Handout shields China Shipping from hefty losses

China Shipping Group (CSG), the country’s second-largest shipping conglomerate, has improved its net earnings by nearly 50% during the first nine months of this year as government support helped it to offset heavy operating losses.

Recent regulatory filings suggested that the state giant suffered from weak market conditions across the container, tanker and bulker sectors, yet government subsidies and income tax rebates pushed up its earnings on a net basis.

The results reinforced the long-standing market belief that the Chinese government would bail out state carriers once their losses become too severe.

CSG’s operating revenues amounted to Rmb49.1 billion (US$785.4m) in the January-September period, down 10.2% from the year-ago level of Rmb54.5 billion.

In its main business, shipping and logistics, the group posted a 10.9% fall in revenues to Rmb48.2 billion.

CSG recorded depreciation costs of Rmb38.4 million during the period, most probably due to falling vessel prices.

Despite an 8.2% year-on-year fall in operating expenses, the group flipped into operating losses of Rmb229.5 million in the nine months from the year-ago profit of Rmb825.1 million.

However, on a net basis, CSG posted a profit of Rmb926.6 million in the same period, 48.4% higher than the Rmb624.3 million it posted a year ago.

A major reason behind the gain was more government subsidies, which soared to Rmb499.6 million, compared with the year-ago level of just Rmb90.2 million.

Moreover, the group received income tax rebates of Rmb462.4 million during the period, having paid Rmb459.5 million a year ago.

With net cash outflows in operation and investment activities, CSG improved its cash reserves to Rmb25.3 billion as of end-September from the year-ago level of Rmb21.2 billion.

Its debt-to-asset ratio stood at 55.6% at end-September, against 48.8% a year before.

The Chinese government has kept CSG in decent financial shape, yet the dismal operating performances should not surprise onlookers after the company’s subsidiaries listed in Shanghai and Hong Kong posted hefty losses.

China Shipping Development, its tanker and bulker operating arm, dipped to a net loss of Rmb363.6 million for the nine months, after a profit of Rmb836.3 million a year ago, and 
China Shipping Haisheng, the Hainan-based unit that focuses on domestic shipping, saw net losses of Rmb166.2 million from a profit of Rmb43.3 million a year ago.

Only China Shipping Container Lines delivered a stronger performance, narrowing its net loss to Rmb244.9 million from a year-ago loss of Rmb1.5 billion.

Unlike these listed units, CSG does not need to release its results to the stock markets. 

However, having issued bonds not yet matured, the group is required by Chinese regulators to disclose its financial details to bond market players.