On March 31, Cosco Shipping Holdings Co.Ltd(601919) ( Cosco Shipping Holdings Co.Ltd(601919) , SH) released the financial results of 2021. Last year, the company achieved an operating revenue of 333694 billion yuan, a year-on-year increase of 94.85%, and a net profit attributable to the parent company of 89.296 billion yuan, a year-on-year increase of 8 times. Among them, the EBIT of container shipping business reached 127.7 billion yuan (about 19.79 billion US dollars)p align=”center” style=”text-align:center;”> Source: screenshot of annual report
By the end of 2021, the company’s asset liability ratio was 57%, a decrease of 14 percentage points compared with the beginning of the period, and the profit available for distribution in the statement of the parent company was 27.78 billion yuan. The board of directors of the company proposes to distribute a cash dividend of RMB 0.87 per share (including tax) to all shareholders. Based on the total number of shares at the end of 2021, a total cash dividend of RMB 13.932 billion will be distributed, accounting for 50% of the distributable profits in the statements of the parent company.
On March 31, at the performance presentation meeting, Cosco Shipping Holdings Co.Ltd(601919) management communicated with investors on the centralized transportation market, company performance, cost control, long-term association price, dividend repurchase, capital planning and other issues.
the cost increased in the fourth quarter of last year
In 2021, the global logistics supply chain was challenged and impacted by port congestion, container shortage, inland transportation delay and other complex situations, and the supply-demand relationship of container transportation continued to be tense.
In terms of market demand, according to the statistics of CTS, a shipping consulting agency, the global container freight volume increased by 6.4% year-on-year in 2021; In terms of market supply, according to alphaliner statistics, the annual market delivery capacity is about 1.08 million TEUs, and the disassembly capacity is only 14000 TEUs. The annual net growth rate of capacity is 4.5%, lower than the growth rate of demand.
Therefore, the freight rates of major routes in 2021 increased significantly compared with the same period of the previous year. The average value of CCFI index (China export container freight rate index) was 2616 points, a year-on-year increase of 165.7%. Taking COSCO Shipping as an example, the company’s single container revenue of international routes was US $2151, a year-on-year increase of 113%, and the single container revenue of domestic trade trunk lines was RMB 2450, a year-on-year increase of 13%.
Cosco Shipping Holdings Co.Ltd(601919) container shipping business segment achieved route revenue of USD 48.3 billion, an increase of 113% year-on-year. Among them, COSCO Shipping integrated transportation realized route revenue of US $33 billion, a year-on-year increase of 114%, and OOCL realized route revenue of US $15.7 billion, a year-on-year increase of 110%.
However, the reporter noted that the performance of Cosco Shipping Holdings Co.Ltd(601919) achieved higher revenue in the fourth quarter of 2021, but the profit level was lower than that in the third quarter, with a month on month decline of more than 30%.
In response, Cosco Shipping Holdings Co.Ltd(601919) Board Secretary Guo Huawei said that in the fourth quarter of 2021, the global supply chain continued to be under pressure, and the port congestion and route network disorder further intensified. In order to ensure the shipment and container demand of customers, Cosco Shipping Holdings Co.Ltd(601919) strengthened the centralized clearing and transportation of overstocked boxes at the wharf, accelerated the speed of unpacking overseas heavy containers, and significantly increased the callback volume of overseas empty containers. Therefore, the increase of freight transportation cost and network cost makes the operating cost show nonlinear growth in this quarter.
According to the financial report of 2021, as of the end of last year, Cosco Shipping Holdings Co.Ltd(601919) self operated container ships numbered 510, about 2.94 million TEU (TEU). Affected by the sluggish supply chain caused by the epidemic, the transportation expenses of equipment and goods accounting for 58.22% of the total cost increased significantly year-on-year, resulting in a year-on-year increase of 34.2% in the cost of single box.
Cosco Shipping Holdings Co.Ltd(601919) general manager Yang Zhijian further said that in the fourth quarter of last year, the company’s expenses such as empty container transportation fee, heavy and empty container storage fee, wharf workers’ overtime fee and cabin rental fee increased significantly. In addition, factors such as the high rise of ship rent and the rise of fuel price also make the company pay more costs and invest more resources in ensuring the operation of the supply chain and helping customers deal with the sluggish supply chain.
The company said that in the chartering market, especially for medium and large ships with more than 3000teu, the increase was particularly obvious. In this regard, Cosco Shipping Holdings Co.Ltd(601919) responded to the increase of ship rent by locking the price in advance, optimizing routes, internal and external linkage, etc. At the lease end, the company renewed the lease of 74 self owned ships (580000 TEU) to its brother company Cosco Shipping Development Company Limited(601866) in the light lease mode. At the purchase end, the company ordered 32 new ships (580000 TEU) from 2020 to 2021, which is expected to be delivered from 2023 to 2025.
In terms of fuel cost control, the company said that by the end of 2021, 23 COSCO Container Ships (240000 TEU) had been installed with desulfurization towers and put into use. At this stage, when the price difference between high and low sulfur oil is enlarged, it shows an obvious cost saving effect.
it is estimated that the freight rate will remain high in 2022
Affected by the tight supply chain and the total price of the container chain in the first quarter of 2022, the average value of the ficc2 index increased by 44 points year-on-year.
