Sinotrans Shipping Limited 中外運航運有限公司 SINOTRANS SHIPPING LTD. (Incorporated in Hong Kong with limited liability) Stock Code : 368 中外運航運有限公司 SINOTRANS SHIPPING LTD. Annual Report 2014 Annual Report 2014 COMPANY PROFILE Sinotrans Shipping Limited and its subsidiaries (collectively the “Group”) is one of the largest shipping companies in China and leading shipping enterprises of the world. Headquartered and listed in Hong Kong, our Group has subsidiaries or offices in Beijing, Shanghai, Shenzhen, Canada, Singapore, the United Kingdom, Germany and other places, with businesses and customers spreading all over the world. We dedicate to providing professional, high-quality and comprehensive shipping services for our customers. Dry bulk shipping and container shipping are the core businesses of our Group. We own, manage and operate a modern fleet on a worldwide scale. The dry bulk fleet is used for transportation of cargoes such as iron ore, coal, grain, steel and other commodities along major trading routes in the world. The container fleet focuses on Intra-Asia market which has high development potential, and our core competence especially lies in Taiwan routes and Japan routes. As at 31 December 2014, our Group owned a fleet of 62 vessels with an aggregate capacity of approximately 4.37 million DWT and controlled a fleet of 126 vessels with an aggregate capacity of approximately 8.79 million DWT. CONTENTS Company Profile 052 Independent Auditor’s Report 001 Financial Highlights Consolidated Financial Statements 002 Chairman’s Statement 053 Consolidated Statement of Comprehensive Income 008 Business Review and Outlook 054 Consolidated Balance Sheet 014 Financial Review 056 Balance Sheet 019 Report on Corporate Governance 058 Consolidated Statement of Changes in Equity 030 Directors and Senior Management 060 Consolidated Cash Flow Statement 033 Report of the Directors 061 Notes to the Consolidated Financial Statements 129 Definitions 130 Glossary 132 Corporate Information FINANCIAL HIGHLIGHTS 2014 2013 US$’000 US$’000 % Change (Restated) Results Revenues 1,206,811 1,313,032 (8.1%) Profit/(loss) attributable to owners of the Company 1,862 (638) 391.8% Basic and diluted earnings/(loss) per share US0.05 cents (US0.02 cents) 391.8% Dividend 40,945(1) – N/A Financial Position Total assets 2,524,144 2,624,066 (3.8%) Total liabilities 333,871 439,113 (24.0%) Equity attributable to owners of the Company 2,151,547 2,185,778 (1.6%) Total cash and bank balances 745,521 955,290 (22.0%) (1) Representing the proposed final dividend of HK8 cents (equivalent to US1.03 cents). SINOTRANS SHIPPING LIMITED ANNUAL REPORT 2014 002 CHAIRMAN’S STATEMENT 003 SINOTRANS SHIPPING LIMITED ANNUAL REPORT 2014 CHAIRMAN’S STATEMENT DEAR SHAREHOLDERS, BUSINESS REVIEW I HEREBY PRESENT THE ANNUAL The international shipping market remained depressed in 2014. The recovery of global economy was fragile and REPORT OF OUR GROUP FOR THE uneven. The United States showed a positive sign in FINANCIAL YEAR ENDED 31 DECEMBER economic recovery, while Europe and Japan remained weak, 2014 FOR YOUR REVIEW. and the economic growth of emerging economies especially China, remarkably slowed down. Without enough impetus from the international trade, the growth of seaborne demand stayed in its low gear. Meanwhile, the capacity accumulation and the trend of employing large-sized vessels intensified the pressure of overcapacity. Consequently, shipping enterprises MAJOR EVENTS struggled in the gloomy market. On 31 July 2014, our Group completed the acquisition The international dry bulk shipping market slumped of equity interest in China National Chartering Co., Ltd. continuously in 2014 and the market performance was far (“Sinochart”), Sinotrans Container Lines Co., Ltd. (“Sinotrans below expectations. The world economic growth lacked Container Lines”), Sinotrans Navigation Ltd. (“Sinotrans in strength with prices of major commodities dropping Tianze”) and other shipping companies from SINOTRANS sharply, thereby the growth of dry bulk seaborne demand & CSC Holdings Co., Ltd and its subsidiaries (collectively decelerated. Since limited increase in demand was difficult “SINOTRANS Group”), which injected new vitality for us. to digest the serious oversupply of tonnage, the Baltic Dry With the accession of Sinochart, we achieved an increase Index (BDI) lingered at a low level for most of the year and in dry bulk business volume, expanded our domestic client even experienced a cliff-like decline at the end of the year. network and enhanced our strength of cargo canvassing, The annual average BDI recorded merely 1,105 points, which together promoted our Group to be a more representing a year-on-year decrease of 8.3%. In early 2015, comprehensive operating shipowner. With the accession