Shipping

16
President’s Statement
COSCO Corporation
(Singapore) Limited
Of even greater significance, the investments we have planned to
improve the capabilities and scale of these yards will position us for
much higher value added work commanding a price premium, such
as oil rig repairs and ship conversions. In particular, the expansion we
have planned at Dalian and Zhoushan will beef up current capacity
overall from 955,000 dwt to 2.2 million dwt, and will augment the
facilities at Zhoushan with the largest dry dock in China. This
500,000 dwt dry dock, when completed by the second quarter of
FY2006, will enable us to handle two VLCCs (Very Large Crude
Carriers) simultaneously, and oil rigs.
Underpinning our business endeavours are
a commitment to the highest quality in our
products and customer services, the highest
standards of integrity and transparency in our
business practices, and the highest sense of
responsibility to our staff, the community and
the environment...we benchmark ourselves
against the best international standards, and
are building a reputation for delivering on our
commitments and promises.
Shipping, our traditional mainstay, will remain a major contributor
to our total revenue. Although this year saw the disposal of one
vessel, “MV Sea Swan” from our fleet of 14 dry bulk carriers, we are
expanding the fleet over the next two years, with two new dry bulk
carriers planned for delivery in 2005 and two in 2006. These will
greatly increase our shipping capacity and the income contributions
from this business unit.
At present, with the Baltic Dry Bulk Index consolidating near last
year’s high due to the accelerating rate of trading activity globally,
and the robust growth in demand for raw materials to support
China’s expanding infrastructure needs and manufacturing sector,
the demand for dry bulk shipping vessels is exceeding the supply.
As most of our dry bulk carriers have been locked into long term
contracts of one year with an option to renew for another year, our
shipping income will remain high and stable over the coming year.
With good market conditions expected to continue, any renewal
of shipping contracts at the newly increased renewal rates will be
beneficial to us.
General financial position
With all the investments described above, including the acquisition
of 51% of the COSCO Shipyard Group, capital commitments are
not expected to increase significantly. In the ship repair arm, the
investments will be self-financing as the shipyards will fund the
expansion of their operations and facilities out of their own cashflow
and bank borrowings. Similarly in the shipping arm, the expansion of
the dry bulk carrier fleet by four new vessels over the next two years
will likewise be funded from the shipping unit’s own cashflow and
bank borrowings.
The overall increase in Group borrowings, and hence the gearing
ratio, will therefore remain within a comfortable range, and
the Group will be able to meet all its obligations. There is no
requirement or need to raise or issue any share capital.
Building to last
We intend to build our growth on foundations that go beyond the
material. Underpinning our business endeavours are a commitment
to the highest quality in our products and customer services, the
highest standards of integrity and transparency in our business
practices, and the highest sense of responsibility towards our staff,
the community and the environment. From the best practices we are
committed to in corporate governance to the stringent operating and
safety procedures we rigorously apply in our ships and shipyards, we
benchmark ourselves against the best international standards, and
are building a reputation for delivering on our commitments
and promises.
In terms of our staff team, I consider our people to be the real growth
drivers of the business. We are therefore putting in place programmes
both to recruit top talent from the industry and to nurture our existing