On March 31, Cosco Shipping Holdings Co.Ltd(601919) disclosed the pre increase of performance in the first quarter of 2022, which said that the company is expected to realize a net profit attributable to shareholders of listed companies of about 27.6 billion yuan during the reporting period, with a year-on-year increase of about 12.15 billion yuan.
With regard to the prospect of the centralized transportation market in 2022, the company said that since the beginning of the year, the container shipping market has continued the overall trend of high-level operation in 2021, and the continuous congestion of global ports has put pressure on the supply of effective transportation capacity. The tense situation of market supply and demand is difficult to be significantly improved in the first half of 2022. In addition, repeated epidemics, global inflation, geopolitics and other events will make it more difficult to predict the future market trend.
Cosco Shipping Holdings Co.Ltd(601919) believes that in terms of demand, according to Drewry, the global container freight volume will reach about 244 million TEU in 2022, with a year-on-year increase of about 5.4%, which is expected to maintain a growth rate of more than 5% for the second consecutive year.
In terms of supply, the congestion of the west American wharf continues, the labor negotiation may become the largest “grey rhinoceros” in the centralized transportation market, and the persistent disease of insufficient supporting infrastructure capacity of inland transportation ports is difficult to be improved quickly; The shortage of dockers and truck drivers may continue to worsen. The increase of crew work intensity and the difficulty of changing shifts have led to a sharp decline in the retention rate of seafarers and exacerbated the global shortage of seafarers.
Cosco Shipping Holdings Co.Ltd(601919) it is expected that the supply chain crisis will continue until at least the second half of 2022. Under this expectation, the market pattern of short supply will support the market freight rate to remain high in 2022, and is expected to promote the whole industry to achieve a higher profit level for the second consecutive year.
Therefore, foreign trade enterprises prefer to establish a solid cooperative relationship with liner companies by signing long-term contracts. At the performance presentation meeting, many investors were concerned about the signing of the company’s long-term association for European and American trunk routes.
Yang Zhijian said that the new year contract negotiation of The Pacific Securities Co.Ltd(601099) route has been officially launched. Some early bidding customers have signed the new year contract. It is expected that the freight rate level will at least double year-on-year. It is expected that most of the signing of the new contract will be completed by mid and late April. The new contract negotiation of Asia Europe routes in 2022 is progressing steadily as planned. At present, the stage signing target has been exceeded, and the one-year contract price is expected to increase by 200400% year-on-year.
550000 shareholders’ hot discussion on dividend and repurchase
The continuous high growth of performance makes Cosco Shipping Holdings Co.Ltd(601919) popular in the capital market. In recent two years, the number of shareholders of the company has increased from 260000 to 550000.
In 2021, Cosco Shipping Holdings Co.Ltd(601919) net cash flow inflow from operating activities was 170.9 billion yuan, with a year-on-year increase of 279.63%. As of the end of the period, the company’s cash and cash equivalents were 177.9 billion yuan, an increase of 125.3 billion yuan over the beginning of the period, but Zhang Mingwen said that the company has no plan to buy financial products at present.
A person from a securities institution asked the company about its future capital expenditure plan. Zhang Mingwen said that the company’s capital expenditure mainly includes ship construction, container purchase, wharf construction, equity investment and so on. By the end of 2021, Cosco Shipping Holdings Co.Ltd(601919) ‘s capital commitment was 36.290 billion yuan, including 28.128 billion yuan for ship construction and 7.391 billion yuan for Wharf capital commitment.
After the release of the annual report, Cosco Shipping Holdings Co.Ltd(601919) dividend scheme has aroused widespread heated discussion among investors. Zhang Mingwen explained that due to the repeated covid-19 epidemic, global inflation, geopolitical conflicts and many other factors, the instability of the global industrial chain and supply chain has increased significantly. Therefore, the company needs to accumulate appropriate retained earnings to deal with future uncertainty.
In 2021, Cosco Shipping Holdings Co.Ltd(601919) minority shareholders jointly proposed to the board of directors, which attracted much market attention. Since then, shareholders have continued to pay attention to the progress of the company’s share repurchase. In this regard, Guo Huawei responded that Cosco Shipping Holdings Co.Ltd(601919) since the end of last year, the general authorization of the board of directors to repurchase shares has been granted through the approval of the general meeting of shareholders, “the purpose is to give the company a flexibility and facilitate listed companies to implement specific repurchase behavior when they think it is necessary within the scope of authorization, but this is not a commitment”.
Guo Huawei further said that the company has carefully studied the specific repurchase plans under different circumstances, but so far, the company has not formed a resolution on the repurchase plan. At present, the information that the company can clearly convey to investors is: according to the general authorization of repurchase, in order to safeguard the company’s value and shareholders’ interests, the board of directors of the company will comprehensively consider the annual capital arrangement, capital expenditure needs, market share price performance and other factors when necessary, and make scientific decisions on repurchase related matters in a timely and flexible manner.
