulated consolidated financial statements of the listed company after the reorganization on September 30, the first three quarters of Xinzhonghai Development's operating income and operating costs were 82,877.3 yuan and 58.827 million yuan, respectively. The net profit attributable to the parent company was 199763.17 million yuan, a significant increase of 189.25% compared to the net profit attributable to the parent company of China Shipping Development in the first three quarters of 69,621,700 yuan.

China Shipping Development said that after the completion of the reorganization, it will use the new fleet size and global operating network to expand its global layout, enhance its comprehensive competitiveness, and realize the "four globalizations" of cargo sources, customers, routes and outlets, thereby effectively grasping oil and gas transportation. Market development opportunities. At the same time, the reorganization of the two major LNG transportation companies in China can strengthen the leading position of New China Shipping Development in the world's LNG transportation, bring long-term stable income, and effectively suppress the cyclical fluctuations in the oil transportation market. At the same time, the divestiture of the dry bulk shipping business makes the main business more focused and the company's sustainable profitability will be improved.

Industry insiders said that for the new China Shipping Development after the reorganization is completed, it is necessary to make full use of the resources and technical advantages that the two sides have established in the field of oil and gas transportation to further consolidate and expand the market share of "National Oil and Gas Transportation" and ensure the security of national energy transportation On the basis of establishing a global supply network, strengthening strategic cooperation with other large oil companies in China, and actively participating in the competition of international oil and gas transportation projects on the premise of ensuring stable income and preventing investment risks, further expanding the scale of business and improving " At the same time as the proportion of “National Oil and Transportation Company”, the international business competitiveness has been enhanced, thereby further improving the overall efficiency of the enterprise.

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