China Cosco could raise billions from divestments
March 28, 2013 Category Logistics, Ports & sea transport
China Cosco may raise as much as CNY27 billion selling assets to its parent. It plans to sell Cosco Logistics, valued at about CNY7 billion, to state-backed parent company China Ocean Shipping. The company is also considering selling other assets to China Ocean to raise as much as an additional CNY20 billion, but the final amount China Cosco will seek has not been decided. Shares in China Cosco fell after the logistics sale was announced, on concern that divesting the profitable unit would undermine earnings over the longer term, but on the other hand gains from asset sales may help China Cosco avoid a third straight annual deficit. “It’s not a good time to sell shipping assets because the value of such assets is difficult to determine right now given the industry environment,” said Davin Chunpong Wu, Transport Analyst at Credit Suisse. “China Cosco’s objective is obviously to return to profit this year.” Cosco Logistics recorded an operating profit of CNY388 million in the first six months of 2012, compared with a CNY1.3 billion loss at its main container shipping division and a loss of CNY3.4 billion from the dry-bulk fleet, according to a company statement. The shipping company said it will use gains from the logistics unit sale to boost operating results in 2013 and reduce the risk of its stock being suspended from trading in Shanghai. Analysts at Citigroup estimated that the division may fetch CNY6.4 billion to CNY9.1 billion, which would result in a gain of as much as CNY4.6 billion. China Cosco could also sell assets including its stake in China International Marine Containers, Citigroup said.
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