COSCO, Rongsheng Heavy issue profit warnings

JULY 30, 2012 — Yet another sign of the challenges confronting China’s maritime sector: Hong Kong exchange profit warnings from both shipbuilder China Rongsheng Heavy Industries and shipping giant COSCO.

In a Hong Kong exchange filing today, the board of China COSCO Holdings Company Limited said that the Group is expected to record a reduction by over 50 percent in net profit attributable to shareholders for the six months ended June 30, 2012 and expects a loss for the period “primarily attributable to the fact that during the said reporting period, the global economy was weak and the economic growth of China has slowed down, while the excessive capacity and the unbalance in demand and supply in the international shipping market persisted. In particular, freight rates in the dry bulk shipping market remained low and the relevant costs, including fuel costs, remained at high levels.”

Shipbuilder China Rongsheng said in a Hong Kong filing that unaudited net profit the first half of the year 2012 prepared in accordance with International Financial Reporting Standards is “expected to decrease significantly as compared with the published net profit for the same period in 2011.”

The filing said that “during the first half of the year 2012, as affected by the decline of the shipbuilding market, the orders and prices of ships dropped sharply as compared with last year, which resulted in the decrease in profits of the Group.”

In a separate filing, China Rongsheng said it had “noted that there were certain articles appearing in the press on Saturday, 28 July 2012 and Sunday, 29 July 2012 regarding, among other things, a court order obtained by the Securities and Exchange Commission (the ‘SEC’) to freeze certain assets of Well Advantage Limited (‘Well Advantage’) and some other parties in respect of their alleged trading of shares of Nexen Inc., a Canadian energy company listed on the New York Stock Exchange, while in possession of nonpublic information concerning the proposed acquisition of Nexen Inc. by CNOOC Limited. The proposed acquisition was announced on 23 July 2012.

“The complaint filed by the SEC alleges that Well Advantage is indirectly wholly-owned by Mr. Zhang Zhi Rong (“Mr. Zhang”), the Chairman and a non-executive director of the Company. The Board does not expect that the SEC matter will affect the normal business and operations of the Company and its subsidiaries (the “Group”). Mr. Zhang does not have any executive role in the Company. The day-to-day business activities and operation of the Group is and will continue to be carried out by the management team, of which Mr. Zhang is not a member, under the leadership of Mr. Chen Qiang, the Chief Executive Officer and an executive director of the Company. Decisions regarding all material projects and investment activities of the Company have been and are required to be made collectively by the Board.”