Full Year Results Financial Statement And Related Announcement
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Unaudited Full Year Financial Statement Announcement for the Financial Year Ended 31 December 2017
Consolidated Statement of Comprehensive Income
The Group recorded net profit attributable to equity holders of $263.9 million for FY2017
The Group recorded loss from continuing operations in dry bulk shipping and other businesses of $27.1 million on turnover of $37.2 million for FY 2017.
Group turnover from continuing operations decreased by 8.2% to $37.2 million for FY 2017 compared to FY 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 3 Handymax carriers, having scrapped seven bulk carriers by the end of FY 2017.
The Baltic Dry Index (BDI), which is a measure of shipping costs for commodities, started the year at 953 points and ended the year at 1,366 points. For FY 2017, the BDI averaged 1,145 points which was a 70.1% increase from the average of 673 points in FY 2016. Whilst 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 FY 2017 was $11.6 million as compared to gross loss of $6.0 million in FY 2016 mainly due to some recovery in the relatively low charter rates of bulk carriers and write-back of accrued owner's expenses for vessels that have been scrapped.
Other losses increased by $21.5 million to $24.3 million for FY 2017 mainly due to the loss on disposal of property, plant and equipment.
Loss attributable to equity holders of the Company for continuing operations increased by 4.3% to $27.2 million, as compared to FY 2016.
The Group recorded net profit from discontinued operations of $166.9 million for FY 2017 which included gain recognised on the disposal of subsidiaries of $373.6 million, offset by loss from discontinued operations of $206.7 million.
(31 December 2017 vs 31 December 2016)
Assets and Liabilities
In August 2017, the Group's shareholders approved the sale of 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. The relevant authorities in China have given their approval for the transfer of shareholdings of Cosco Shipyard Group Co., Ltd and Cosco (Dalian) Shipyard Co., Ltd in October 2017 and Cosco (Nantong) Shipyard Co., Ltd in November 2017. Accordingly, the 3 entities ceased to be subsidiaries of the Company on the respective dates and the carrying value of the assets, liabilities and non-controlling interest of the former subsidiaries have been de-recognised from the balance sheet.
Statutory and other reserves deficit of $19.0 million mainly due to foreign currency translation loss.
Capital and reserves attributable to equity holders of the Company increased by $179.1 million to $515.2 million mainly due to the gain on disposal of subsidiaries.
Net cash provided by operating activities for FY 2017 was $341.9 million compared to net cash used in operating activities of $438.4 million in FY 2016.
Net cash used in investing activities for FY 2017 was $1.3 billion mainly due to the net cash outflow on disposal of subsidiaries.
Net cash used in financing activities was $509.4 million. This was mainly due to net repayments of bank borrowings and interest paid during FY 2017.
On 3 November 2017, the Company made an offer (the “Offer”) to acquire all the ordinary shares in the capital of Cogent Holdings Limited (“Cogent”). The Offer turned unconditional on 2 January 2018 and the Company now holds more than 90% of the issued shares of Cogent. It is the Company's intention to compulsorily acquire all the remaining shares in Cogent that it does not own. After the completion of such compulsory acquisition, Cogent will become a wholly-owned subsidiary of the Company. Cogent, together with its subsidiaries, are Singapore's leading logistics management service providers with a broad-based clientele that includes local small and medium sized enterprises, large local companies and multinational companies. The Company intends for Cogent to carry on with its existing business activities.
The Company envisages that as the Company's ultimate holding company, China COSCO Shipping Corporation Limited, has a well-established logistics business network throughout the People's Republic of China (“PRC”), the Company will be able to leverage on this existing logistics business platform to potentially develop new business opportunities in the logistics sector in South and Southeast Asia, taking advantage of the “Belt and Road Initiative” formulated by the PRC Government in 2013. The Company will also be able to offer end-to-end services to its customers with logistical needs in Singapore and Malaysia, thereby increasing the Company's competitive edge in relation to its global competitors and entrenching its customers.
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. Completion of the sale and purchase of the shares in PT Ocean Global Shipping is conditional upon inter alia certain approvals being obtained. Completion will take place after all the conditions precedent are satisfied and will be deemed to have occurred when all the steps to transfer the shares have been completed even though payment of the Consideration will occur only later. The conditions precedent have been satisfied and the transfer of the shares has recently been completed. Payment will be made no later than 31 December 2018.
With respect to the Group's shipping business, the world dry bulk shipping market is still seeing excess tonnage and overall weak macroeconomic conditions. For FY 2017, in comparison to the 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 1145 points in FY 2017, an increase of 70.1% from the average of 673 points in FY 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 7 dry bulk carriers by the end of FY2017.
The Company also disposed 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 in FY 2017.