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Hong Kong's COSCO International Holdings Ltd. has said that it plans to 'actively expand' into new business areas related to the sale of marine fuel and related products.

The announcement follows the group's recent launch of its wholly owned subsidiary Sinfeng Marine Services Pte. Ltd., which COSCO International says has laid a 'solid foundation' for the group's long-term development of its shipping services.

Details of the the shipping group's future plans were revealed in the announcement of its annual financial results for 2009.

Profit attributable to its equity holders in 2009 was HK$843,675,000 (US$108,686,000), up 72 percent year-on-year. Excluding the net gains arising from issue of new shares and share of profit from SOLHL totalling HK$599,768,000 (US$77,265,000), profit attributable to the equity holders was up 42 percent to HK$243,907,000 (US$31,421,300).

Basic earnings per share were 56.25 HK cents, up by 70 percent year-on-year.

Revenue for the group in 2009 was HK$1,630,055,000 (US$209,992,000), down by 22% year-on-year. The decrease was said to be mainly due to an imbalance between demand and supply in the global shipping market as a result of global economic recession, a steep decline in international trade, and the sluggish container shipping market negatively impacting on the demand for container coatings.

Outlook

COSCO International said global trade volumes are expected to regain growth momentum in the year 2010 amid a gradually recovering global economy. However, the group also warned of future uncertainties in the shipping market.

"There are uncertainties still lurking in the market. The reviving pace of trade volume growth is expected to be limited and there is still a long journey back to a prosperous economy. Although many difficulties and challenges remain with numerous factors that influence and complicate the situation, the business environment is still generally favourable," COSCO International said in a statement.

"In the first year of the post-financial crisis era, the overall shipping market may continue to recover, but it will be accompanied by intensifying competition. Nevertheless, the PRC Government's continued initiatives to stimulate the economy and the promulgation of policies such as the "Plan for Readjustment and Revitalisation of the Shipping Building Industry" may help stabilise the shipping industry and shipbuilding industry in a broader extent. In addition, given the previous backlogs, 2010 and 2011 will be still the peak period for new build vessel delivery. These factors shall be favourable to the Group, as our core businesses are based upon the shipping services industry," COSCO International added.

Singfeng Marine Services Pte. Ltd.

Sinfeng Marine Services Pte. Ltd. was established as a wholly owned subsidiary of COSCO International Holdings in November 2009.

COSCO International says that it plans to to build Sinfeng Marine as one of the key revenue drivers of its core business - shipping services. The growth of Sinfeng Marine is seen as being an important part of the company's plan to become a global leader in shipping services.

Speaking in December, Mr. Liang Yanfeng, Managing Director of COSCO International, said, ‘Sinfeng Marine is one of the strategic arms of COSCO International’s expansion into the marine bunker supply services. With Sinfeng Marine’s wide business network and extensive experience of the management team, we are confident that it will enlarge the income base of the company and expand the scale and scope of core business, and therefore help the company achieve a higher growth rate in the future."

Sinfeng Marine is mainly engaged in the provision of marine fuel and related services including marine bunker supplies, trading of oil and oil related products and broker services for clients who are mainly not members of the COSCO Group. Its current businesses originate from a subsidiary of COSCO Group which will cease operation.

During the past few years, business transaction volumes for clients who are not members of the COSCO Group for the supply and trading of fuel oil amounted to approximately 520,000 tonnes and 720,000 tonnes in 2007 and 2008 respectively, and 670,000 tonnes for the ten months ended 31st October 2009.

On 1st December 2009, COSCO Petroleum Pte. Ltd., a wholly-owned subsidiary of COSCO (Hong Kong) Group Limited and a fuel oil supply and trading company providing services to the fleet of COSCO Group, and Sinfeng Marine entered into an agreement in relation to fuel oil trading transactions and financial services, through which Sinfeng Marine may sell or purchase oil products to or from COSCO Petroleum in order to benefit from improved market prices obtained through bulk purchase orders placed either by COSCO Petroleum or Sinfeng Marine.

Meanwhile, COSCO Petroleum will help Sinfeng Marine carry out financial arrangements free of charge which enable Sinfeng Marine to hedge against the risk of fuel oil price fluctuations.

Double Rich Limited

In April 2009, COSCO International completed the acquisition of an 18 percent interest in Double Rich Limited, a Hong Kong-based bunker oil trading and supply company, which represented the company's first step into the bunker oil supply business. The establishment of Singapore-based company, Sinfeng Marine, is therefore the second phase in the company's expansion of its bunker oil supply operations.