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Financial Information : Financials

Third Quarter Results Financial Statement And Related Announcement

Financials Archive

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Unaudited Third Quarter Financial Statement Announcement for the Financial Period Ended 30 September 2017

Income Statement

Consolidated Statement of Comprehensive Income

Review of Performance

Q3 2017

The group recorded net profit attributable to equity holders of $24.8 million in Q3 2017.

Continuing Operations

The Group recorded net loss from continuing operations in dry bulk shipping and other businesses of $4.1 million on turnover of $7.0 million in Q3 2017.

Group turnover from continuing operations decreased by 29.0% to $7.0 million in Q3 2017, from $9.9 million in Q3 2016 mainly due to a decrease in shipping revenue from a smaller fleet of bulk carriers. Currently, the Group's dry bulk shipping fleet comprises 4 Handymax carriers, having scrapped six bulk carriers by the end of September 2017.

The Baltic Dry Index (BDI), which is a measure of shipping costs for commodities, started Q3 2017 at 901 points and ended the quarter at 1,356 points. In Q3 2017, the BDI averaged 1,134 points which is a 54.2% increase from the average of Q3 2016 of 735 points. While there has been some recovery, such recovery was made from a very low base and the BDI remains at a relatively low level.

Gross loss for Q3 2017 was $0.1 million as compared to gross loss of $2.4 million in Q3 2016 mainly due to some recovery in the relatively low charter rates of bulk carriers.

Other income comprised interest income and others. Compared to Q3 2016, other income increased by 26.5% to $0.4 million in Q3 2017 mainly due to higher interest and rental income.

The Group recorded net loss of $4.1 million from continuing operations, as compared to net loss of $4.8 million in Q3 2016; and net profit of $23.6 million from discontinued operations, as compared to net loss of $249.3 million in Q3 2016.

Discontinued Operations

The Group recorded net profit from discontinued operations of $23.6 million in Q3 2017. This relates to the Group's shipyard business in China.

First Nine Months 2017

The group recorded net loss attributable to equity holders of $75.0 million for the first nine months in 2017.

Continuing Operations

The Group recorded net loss from continuing operations in dry bulk shipping and other businesses of $23.9 million on turnover of $29.2 million for the first nine months in 2017.

Group turnover from continuing operations remain relatively unchanged at $29.2 million for the first nine months in 2017 as compared to the corresponding period in 2016. Currently, the Group's dry bulk shipping fleet comprises 4 Handymax carriers, having scrapped six bulk carriers by the end of September 2017.

The Baltic Dry Index (BDI), which is a measure of shipping costs for commodities, started the year at 953 points and ended the period at 1,356 points. For the first nine months 2017, the BDI averaged 1,030 points which was a 80.1% increase from the average for the first nine months in 2016 of 572 points. While there has been some recovery, such recovery was made from a very low base and the BDI remains at a relatively low level.

Gross profit for the first nine months in 2017 was $2.4 million as compared to gross loss of $11.4 million for the corresponding period in 2016 mainly due to some recovery in the relatively low charter rates of bulk carriers.

Other income comprised gain from interest income and others. Compared to first nine months in 2016, other income increased by 32.0% to $1.2 million mainly due to higher interest and rental income.

Other losses increased by $14.1 million to a loss of $17.5 million for first nine months in 2017 mainly due to the loss on disposal of property, plant and equipment.

The Group recorded net loss of $23.9 million from continuing operations for the first nine months in 2017, as compared to net loss of $23.2 million for the corresponding period in 2016; and net loss of $133.7 million from discontinued operations, as compared to net loss of $295.4 million for the corresponding period in 2016.

Discontinued Operations

The Group recorded net loss from discontinued operations of $133.7 million for first nine months in 2017. This relates to the Group's shipyard business in China.

Balance Sheet
(30 September 2017 vs 31 December 2016)

The Group has obtained shareholders' approval at an Extraordinary General Meeting held on 30 August 2017 to sell 51% equity interest in COSCO Shipyard Group Co., Ltd, 50% equity interest in COSCO (Nantong) Shipyard Co., Ltd and 39.1% equity interest in COSCO (Dalian) Shipyard Co., Ltd. (collectively the Group's shipyard business in China). As a result, the entire assets and liabilities related to the Group's shipyard business in China are classified as a disposal group held-for-sale on the balance sheet, and the entire results from the Group's shipyard business in China are presented separately on the Consolidated Income Statement as “Discontinued operations”. The transaction is expected to be completed by Q4 2017.

Cash Flow

Net cash used in operating activities for the quarter was $106.3 million compared to net cash used in operating activities of $82.9 million in Q3 2016.

Net cash provided by investing activities for the quarter was $0.7 million. This comprised principally the interest received and proceeds from the disposal of assets and partially offset by purchase of property, plant and equipment during the quarter.

Net cash provided by financing activities was $10.0 million. This was mainly due to net repayments of bank borrowings and interest paid during the quarter.

Commentary

The world dry bulk shipping market is still seeing excess tonnage and overall weak macroeconomic conditions. In Q3 2017 as comparison to same period last year, there has been some recovery, but such recovery was made from a very low base and the BDI remains at a relatively low level. The Baltic Dry Index (BDI) averaged 1134 points in Q3 2017, an increase of 54.2% from the average of 735 points in Q3 2016. Given these prevailing market conditions, any recovery in the dry bulk shipping segment will remain weak. Under such difficult market conditions and considering that the upkeep costs of the Group's dry bulk fleet will continue to increase, the Group has scrapped 6 dry bulk carriers by the end of September 2017.

On 5 May 2017, the Company entered into a conditional sale and purchase agreement with COSCO Shipping Heavy Industry Co., Ltd. in relation to the proposed disposal by the Company of its (a) 51% equity interest in COSCO Shipyard Group Co., Ltd.; (b) 50% equity interest in COSCO (Nantong) Shipyard Co., Ltd.; and (c) 39.1% equity interest in COSCO (Dalian) Shipyard Co., Ltd. for a total consideration of RMB1,465,822,955. The Company's shareholders approved the proposed disposal at an extraordinary general meeting held on 30 August 2017. The transaction is expected to be completed by Q4 2017.

The Company is currently working towards completing the proposed disposal as soon as possible. The Company intends to use the sale proceeds from the proposed disposal to fund future projects, which may include mergers and acquisitions, and for working capital requirements of the Group. In this regard, the Company's management has commenced and is actively reviewing potential investment opportunities, and the Company will provide updates as necessary at the appropriate time.

On 4 August 2017, the Company announced that it had entered into a non-binding Memorandum of Understanding with COSCO SHIPPING (South East Asia) Pte Ltd in relation to the proposed acquisition of approximately 40% of the issued shares of the issued and paid-up share capital of PT. Ocean Global Shipping (a company incorporated in Indonesia) by the Company. PT. Ocean Global Shipping's businesses include logistic service, container canvassing and management, ship agency and chartering and bunkering. On 3 November 2017, the Company announced that it had entered into a share sale and purchase agreement for the purchase of an approximately 40% stake in PT Ocean Global Shipping for a consideration of S$13,953,370.86 payable in cash.

Balance Sheet