COSCO CORPORATION (SINGAPORE) LTD FY2003 Full Year Results Presentation 11 February 2004 1
Outline of Presentation 1. Background & Corporate Restructuring Exercise 2. Operations Review 3. Financial Review 4. Industry Review Dry Bulk Shipping Ship Repair Nantong Dalian 5. Prospects 2
New Shareholding Structure of COSCO Corporation (S) Ltd 100% China Ocean Shipping (Group) Company (COSCO) COSCO HK Group (Non-listed) 46.23% 53.77% SembCorp Marine (Listed SGX) COSCO Holding (S) Pte Ltd (Non-listed) 3.7% COSCO Coporation (S) Ltd (Listed - SGX) 55.4% Temasek Holdings 5.1% 35.8% Public 3
1. Background Information Listed on SGX Mainboard in October 1993. 55.4% owned by COSCO Holdings (Singapore) Pte Ltd, a 100% subsidiary of China Ocean Shipping (Group) Co. Headed by President Ji Hai Sheng Issued capital: 898.2m shares Estimated free float: 35.8% Market Capitalisation: $800m (@89cts 6th Feb 2004) 4
Cosco Group COSCO Corporation (S) Ltd is part of China Ocean Shipping Group Company (COSCO Group), one of China s top 30 largest conglomerates with over 300 subsidiaries and more than 100 representative offices located overseas. COSCO Group s core business is in international shipping, shipping agencies, sea and air freight forwarding, terminals and warehousing, inland haulage, finance and insurance. COSCO Group s mandate: To build, own and operate shipping and logistics assets that are strategic to China s international trade. 5
Restructuring Milestones 1 Jan 2002 Feb 2002 Divested two non-core trading companies, COSCO Trading & COSTO Pte Ltd for $2.25m Completed acquisition of 50% stake in COSCO Nantong Shipyard Co., Ltd for US$14.4m. Apr 2002 Nov 2002 Increased stake in Coslink (M) Sdn Bhd from 51% to 82.6%. Took delivery of MV Cos Knight Dec 2002 Divested stakes in 2 property owning subsidiaries to COSCO Holdings (S) Pte Ltd 6
Restructuring Milestones - 2 Feb 2003 Divested Revo Technologies Co. Ltd to COSCO Holdings (S) Pte Ltd Apr 2003 Apr 2003 May 2003 Received delivery of MV Cos Lucky, the Group s 14 th bulk carrier Entered into conditional agreement to acquire 40% stake in COSCO Dalian Shipyard Co., Ltd Private Placement of 100m Ordinary Shares 7
Restructuring Milestones - 2 Aug 2003 Nov 2003 Completion of acquisition of COSCO Dalian Shipyard Co., Ltd Renamed as Cosco Corporation (S) Ltd Nov 2003 Dec 2003 Dec 2003 Conditional S/P agreement to build 2 x 55,500DWT Handymax from Nantong Cosco KHI Ship Engineering Co., Ltd To lease two 74,000DWT Panamax from Cosco Group from 3Q 2005 Exercised put option to sell 100% of Cosland (SR) Development to Cosco Holdings (S) Pte Ltd 8
Results of Restructuring Sharper focus on shipping & ship related activities Disciplined divestment of remaining non-core assets Active acquisition of profitable ship repair businesses in China 9
2. Operations Review Core Group Activities COSCO Corporation (S) (S) Ltd Ltd Shipping Ship Ship Repairing Marine Marine Engineering Shipping Agencies 10
Operations Review Shipping Fleet of 14 dry bulk carriers in excess of 700,000 dwt : 13 owned and 1 joint ventured. BDI rose by 174% in 2003 and 19% in 2004 to date. Leased on 1+1 year duration. All 14 charter contracts will be renewed in 2004 at higher freight rates. Average age of fleet: 11 years. 11
Operations Review M V Cos Knight 12
Operations Review Ship Repair Contributions from COSCO Nantong & Dalian shipyards resulted in the 273% growth in associate income to $17.6 million in FY 2003 In FY2003, COSCO shipyards accounted for 13.8% of total ship repair in China. Over 90% of ship repair customers are foreign registered ship owners. Acquisition of Cosco Dalian was completed in August 2003 13
Location of Cosco Shipyards Tianjin Dalian Nantong Shanghai Xiamen Guangzhou 14
Shipyard Facilities of Nantong & Dalian Operating Facilities Coastline Land area Floating docks Repair berths Dry dock COSCO Nantong 1.1 km 210,000 m 2 2 (150,000 & 80,000 dwt) 2 Nil COSCO Dalian 1.6 km 350,000 m 2 2 (180,000 & 80,000 dwt) 6 1 (80,000 dwt) 15
Shipyard Facilities of Dalian 16
Shipyard Facilities of Dalian 180,000 DWT Floating Dock Dry Dock 80,000 DWT Floating Dock 17
Shipyard Facilities of Nantong 80,000 DWT Floating Dock 150,000 DWT Floating Dock 18
Completed Jobs - Nantong Conversion of Container Vessel Oil Rig 19
Completed Jobs - Dalian Conversion of bulk carrier Barge Length 125m Tonnage 15,500 DWT Dry Dock Caisson 20
Work In Progress - Dalian Oil Platform Will be completed in April 2004 21
Ship Repair Cost Ranking Country Singapore South Korea The PRC Indonesia Japan Middle East South Africa Mediterranean Balkans/Turkey North Europe Scandinavia Baltic/Russia USA % 100 105/110 50/65 60/75 250 100/105 110/115 125/130 110/115 140/150 150/160 110/115 170/180 Source : Marine Log Magazine Website 22
China s Ship Repair Market Top 10 Companies COSCO (Nantong) Shipyard Co., Ltd COSCO (Dalian) Shipyard Co., Ltd Chengxi Shipyard Shanhaiguang Shipyard China Shipping Shipyard Beihai Shipyard Guangzhou Wenchong Shipyard Co., Ltd Shanghai Shipyard Huarun Dadong Dockyard Co COSCO (Guangzhou) Shipyard Co., Ltd Year 2003 USD million 71.19 67.91 49.38 41.29 30.10 26.59 25.85 22.95 20.65 20.06 Year 2002 Ranking 1 3 2 8 4 5 6 10 9 7 Source: China Ship Industry Association Jan 2004 23
