Tue, Aug 23, 2005 - Page 10 News List

China Shipping's first-half profit exceeds 41 percent

BLOOMBERG

China Shipping Container Lines Co (中海集裝箱運輸), China's second-biggest shipping-line operator, said first-half profit increased 41 percent after rising trade bolstered cargo volume and allowed the company to raise rates.

Net income rose to 2.14 billion yuan (US$264 million), or 0.36 yuan a share, from 1.52 billion yuan, or 0.38 yuan, a year earlier, the Shanghai-based company said in a Hong Kong exchange statement today. A Bloomberg News survey of three analysts had a median estimate of 2.38 billion yuan.

Sales at the company, a unit of China Shipping Group Co (中國海運集團), China's second-biggest shipowner, rose to 13.5 billion yuan from 9.9 billion yuan as China's exports of clothing and other goods rose 33 percent, boosting cargo at China Shipping Container and rivals. Congestion at ports is leading to higher charges this year after freight rates rose to a record amount last year.

"China's exports will likely expand at a similar rate in the second half," said Zhang Xi, an analyst at UOB Kay Hian Ltd.

Analysts in Hong Kong recommend investors buy China Shipping Container shares, as "... freight rates should increase from the first half."

China Shipping Container received an average 6,080 yuan for each standard 20-foot box in the first quarter, up 10 percent from a year earlier, the company said in April. It didn't give details on second-half volume and rates in its statement today.

China Shipping Container carried 30 percent more cargo in the first six months of the year, with average freight rates rising 4 percent to 5 percent, Credit Suisse First Boston (CSFB) analysts Karen Chan and Peter Hilton wrote in an Aug. 19 report.

They have an "underperform" rating on China Shipping Container.

The company's shares fell 2.2 percent to close at HK$1.325 in Hong Kong before the earnings were announced. The stock has gained 6.4 percent this year, compared with about a 7 percent increase on the key Hang Seng Index.

China Shipping's first-half per-share earnings were lower than a year earlier because the company sold stock in an initial public offering in June last year.

Higher fuel prices and trucking fees also are increasing costs at China Shipping Container, Neptune Orient Lines Ltd and other container shipping lines. The price of bunker fuel in Singapore averaged US$233 per metric tonne in the first half, up 34 percent from US$174 a year earlier, according to Bloomberg data.

Fuel now makes up about 17 percent of China Shipping Container's operating costs.

China Shipping Container and rivals have been adding surcharges to help cover costs. The company said it raised fuel surcharges on US and Australian routes and will increase the fee on European and African routes next month.

China Shipping Container, which operates more than 120 vessels, is increasing capacity by 37 percent this year to 347,895 20-foot containers. The global container fleet will expand 13 percent next year, outpacing growth in world trade, Oslo-based broker R.S. Platou said in a June 30 report. Rates may fall next year because of the increase in capacity, CSFB said.

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