Fortunately, the troubled mainland carrier still has assets to sell off before the year ends and the money is counted.
China Cosco now has a financial target for the fourth quarter to avoid a third consecutive year of losses and delisting from the Shanghai Stock Exchange – 1.67 billion yuan.
But it is a target that would have a CEO and board of directors anxiously scanning their mail pigeonholes for pink slips every morning, because it is written in blood red ink.
The container and bulk shipping giant has found itself in the incredible position where it cannot LOSE more than US$274 million in the last quarter.
According to the three-quarter results filed with the exchange this week, China Cosco lost US$328 million up to the end of September. Looking at the nine-month figure it doesn’t seem that unlikely to avoid losing a further US$274 in the last three months.
Except the state owned carrier’s losses accelerated in the third quarter, doubling the loss made in the first half. That is a disturbing trend that must be keeping the liner executives out of reach of the Sandman every night.
In fact, if China Cosco hadn’t started selling off the family silver to its parent company – stakes in the container making business, office buildings and its logistics business – it would have ended Q3 with losses of US$945 million and a notice to clean out its Shanghai exchange desk.
To be fair to China Cosco, the global shipping business is in deep trouble. There was no peak season this year and the Q3 results for all the carriers are dismal. APL saw its net profit fall by 60 percent in the third quarter compared with 2012, hardly a record-setting year itself.
Even when carriers can increase cargo volume, the freight rates are at chronically low levels for containerized cargo or bulk. There is excess capacity across the shipping business and newbuildings coming online with relentless regularity. Not enough capacity has been laid up and scrapping and extra slow steaming are no panacea.
So China Cosco is not alone in its loss-making endeavours, but years of poor management and grand plans left it stumbling around looking for a chair long after the music stopped.
With increasing business and better rates impossible, the only option left for the carrier in its struggle to remain profitable and stay on the exchange is to keep selling assets. Shareholders have approved plans to sell commercial properties that could add as much as US$602 million to the coffers.
It keeps the company in the black but it is a pretty poor way for a shipping line to stay on bourse (Geddit? Bourse – stay on course … oh, never mind).