China Cosco Sells Offirce Property Assets to Parent to Avoid Delisting; Shipping Company’s Outlook Remains Uncertain Amid Prolonged Global Shipping Downturn

August 30, 2013 Leave a comment

August 29, 2013, 12:31 p.m. ET

China Cosco Sells Assets to Avoid Delisting

Shipping Company’s Outlook Remains Uncertain Amid Prolonged Global Shipping Downturn

JOANNE CHIU

HONG KONG—China Cosco Holdings Co. 601919.SH +4.62% agreed to sell most of its stakes in two office properties in China to its state-run parent, the third asset sale this year as part of the shipping company’s plans to return to a profit next year. The 3.73 billion yuan (US$609.4 million) sale, plans for which were reported earlier in August, were announced as the shipping company on Thursday posted a narrower first-half net loss.The sale is part of China Cosco’s efforts to prevent a third straight year of losses, which could lead to an automatic delisting of its shares in Shanghai. The company, shares of which also trade in Hong Kong, recorded losses in 2011 and 2012.

The flagship of state-run China Ocean Shipping (Group) Co. said it planned to sell an 81% stake in two asset-management companies, which control two high-profile office properties: Cosco Plaza in Shanghai and Sunshine Plaza in the northeastern city of Qingdao.

Cosco Plaza, an office building housing the headquarters of China Cosco’s container-shipping unit, is located in the North Bund area, a prime waterfront district in central Shanghai.

The company will book a gain of 3.67 billion yuan from the sales, which analysts said likely would be the final step to return the company to a profit this year.

The deal will improve Cosco’s results, replenish capital and reduce the risk of its shares being delisted from the Shanghai Stock Exchange, the company said.

In March the company said it would sell its logistics business to parent Cosco Group for US$1.1 billion. That followed a decision in May by China Cosco’s port-operating unit to sell its stake in a container manufacturer to Cosco Group for US$1.22 billion.

While the asset sales could prevent China Cosco from being delisted, the company’s outlook remains uncertain amid a prolonged global downturn in the shipping industry. The company’s net loss narrowed to 990 million yuan in the first half, compared with a loss of 4.87 billion yuan a year earlier.

Excluding gains from asset sales, China Cosco’s operating loss was 3.18 billion yuan in the most-recent half. Overcapacity throughout the industry and softening demand have depressed freight rates.

Rival China Shipping Container Lines Co. 601866.SH +3.14% on Wednesday reported a first-half net loss of 1.27 billion yuan.

The container-shipping business, a barometer of the global economy, has faced difficulties in recent years. The delivery of new ships boosted capacity as an economic slowdown slashed freight demand, depressing shipping rates.

China Cosco was hit particularly hard in recent years.

Filed under Macro Trends

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