Aug. 30 (Bloomberg) -- China Cosco Holdings Co. agreed to sell stakes in two units for 3.73 billion yuan ($609 million) as the nation’s biggest shipping company restructures assets to avoid a third straight annual loss.
China Cosco is selling 81 percent stakes in each of the property units to its state-owned parent, the company said in a statement yesterday. Gains from previous asset sales helped the Tianjin-based shipping line narrow its first-half loss amid a slump in freight rates.
Shares of China Cosco jumped the most in more than two weeks in Hong Kong trading today as the company said gains from the stake sale will help it repay some debt and invest in its main business. The shipping line is restructuring assets in a bid to return to profit as a third consecutive loss may result in its shares being delisted in Shanghai.
“It is selling non-core assets with disposal gains sufficient to cover recurring loss, and the company is relieved of the pressure to sell more profitable assets,” Credit Suisse Group AG analysts Davin Wu and Timothy Ross said in note today. “We see it as good news.”
The net loss in the six months through June narrowed to 990 million yuan from 4.87 billion yuan a year earlier, the company said in a filing to the Shanghai Stock Exchange yesterday. Sales fell 13 percent as shipping lines struggled with overcapacity.
China Cosco had a gain of 3.13 billion yuan in the first half from the sale of assets including a logistics unit. It last posted an annual profit in 2010. According to Shanghai stock exchange rules, companies that post a third consecutive annual loss may be delisted.
“The imbalance between demand and supply in the international shipping market had no material improvement,” the company said in the statement. “We will continue to work toward the target of turning around this year, which is our top priority.”
Shares of China Cosco rose as much as 3.5 percent, heading for the biggest increase since Aug. 12, in Hong Kong trading. Its Shanghai shares advanced as much as 5 percent.
The company’s container-shipping unit, Asia’s second biggest, posted a net loss of 2.24 billion yuan in the first half while its commodity-carrying arm had a net loss of 1.82 billion yuan.
Revenue from shipping containers fell 1.4 percent even though Cosco moved 8.7 percent more boxes, as average rates declined from a year earlier, especially on the Asia-Europe route, according to the statement.
Commodity-shipping volumes dropped 3.5 percent from a year earlier and the average of the Baltic Dry Index, the benchmark for commodity-moving rates, dropped 11 percent during the period, the company said.
China Cosco booked a net gain of 1.85 billion yuan from selling the logistics unit. It also had a gain of 1.28 billion yuan from the sale of its stake in China International Marine Containers Group Co. by group company Cosco Pacific Ltd., in which it owns 43.2 percent, according to a Bloomberg calculation.
China Cosco had a fleet of 332 owned and leased dry-bulk ships as of June 30, compared with 380 six months earlier. It also had another 15 dry-bulk ships on order. Its container-ship fleet totaled 187 ships, with another 10 on order.
The latest disposals will replenish working capital and reduce the risk of the company’s A-shares being delisted, the company said in the statement.
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