It was a rough third quarter for COSCO Shipping International (Singapore) (SGX: COSCO SHP SG) or CSIS, a logistics focused arm of COSCO, which is active in Southeast Asia.
Consolidated revenues for the three months ending September 30, 2019, were just over $42.06 million Singapore dollars ($30.41 million), which is largely flat compared to the corresponding period in 2018. Last year, in the third quarter, CSIS reported about S$42.15 million ($30.84 million). That’s a 0.22% decline in revenues.
CSIS attributed the decline to lower revenues from shipping and property management but was able to limit the damage which was “partially offset by an increase in revenue from logistics… ship repair and marine engineering.”
On a nine-month basis, the company said that turnover had increased due to higher revenues from transportation, warehousing and automotive logistics management services. Ocean shipping revenues increased due to contribution from an additional dry bulk ship that the company had chartered in the first quarter of the year.
The cost of sales for CSIS was largely flat at S$32.57 million ($23.55 million) in the 2019 third quarter, which is a 1.47% increase on the prior corresponding period. It’s an increase in costs, in absolute terms of about S$472,000.
Accordingly, there was a decline in gross profit of about 5.61% year-on-year to S$9.49 million ($6.86 million).
Other Incomes & Expenses
CSIS experienced a decrease in “other income” of about 40.74% from S$734,000 ($537,000) in the third quarter last year to about S$435,000 ($314,500) in the most recent quarter. This decline was driven by decreases in interest income, rental income and “sundry” income. Aggravating the decline was a small decrease in its share of profit from associated companies.
That said, CSIS still generated S$647,000 of revenues from its associates. Further negative pressure was generated by a swing from the black into the red in “other gains and losses.” This was largely foreign exchange-generated losses and related to the sale of property, plant and equipment.
Other consolidated expenses increased slightly, by about 5.56%, to stand at S$8.54 million ($6.18 million).
These increases were driven primarily by increases in, firstly, the cost of finance and, secondly, distribution costs
Finance costs increased due to an increase in lease liabilities. Distribution costs rose because of higher staff costs, which, in turn, increased as the company boosted headcount in the sales and marketing areas. The company was able to limit the damage with a small decline in administrative costs of just about 5.3% from just over S$6.06 million down to S$5.74 million ($4.15 million).
Overall, the effect was to drive year-on-year consolidated profit after tax down by 45.74% from just over S$2.02 million ($1.61 million) in the third quarter of 2018 to S$1.20 million ($864,781) in the third quarter of this year.
However, the final line “total comprehensive income for the period” was radically transformed by the addition of “currency translation differences arising from consolidation,” which swung from an S$347,000 loss in the third quarter of 2018 into a $1.86 million gain in the third quarter of this year.
That left the “Total comprehensive income” line standing at a much healthier S$3.05 million in the third quarter, which is a whopping 64.46% year-on-year increase.
CSIS is controlled by COSCO Shipping Corp of China. CSIS is an integrated logistics management service provider in the south and southeast Asia.
It was created after acquiring all of Cogent Holdings and 40% of PT Ocean Global Shipping Logistics
Cogent offers warehousing, container depot, automotive logistics (including trucking), transportation and property management services in Singapore and warehousing and container depots in Malaysia.
PT Ocean Global Shipping Logistics provides freight forwarding, ship agency, container depot and bunkering services, among others.
CSIS has set up a logistics network in Vietnam, Singapore, Indonesia and Malaysia. It says it is currently making progress on its Malaysian expansion plans and expects to make further announcements in due course.
Commenting on its plans, the company said it wants to expand its logistics network in the region “through acquisitions and investments and continues to explore potential targets to acquire and seek investment opportunities.”
As a subsidiary of China COSCO Shipping, CSIS will be “able to leverage” the parent’s “well-established logistics business network” to “potentially develop new business opportunities in the logistics sector in South and Southeast Asia, taking advantage of the Belt & Road Initiative formulated by the PRC Government.”
This graph shows the total weekly import shipments (both containerised and non-containerised) in the U.S. as reported to U.S. Customs & Border Protection from the beginning of March to November 2019.