COSCO SHIPPING International (Singapore) Co., Ltd. (“COSCO SHIPPING” or the “Company” and together with its subsidiaries, the “Group”) aims to become the best-integrated logistics service provider in South and Southeast Asia. The Company is also involved in dry bulk shipping, ship repair and marine engineering, as well as property management.
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Condensed Interim Financial Statements For the six months and full year ended 31 December 2023
2H 2023
Group revenue for 2H 2023 totalled $88.5 million, 5% lower than 2H 2022. The decline in revenue was primarily attributed to lower earnings from Property management, Ship repair and marine engineering segments. The drop in revenue from the Property management segment was largely affected by reduction of occupancy rate at the Grandstand shopping mall, where the lease for the State land expired on 31 December 2023. The decrease in revenue from Ship repair and marine engineering segment was mainly due to drop in ship repair activities.
Gross profit decreased by 13% from $21.0 million in 2H 2022 to $18.3 million in 2H 2023 mainly due to lower margins from Property management segment as a result of higher operational costs and the reduction of occupancy rate at the Grandstand.
Other income was lower by 56% from $2.9 million in 2H 2022 to $1.3 million in 2H 2023 mainly due to lower sale of scrap material and interest income from bank deposits and cash at bank.
Other gains and losses in 2H 2023 was lower than 2H 2022 mainly due to reduction in gain on termination of lease and the foreign exchange loss in 2H 2023.
Distribution expenses increased by 18% in 2H2023 compared to 2H2022, primarily due to higher staff costs. Administrative expenses decreased by 88% in 2H2023, mainly attributed to the recognition of goodwill impairment in FY2022. Excluding the impact of the goodwill impairment in 2H2022, there is no significant movement in administrative expenses compared to 2H2022.
Finance costs increased by 6% to $6.7 million in 2H 2023 mainly due to higher borrowing costs resulting from increase in interest rates.
Group profit before tax for 2H 2023 amounted to $1.3 million, compared to a Group loss before tax of $93.1 million in 2H 2022. The increase in profits was primarily attributed to the impairment charge of goodwill in 2H 2022. Excluding the effect of the impairment of goodwill in 2H 2022, the Group profit before tax decreased from $5.8 million to $1.3 million. This decline was mainly due to a reduction in gross profit and decrease in other income, partially offset by increase in the share of profit from associated companies.
FY 2023
Group revenue for FY 2023 totalled $178.7 million, 4% lower than FY 2022. The reduction of revenue was attributed to the decrease in revenue from Logistics, Property management and Ship repair and marine engineering segments.
Logistics activities accounted for approximately 83% of the Group’s revenue in FY 2023. However, revenue from logistics activities decreased by 3% to $148.2 million. This decline was mainly attributed to a lower revenue contribution from transportation and supply chain management service in Singapore and Malaysia due to a reduced volume of business activities from key customers. This decrease was partially offset by higher revenue from the container depot, driven by an increased volume of Lift on/Lift out (LOLO) activities.
Revenue from Property management decreased by 14% or $2.0 million to $12.5 million mainly due to reduction of occupancy rate at the Grandstand shopping mall, where the lease for the state land has expired on 31 December 2023.
The decrease in revenue from Ship repair and marine engineering was driven by a decrease in volume of ship repair jobs in Singapore.
Costs and Profitability
The cost of sales decreased by 4%, aligned with the drop in revenue as compared to FY2022.
The gross profit margin remained relatively constant as compared to FY2022.
The decrease in other income was mainly due to lower sales of scrap material which was a one-off event in FY 2022, and drop in government grant, partly offset by an increase in interest income. Interest income increased by 57% in FY 2023 mainly due to increase in interest rates for bank deposits and cash at bank.
Other gains and losses in FY 2023 was lower than FY 2022, primarily due to a reduction in gain on the disposal of property, plant, and equipment, as well as foreign exchange losses.
Distribution expenses increased by 14% mainly due to higher staff cost. Administrative expenses decreased by 79% mainly due to the impairment of goodwill in FY2022. Excluding the impact of the goodwill impairment in FY2022, there is no significant movement in administrative expenses compared to FY2022.
Finance costs increased by 33% to $13.7 million mainly due to higher borrowing costs resulting from increase in interest rates.
Share of profit of associated companies of $5.1 million was contributed by the Group’s 40% shareholdings in COSCO SHIPPING Bulk SEA , 40% shareholdings in PT. Ocean Global Shipping Logistics and the 30% shareholdings in SINOVNL Company Limited. The decrease in share of profit of associated companies was mainly due to lower profit contribution from COSCO SHIPPING Bulk SEA. The Baltic Dry Index (BDI), a measure of shipping costs for commodities, averaged 1,485 points in FY 2023, a decrease of 16% from the average of 1,770 points in FY 2022.
Income tax expense decreased by 5% to $3.0 million mainly due to lower profits in FY 2023 (excluding the impact of goodwill impairment in FY 2022).
