The Cosco Shipping Energy Transportation Co.Ltd(600026) (600026), which was inquired about the provision of large impairment, disclosed the reply announcement to the inquiry letter on the evening of January 27, giving a detailed explanation on the details of the provision of impairment and other matters.
First, simply go back to what happened. Cosco Shipping Energy Transportation Co.Ltd(600026) released the performance forecast on January 22. The company expects a net loss of 4.92 billion yuan to 5.12 billion yuan in 2021. The main reason for the loss is the impairment of large assets. It is disclosed that the company has made impairment provision for 94 of the 141 ships it holds, totaling about 4.96 billion yuan. The Shanghai stock exchange quickly issued an inquiry letter requiring Cosco Shipping Energy Transportation Co.Ltd(600026) to supplement and disclose the details of the provision for impairment, the solutions and Countermeasures the company has taken and plans to take in response to the market downturn, etc.
The reply to the inquiry letter disclosed today shows that during the impairment test of ship assets, Cosco Shipping Energy Transportation Co.Ltd(600026) set the ship assets into three asset groups, namely foreign trade aging ship asset group, non foreign trade aging ship asset group and floating warehouse asset group. The number of impaired ships, book value, net amount of fair value minus disposal expenses, present value and recoverable amount of future cash flow shall be disclosed according to the type.
It is disclosed that from the third quarter of 2020 to the third quarter of 2021, Drury, an authority, continuously lowered the expected TCE level of the trunk route VLCC Middle East China (td3c) for the whole year of 2021 and 2022. Specifically, in the third quarter of 2020, the agency expects the average TCE level in 2021 to be $18750 / day, while the estimated value of TCE for the whole year in the third quarter report of 2021 is reduced to $1242 / day; For the prediction of TCE level from 2022 to 2024, there are also different degrees of reduction. In addition, the agency also expects the VLCC market to recover from 2025.
According to the income method, the decline of the discounted appraisal income brought by the substantial reduction of TCE level in the first few years of the appraisal period is much higher than the increase of the discounted appraisal income brought by the increased TCE level in the next few years of the appraisal period. At the same time, according to the discount calculation rules, the discount factor has the law of first high and then low, which further widens the gap between the ship asset evaluation value in 2021 and the ship asset evaluation value in 2020, thus greatly increasing the scale of ship asset evaluation impairment in 2021.
“After verification, the company believes that the external data used in the impairment test in the reporting period follows the principle of consistency, is objective and reasonable, and there is no significant deviation. On this basis, the amount of impairment provision calculated according to the model is accurate and appropriate.” In the reply announcement to the inquiry letter, Cosco Shipping Energy Transportation Co.Ltd(600026) said.
The announcement shows that the main reason for the Cosco Shipping Energy Transportation Co.Ltd(600026) provision of asset impairment loss is the reduction of the rent level forecast of the tanker transportation market by international authoritative institutions, the impact of the “carbon emission reduction” policy and the implementation of the green development strategy.
Cosco Shipping Energy Transportation Co.Ltd(600026) said that judging from the rules of the tanker market over the years, it was generally believed that in the middle and late 2021, with the arrival of the traditional peak season in the fourth quarter, the company’s ship assets should not show significant signs of impairment. However, in November 2021, with the emergence of highly infectious Omicron variant strain, countries have restarted the previously relaxed travel control, and various institutions have lowered the revenue forecast of each tanker ship type in 2021 and 2022.
At the same time, the State Council issued the action plan for reaching the peak of carbon by 2030 in October 2021, which clearly puts forward the overall requirements of “accelerating the formation of green and low-carbon transportation modes and ensuring that the growth of carbon emissions in the field of transportation remains within a reasonable range”. In particular, the action plan puts forward specific requirements for shipping enterprises to “accelerate the renewal and transformation of old ships, develop electric and liquefied natural gas powered ships, and promote the low-carbon transformation of transportation equipment”.
Cosco Shipping Energy Transportation Co.Ltd(600026) said that due to the emergence of new disturbing factors in the oil transportation market, the introduction of environmental protection policies of shipping enterprises and the establishment of specific program requirements, the company started the calculation of ship asset value at the end of 2021 in mid November 2021, including the establishment of a special team and the selection of qualified evaluation institutions.
In addition, the reply also shows that in the face of the operating pressure brought by the continuous downturn of the international oil transportation market, Cosco Shipping Energy Transportation Co.Ltd(600026) has mainly taken measures from four aspects: first, strengthen the research and judgment of the trend of the international oil transportation market and formulate diversified business strategies to effectively improve the voyage revenue; Second, strengthen the development of domestic oil transportation market and put oil tankers with domestic and foreign trade qualification into the domestic oil transportation market to the greatest extent; Third, focus on the development of LNG transportation projects; Fourth, focus on controlling the fuel consumption of ships, formulate the best effective speed according to the actual situation of the voyage, and strictly monitor the fuel consumption of all links of the voyage. At the same time, through strengthening market research and judgment, carefully manage the fuel procurement, so as to save money in procurement.