the BDI even plunged to 509 points, representing a new of Sinotrans Container Lines, we further developed our record low over the past 30 years. container shipping business, extended our industry chain, and increased earnings through its mature network layout as For container shipping market, owing to the slow recovery well as advantages in shipping routes. With the accession of of global economy, especially of developed economies, the Sinotrans Tianze, our Group got a new vessel management import and export rebounded to a certain extent in 2014. platform in Shanghai, which improved our network layout and The seaborne demand in the international container shipping vessel technical management capability. After the acquisition, market slightly improved, while the pressure of overcapacity we transformed our original relatively single business mode still exists. For Intra-Asia market, the economic growth in of ocean dry bulk shipping to a comprehensive business China and other Asian emerging markets slowed down but mode combining ocean dry bulk shipping and short-sea have still maintained a relatively high level. Many shipping container shipping business, which effectively diversified companies within Intra-Asia area collaborated proactively the operational risks, contributed to a significant increase by taking measures such as rotatory laying up vessels to in overall revenue and further strengthened our market minimize the capacity scale in the market. Generally, the competitiveness. container shipping market of Intra-Asia area managed to remain relatively stable. SINOTRANS SHIPPING LIMITED ANNUAL REPORT 2014 004 CHAIRMAN’S STATEMENT 005 SINOTRANS SHIPPING LIMITED ANNUAL REPORT 2014 CHAIRMAN’S STATEMENT In light of such severe market situation, our Group further of the year our Group ordered the newbuildings of 10 eco dry expanded its business scale and improved its market bulk vessels at attractive prices, which were expected to be competitiveness by acquisition of shipping companies from delivered successively in 2015. Coupled with the expanded SINOTRANS Group. In the meantime, we adhered to the fleet size and optimised fleet structure, our Group’s strength philosophy of seeking improvements with stable operation in the industry was further consolidated. We will continue and endeavoured to spot opportunities in the volatile market. to seize favorable market opportunities to optimise the fleet We took measures such as optimising business deployment, structure and enhance our competitiveness. reinforcing cargo canvassing and restructuring fleet to improve our financial performance. In addition, we constantly Our Group has been dedicated to improving the vessel enhanced our management capability, further strengthening management standard. In order to comply with ISM Code, ISO the cost control. With a sound and robust business model, 9001 and ISO 14001, continuous efforts are made to improve solid financial position and dedication of all our staff, our and standardise the business process. It helps ensure Group recorded revenue of US$1,206.81 million, profit healthy development of our fleet on the way to sustainable attributable to owners of the Company of US$1.86 million and development. earnings per share of US0.05 cents in 2014. * Including 2 dry bulk vessels owned by joint ventures. For fleet development, our Group made further achievements in 2014. We acquired two secondhand vessels, and through the acquisition project, 10 more vessels were added to our fleet. Meanwhile, we also took opportunities to scrap 2 aged DIVIDEND vessels, optimising the fleet structure. As at 31 December 2014, our Group owned a fleet of 62* vessels with an To reward our shareholders for their continuous support aggregate capacity of approximately 4.37 million DWT and to our Group, and taking into consideration of the healthy an average age of approximately 9.9 years. The controlled financial position of the Company, the Board proposes a final fleet includes 126* vessels with an aggregate capacity of dividend of HK8 cents (equivalent to US1.03 cents) per share approximately 8.79 million DWT. In addition, at the beginning in 2014. SINOTRANS SHIPPING LIMITED ANNUAL REPORT 2014 006 CHAIRMAN’S STATEMENT OUTLOOK In the meantime, we will seize favorable market opportunities to continue the fleet restructuring and strengthen market In 2015, the imbalanced recovery of global economy will competitiveness. With the aforesaid measures and by taking continue. Economy of the United States recovers with strong advantages of our solid financial position, low-cost structure momentum, while Europe and Japan still restore in a sluggish and modern fleet, our Group believes that we will embrace pace. China’s economy enters the “new normal” mode of a new