Annual Report 2016 COMPANY PROFILE COMPANY PROFILE
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Sinotrans Shipping Limited ANNUAL REPORT 2016 Annual Report 2016 (Incorporated in Hong Kong with limited liability) Stock Code : 368 COMPANY PROFILE COMPANY PROFILE Sinotrans Shipping Limited and its subsidiaries (collectively In addition, the Company actively looks for opportunities that known as “the Group”) is one of the largest shipping can provide long-term stable returns, and has successfully companies in China and leading shipping enterprises of the realized the diversification by expanding its business into the world. Headquartered and listed in Hong Kong, our Group LNG shipping market in 2015. has subsidiaries or offices in Beijing, Shanghai, Shenzhen, Canada, Singapore, the United Kingdom, Germany and We own, operate and manage a scaled modern fleet. other places, with businesses and customers spreading As at 31 December 2016, the total controlled fleet of the all over the world. We dedicate to providing professional, Group was 107 vessels with an aggregate capacity of high-quality and comprehensive shipping services for our approximately 7.155 million DWT, among which, 48 vessels customers, and have established a strong reputation and were owned by the Group, including 37 dry bulk vessels with brand image in the industry. an aggregate capacity of approximately 3.417 million DWT (9 Capesize dry bulk vessels, 11 Panamax dry bulk vessels, The Company is an integrated shipping enterprise involved 13 Handymax dry bulk vessels and 4 Handysize dry bulk in investment, operation and management of vessels vessels) and 11 container vessels with an aggregate capacity with dry bulk shipping and container shipping as our of 9,537 TEU. The average age of our self-owned fleet was core businesses. Our dry bulk business is engaged in 6.38 years. transportation of bulk cargoes such as iron ore, coal, grain, steel and other break-bulk cargoes along the major trade routes of the world. The container shipping business focuses on Intra-Asia market which has a relatively high-potential development, and our core competence lies particularly in Taiwan routes and Japan routes. CONTENTS Company Profile 84 Independent Auditor’s Report 1 Financial Highlights Consolidated Financial Statements 2 Chairman’s Statement 89 Consolidated Statement of Profit or Loss 7 Business Review and Outlook and Other Comprehensive Income 13 Financial Review 90 Consolidated Balance Sheet 19 Environmental, Social and Governance Report 92 Consolidated Statement of Changes in Equity 43 Corporate Governance Report 94 Consolidated Cash Flow Statement 54 Directors and Senior Management 95 Notes to the Consolidated Financial Statements 58 Report of the Directors 159 Definitions 161 Glossary 164 Corporate Information FINANCIAL HIGHLIGHTS 2016 2015 US$’000 US$’000 Results Revenues 841,461 999,774 Loss for the year (242,114) (81,537) Loss attributable to owners of the Company (229,579) (66,334) Basic and diluted loss per share US(5.75) cents US(1.66) cents Loss attributable to owners of the Company excluding non-cash vessels impairment and provision for onerous contracts, net (1) (58,605) (64,328) Dividend 20,472(2) – Financial Position Total assets 2,074,342 2,353,225 Total liabilities 278,099 296,231 Equity attributable to owners of the Company 1,788,437 2,035,380 Available fund (3) 693,068 655,003 Interest bearing liabilities 70,888 78,617 Interest bearing debt ratio (4) 3.4% 3.3% (1) Non-cash vessels impairment and provision for onerous contracts are US$177,709,000 (2015: reversal of US$1,591,000), of which US$170,974,000 (2015: US$2,006,000) is attributable to owners of the Company. (2) Representing the proposed final dividend of HK4 cents (equivalent to US0.51 cents). Details are set out in Note 15 of the notes to the consolidated financial statements. (3) Include bank deposit, cash and bank balances and debt securities. (4) Interest bearing liabilities divided by total assets. ANNUAL REPORT 2016 001 CHAIRMAN’S STATEMENT CHAIRMAN’S STATEMENT DEAR SHAREHOLDERS, I HEREBY PRESENT THE ANNUAL REPORT OF OUR GROUP FOR THE FINANCIAL YEAR ENDED BY 31 DECEMBER 2016 FOR YOUR REVIEW. BUSINESS REVIEW For the container shipping market, in the first half of 2016, the market was confronted with severe challenges as the In 2016, with the frequent occurrence of Black Swan events, revival of the world economy and international trade were the world economy was still struggling to recover. The below expectation, while the capacity of fleet continued to growth of the international trade and the shipping demand grow. The China Containerized Freight Index (CCFI) dropped slowed, while the supply of vessels continued to increase. to a historical low of 632 points in April. The freight rates The imbalance between supply and demand led to a recovered under the influence of shipping companies’ continued fall of freight rates, which resulted the bankruptcy control of ship