Operations Review Shipping Agencies COSCO Corporation (Singapore) Ltd SINGAPORE 70% owned Costar Shipping Pte Ltd MALAYSIA 82.6% owned Coslink (M) Sdn Bhd Provides agency services for full container and break-bulk liner services in both Singapore and Malaysia. 24
Operations Review Marine Engineering COSCO Marine Engineering Singapore provides 24-hour marine engineering and ship repair services in Singapore. 25
($m) Turnover 3. Financial Review FY2003 FY2003 FY2002 91.9 102.4 % +/- -10% Gross Profit 35.6 27.4 30% Operating Profit 23.8 17.5 36% Finance costs 10.8 15.2-29% Associates 17.6 4.7 273% Profit Before Tax 30.1 6.5 363% Net Profit 24.3 3.9 523% 26
Financial Review FY2003 Restructuring-related disposal of property companies resulted in decline in group turnover. Full year contribution from 50% Cosco (Nantong) and 5-month from 40% Cosco (Dalian) = 273% jump in associates to $17.6m. Benefit from restructuring: net profit +523% to record $24.3m. Reward to shareholders: higher dividend +42.8% and 1-for-5 bonus share issue 27
Balance Sheet Highlights Shareholders Funds Fixed Assets Bank Borrowings Cash Interest cover Net Gearing NTA / share Dec 2003 273.9 454.5 226.2 86.1 2.7x 0.51x 29.8cts Dec 2002 186.9 441.3 274.1 32.4 0.9x 1.29x 28.7cts 28
Balance Sheet Review Good, steady cash flow from shipping High interest cover Bank borrowings reduced by: Sale of non-core properties Share placement 29
4. Industry Review Dry Bulk Shipping 90% of total cargo transported worldwide is shipped by sea. Baltic Freight Index launched in 1985, it is a composite average of the Handymax, Panamax and Capesize dry indices. Baltic Dry Index (BDI) rose 174% in 2003 & 18% to 6 Feb 2004 30
Industry Review Ship Repair Global ship repair industry has been buoyant since 2001, with yards reporting strong demand and modest price increases.* Strong demand due to: Ageing shipping fleet profiles; More demanding class and other regulatory requirements; Absorption of repair yards into the conversion sector; Lack of new ship repair capacity. * According to London based Drewy Shipping Consultants 31
Industry Review Ship Repair COSCO Nantong Ranked No. ONE in earning of foreign vessels repairs revenue COSCO Dalian Ranked No. Two in earning of foreign vessels repairs revenue 32
Types of Ships Size (deadweight tonnes) Number in world fleet % of world fleet (by vessel) Types of cargo Handysize / Handymax 10-49,999 dwt 3,753 67.8% Variety of Goods Panamax 50-79,999 dwt 1,215 22.0% Iron ore, coal, grain Capesize 80,000+ dwt 565 10.2% Iron ore and coal 33
Baltic Dry Index (from 2001) 34
Bulk Carrier Fleet Deliveries & Orders 25 20 1997-2004 DWT Tonnes 15 10 5 0 1997 1998 1999 2000 2001 2002 2003 2004 Delivered 19 11 13 13 21 8 Ordered 9 10 6 Source: Intercargo Annual Review 2002 35
Market Conditions for Bulk Shipping BDI has remained firm, up 174% in 2003 & 18% to 6 Feb 2004 Quantity of dry bulk cargo remains high. Reduction in capacity expected from 2002 onwards as order indications have been weak for dry bulk carriers. Impact: BDI expected to be more stable as demand for cargo space and available capacity will be better matched. Benefit existing players like COSCO Corporation. 36
5. Group Prospects Shipping & Agencies Firmer freight rates has benefited charter renewals for the Group s bulk carriers Higher renewal rates will impact group results in FY 2004. Earnings from new ships: MV COS Knight and MV COS Lucky will contribute to current year profits. New buildings will be added to fleet over next 2 years Agency businesses continue to provide strong and steady income. 37
Ship Repair Ship repair sector in China will continue to grow due to low costs and growth of China s foreign trade. More foreign vessels will undertake ship repair at China shipyards. Purchase of COSCO Dalian and COSCO Nantong will expose Group to growth opportunities in China ship repair segment. Both shipyards will have a full year contribution to FY2004. 38
Current Year Prospects Continue to focus on core business of dry bulk shipping and ship repair. Expansion of bulk cargo fleet in near future. Firmer BDI (up 174% in 2003) has continued to rise 18% to 6 Feb2004. At current levels, all 14 charter agreements will be renewed at higher rates. 39
Current Year Prospects Associate companies from shipyards will remain strong in FY2004. Exploring more shipyard acquisition opportunities in China. With higher charter rates and profits from China ship yards, profit momentum of FY2003 should continue into FY2004. Group net profit in FY2004 to be higher than FY2003. 40
COSCO - 5 Year Price Chart 41
2003 / 2004 Price Chart 42
Conclusion Restructuring & divestment almost completed in last two years Focus on core businesses 43
Contact us at : www.cosco.com.sg sg 44
Thank You 45