In FY 2023, the net profit attributable to equity holders amounted to $1.9 million, a significant increase compared to the net loss of $88.6 million in FY 2022. The substantial rise in net profit was primarily attributed to the recognition of goodwill impairment in FY2022. Excluding the impact of the goodwill impairment in FY 2022, the net profit witnessed an 82% decrease compared to FY2022. This decline was mainly attributed to the reduction in the occupancy rate at the Grandstand shopping mall, higher interest expenses, lower share of profits from associated companies, partially offset by an increase in interest income.
Balance Sheet
(31 December 2023 vs 31 December 2022)
Cash and cash equivalents decreased from $106.7 million to $66.7 million mainly due to the repayment of borrowings, interest payments and acquisition of property, plant and equipment, This was partially offset by the net cash provided by operating activities. Please refer to Consolidated Statement of Cash Flows for more details.
Trade and other receivables increased by $2.2 million to $47.2 million (compared to $45.0 million on 31 December 2022). The rise in trade and other receivables is primarily attributed to amounts generated from the operational business activities.
Property, plant and equipment decreased by $18.4 million to $651.5 million mainly due to depreciation expense recognised in FY 2023.
Trade and other payables have increased by $1.3 million to $37.5 million, primarily due to other payables related to the newly acquired subsidiary, Golden Logistics & Storage Sdn Bhd.
Total borrowings decreased by $67.1 million to $261.8 million mainly due to the repayment of bank borrowings and lease liabilities.
Shareholder’s equity decreased by $1.9 million to $487.1 million mainly due to currency translation losses, offset by profit for the year.
Cash Flow
Net cash provided by operating activities for FY 2023 was $48.6 million. This was mainly due to operating profits generated during the financial year. Please refer to Consolidated Statement of Cash Flows for details.
Net cash used in investing activities for FY 2023 was $0.3 million. This was mainly due to payments for property, plant and equipment, partially offset against dividends received from associated companies, net cash inflows from the newly acquired subsidiary, Golden Logistics & Storage Sdn Bhd. and interest received.
Net cash used in financing activities for FY 2023 was $87.5 million. This was mainly due to the repayment of borrowings and interest payments.
In the year 2023, the global economy has not yet fully emerged from the shadow of the COVID-19 pandemic. Inflation and high-interest rates have also had an impact on global economic recovery. The Group has also been affected by higher financing costs. The Russia-Ukraine War has been ongoing for two years, and in the second half of 2023, armed conflicts erupted again between Israel and Palestine in the Middle East. The unstable global geopolitical situation has negatively affected economic growth. In January 2024, the World Bank released the Global Economic Prospects report, predicting a global economic growth rate of 2.4% for 2024, lower than the 2.6% global growth rate in 2023. Against such background, global economic conditions will remain challenging.
On March 7, 2023, the Company announced that it had signed a joint venture agreement with an affiliated company Supply Fortune Limited to jointly invest in logistics infrastructure and resource development, focusing on the development of the logistics supply chain business in Southeast Asia. Subsequently, the two parties established a joint venture company named Goldlead Supply Chain Development (Southeast Asia) Limited, with Supply Fortune Limited holding 51% and the Company holding 49% of the issued shares. The joint venture aims to become a digital supply chain investment and operating platform, providing customers with enhanced digital supply chain solutions by improving supply chain service capabilities. After the establishment of the joint venture, both parties are actively exploring digital supply chain infrastructure and resource investment projects such as warehouses, depots, and trailer fleets in the Southeast Asia. The parties will also consider increasing their investments in the joint venture according to their shareholding proportions to meet future development needs, where required.
On December 15, 2023, the Company announced that its wholly-owned subsidiary, SH Cogent Logistics Pte Ltd ("Cogent Logistics"), had signed an equity transfer agreement with an affiliated company COSCO Shipping (Southeast Asia) Limited, to acquire 100% equity of Golden Logistics & Storage Sdn Bhd ("Golden Logistics") in Malaysia. Golden Logistics primarily engages in non-container vessel agency, general cargo agency, and logistics business. After the acquisition, Cogent Logistics is able to offer customers more comprehensive logistics services, thus promoting further integration of Cogent Logistics’ business in Malaysia.
Regarding the Jurong Island Integrated Logistics Center Phase II project, the Company is currently revising and improving the feasibility study report and risk assessment report. At the same time, the Company is in communication with government departments such as JTC Corporation to prepare for the continued progress of the project.
The GRANDSTAND commercial center closed at the end of 2023, and the leased land was returned to the government. Cogent Automotive Logistics Pte Ltd will continue to conduct automobile sales and storage operations at other locations and will also conduct online automobile showroom operations through the SuperApp digital platform.
The Company will continue to monitor the development of the logistics market in Singapore and Southeast Asia even as global economic conditions remain challenging. It will invest in and build logistics supply chain infrastructure and resources at the appropriate time, expand the logistics supply chain network, and strive to become a leading comprehensive logistics and supply chain service company in the Southeast and South Asia. The Company remains committed to long-term sustainable development, making efforts to bring better returns to its shareholders.