Shanghai and Hong Kong-listed Cosco says its deficit for last year will be significant.
Fears over the impending disappointing results sent its shares down this morning before springing back in the afternoon session.
Jon Windham, an analyst at Barclays Capital, says the CNY 10.4bn ($1.67bn) loss projected is deeper than the CNY 6.5bn he had feared and the CNY 7.00bn consensus.
The reversal would mark the second heavy full-year deficit in succession on the back of a CNY 10.5bn red number seen in 2011.
Windham said: “There was considerable sequential decline in profitability compared with the 3Q12 loss of CNY 1.5bn that is hard to explain based on the operating environment.
“Roughly CNY 1.0bn of the sequential decline is likely from falling q/q container freight rates and volumes in 4Q12.
“China Cosco’s container business is similar in size to that of China Shipping Container Lines which posted sequential operating profit decline with a 4Q12 loss of CNY115mn compared to a 3Q12 profit of CNY 911mn.”
Windham adds Cosco’s dry-cargo segment will likely have suffered due to the weak market and Cosco’s high charter commitments.
He added: “The dry bulk segment posted a 1H12 operating loss of CNY 3.4bn. The Baltic Dry Index averaged 950 in 1H12 compared to 865 in 3Q12 and 934 in 4Q12.
“However, the loss run rate in the dry bulk division should be rather stable q/q. This leaves us with CNY 1.5bn in q/q sequential profit decline that is unresolved. “
With Cosco having a policy to take as many charges as possible in its 2012 accounts to boost its chances of making a profit this year, some CNY 1.5bn of its fourth quarter shortfall is likely to stem from accounting measures, the analyst argues.
“However, given the sheer magnitude of China COSCO’s losses, RMB20.9bn in FY2011-12, further losses in FY2013 is still our base case estimate,” he concluded.