utilization, and the shipping demand picked and reorganization of many shipping enterprises. It was a up afterwards. The annual average CCFI recorded its lowest year full of risks and challenges for the Group. level at 712 points dropping by 19% year-to-year. For the dry bulk shipping market, the shipping demand was Facing the severe economic and industrial environment, we weak at the beginning of the year, and the overcapacity led dedicated ourselves to control the cost as well as to optimize to a further imbalance between supply and demand. The the resources and structural adjustment according to our Baltic Dry Index (BDI), which reflects the condition of dry bulk general principle of “Maintaining cash and stability first.” We shipping market, hit a historical low of 290 points. Due to the put more efforts on marketing so as to maintain our market rebound of major dry bulk commodities’ price and the effect share. We also improved ship management, and strived for of grain season, the market improved gradually afterwards. innovation. The above measures have provided a strong The average BDI was only 673 points for the year, which foothold for the Group’s sustainability. At the same time, we dropped a further 6.3% as compared with the once historical managed to maintain a strong balance sheet and a sufficient low point in 2015, setting the lowest record. available fund so as to lay a foundation for Group’s sound development. 002 SINOTRANS SHIPPING LIMITED CHAIRMAN’S STATEMENT CHAIRMAN’S STATEMENT With persistent depression in the dry bulk shipping will receive 6 Handysize dry bulk vessels and 4 container market, the market price for dry bulk vessels went further vessels in 2017. Through replacement and upgrading of downward. The management of the Company has been vessels, the Group optimized the fleet structure, which paying close attention to the shipping market, vessels brought a significant decrease in fleet costs and a notable market price as well as the impairment of the Company’s growth in profitability. Our comprehensive competitiveness fleet. At the end of 2016, the Group recognized a non-cash has enhanced as a result. impairment loss of US$162.79 million on self-owned dry bulk vessels. In cooperation with its partners, the Group successfully won the bidding of Russian Yamal Ice-Class LNG Carriers Project The Group recorded a revenue of US$841.46 million for the in 2015, and then jointly invested in five new-built LNG year 2016. The loss attributable to owners of the Company carriers, and engaged in the LNG shipping business of Arctic was US$229.58 million and loss per share amounted to route. Currently the project is on the right track. The joint US5.75 cents. venture set up with the joint venture partners has began to operate in an orderly way, and the construction of two of the In 2016, the Group continued to put more efforts on the five new carriers are progressing smoothly. adjustment of fleet. After scrapping 18 aged vessels in 2015, 5 aged Panamax dry bulk vessels were scrapped, while 4 The Group has been committed itself to improving the Handymax eco-vessels were delivered in 2016. As at 31 corporate governance standard so as to comply with ISM December 2016, the average age of our self-owned vessels Code, the quality management standard ISO 9001 and the was 6.38 years old. While phasing out old vessels, the Group environmental management standard ISO 14001. The above ANNUAL REPORT 2016 003 CHAIRMAN’S STATEMENT measures helped ensure sound and prudent operation and the supply side in the market. As for the demand, with the sustainable development of the Group. progress of “the Belt and Road” initiative of China, the dry bulk shipping demand tends to increase. The expectation DIVIDEND of increase in infrastructures expenses by the US further strengthens the market confidence. Business activities On 9 March 2017, the Board proposed the payment of final among Intra-Asia are more active and the competition dividend of HK4 cents (equivalent to US0.51 cents) per share landscape of container routes tends to remain stable, which for the year ended 31 December 2016 (2015: nil). shows a positive sign in freight rates. However, the business performance of the Group may be affected to certain extent OUTLOOK due to various uncertainties including geopolitical risks, the rise of trade protectionism and the fluctuation in bunker In 2017, the international economic growth is expected to prices. move at a slightly faster pace accompanied with a variety of global political and economic uncertainties. The shipping The Group will adhere to the principle of moving forward market is still faced with pressure and challenges. For the with steady growth, take advantage of its brand, actively dry bulk market, the supply and demand situation tends capture the opportunities brought by the “the Belt and to be roughly balanced, and the dry bulk orders on hand Road” initiative of China, enhance cooperation with continued to reduce.