Annual Results 2005 China COSCO Holdings Company Limited 11 April 2006
Agenda Highlights Financial Review Operational Review Group Outlook 2
Highlights RMB million 2005 2004 (Restated) Change (%) Turnover 39,166 32,189 21.7 Gross profit 8,575 6,436 33.2 Profit before income tax 7,450 5,243 42.1 Net profit attributable to shareholders 5,451 4,158 31.1 Basic EPS(RMB) 1.06171 1.01414 4.7 Dividend distribution: RMB 0.13 per share for the year of 2005, representing a pay-out ratio of 29.8% * * Based on the EPS of RMB0.43616 for 2H of 2005. 3
Summary of Segment Results* 2004 2005 RMB million 18% 15% 5,000 4,000 4,705 3,496 60% 3% 5% 14% 57% 16% 6% 6% 3,000 2,000 1,000 0 Container shipping 812 1314 Container terminals 1287 1,074 Container leasing 321 531 Freight forwarding & shipping agency 156 551 Others * Including share of profits less losses of jointly controlled entities and associated companies. 4
Financial Review 5
Summary Profit & Loss RMB million 2005 2004(Restated) Change (%) Turnover 39,166 32,189 21.7 Gross profit 8,575 6,436 33.2 Operating profit 7,055 5,046 39.8 Finance costs (868) (640) 35.7 Share of profit/loss JCE & Assoc. 1,263 837 50.9 Profit before tax 7,450 5,243 42.1 Income tax expenses (651) (285) 128.4 Profit after tax 6,799 4,958 37.1 Net profit attributable to shareholders 5,451 4,158 31.1 6
Summary Balance Sheet RMB million 2005 2004 Restated Change (%) Non-current assets 38,598 32,921 17.2 Current assets 13,078 11,328 15.4 Current liabilities 12,509 17,678-29.2 Owner s equity 18,436 7,449 147.5 Minority interests 7,509 5,953 26.1 Non-current liabilities 13,222 13,169 0.4 Total assets 51,676 44,249 16.8 7
Capital Structure Net Debt and Gearing Ratio RMB million As at 31 December 2005 RMB million 14,000 12,942 Short-term loans 2,123 12,000 Current portion of LTB. 2,197 10,000 8,542 Total current borrowings 4,320 8,000 *% 6,000 Long term borrowings 12, 369 4,000 *% Gross debt 16,689 2,000 Cash 8,147 0 2004.12.31 2005.12.31 Net debt 8,542 8
Cash Flow Statement RMB million Cash & Cash Equivalents -Beginning Cash Inflow (outflow) From Operating Activities Used in Investing Activities From Financing Activities Exchange Losses (gain) Cash & Cash Equivalents-Closing 2005 4,895 3,252 6,152 (7,615) 4,812 (96) 8,147 2004 (Restated) 4,495 400 5,438 (5,722) 698 (14) 4,895 9
Capital Expenditure RMB million 2005 2006 Purchase of containers 2,753 2,420 Purchase of container vessels 2,534 1,238 Investments in container terminals 730 2,843 Others 188 1,131 Total 6,205 7,632 10
Operational Review 11
Container Shipping Shipping Volume by Market 15% 2004 27% 16% 2005 26% 000 TEUs 6% 5% 1,600 1,400 1,200 1,000 800 1,000 18.3% 1,184 31.7% 761 1,003 14.7% 1,393 1,215 32% 20% 31% 25.1% 714 22% 600 400 200-0.2% 241 241 571 0 Trans-pacific Asia-Europe Intra-Asia Other International 12 PRC
Container Shipping Turnover by Market 2004 2005 RMB million 20% 9% 4% 40% 19% 8% 5% 39% 16,000 14,000 12,000 10,000 8,000 10,680 17.3% 12,527 7,355 24.5% 9,154 10.9% 27% 29% 6,000 5,353 5,936 13.3% 4,000 2,000 2,271 2,573 29.2% 1,147 1,481 0 Trans-pacific Asia-Europe Intra-Asia Other International 13 PRC
Container Shipping Cost of Services 2004 2005 Cost Per TEU 18% 6,000 61% 21% 54% 28% 5,500 5,354 18% Vessel costs Voyage costs Equipment and cargo transportation Growth rate of both equipment and cargo transportation costs and vessel costs were lower than that of volume Voyage costs up 48.1%, driven by rising fuel costs Average unit cost down by 3.9% 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 3.9% 5,146 2004 2005 14
Container Shipping Operating Profit Operating profit achieved steady growth RMB m 6,000 14.7% 15.0% 5,000 12.8% 4,705 4,000 3,496 10.0% 3,000 2,000 1,000 1,300 5.9% 5.0% 0 2003 2004 2005 0.0% Operating profit 15 Operating profit margin
Container Shipping Steady Capacity Growth Nominal capacity (TEU) Total capacity =322,414 TEU 82,937 26% 21,621 7% 133,725 41% Future Capacity 2006 2007 Owned 187,536 212,841 212,887 219,995 Chartered Total 400,423 432,796 2005 Delivered Vessel 2008 288,076 228,127 516,203 84,131 26% Date of Delivery November,2005 February,2005 March,2005 Capacity (TEU) 8,204 5,816 5,816 Deployed market Asia-Europe June,2005 5,816 5001TEU 3001TEU 5000TEU 1000TEU 1001TEU 3000TEU May,2005 June,2005 August,2005 September,2005 December, 2005 2,702 2,741 2,741 2,702 2,702 Trans -Pacific Trans -Pacific Intra-Asia Intra-Asia Trans -Pacific 16
Container Shipping Trade Lanes and Alliance CKYH alliance Joint services Slot exchange We collaborate with CKYH members in operating a total of 32 trade lanes, 192 vessels with over 800,000 TEU We operate 17 joint service trade lanes, providing more than 36 vessels with over 100,000 TEUs capacity We have slot exchange and purchase with 20 companies, covering 37 trade lanes and feeder routes Trans-pacific Asia /Europe 22.8% 24.4% CKYH 6.3% 20.3% 22.1% 9.2% 14.5% 11.3% 16.5% 23.5% 15.8% 13.3% CKYH Grand New World Maersk Sealand Evergreen/Lloyld Others Source Drewry, Dec 2005 17
Container Shipping Growth Strategies Explore new potential markets, such as West Africa, India, Caribbean area Strengthen the CKYH alliance to reduce cost and risk by optimizing our service structure, enlarging port coverage Build long-term cooperative relationships with strategic global customers. Further consolidate and develop global customer base Control cost through successful implementation of IT system. Maximize benefits of economies of scale and lower average fixed cost per TEU Stabilize freight rate in shipping markets via shipping association 18
Freight Forwarding and Shipping Agency Achieved high growth during the past 3 years RMB Million 10,000 8,000 CAGR=32.9% 8,203 RMB Million 600 500 CAGR=41.0% 531 6,000 4,000 4,643 5,898 400 300 200 267 321 2,000 100 0 2003 2004 2005 0 2003 2004 2005 Revenue Segment Results 19
Container Terminals Steadily Growing Volume THROUGHPUT ( 000 TEU) 2005 TEU y -o-y 2004 TEU PEARL RIVER DELTA COSCO-HIT 1,841 8.5% 1,697 Yantian Int l Terminals (Ph I, II,III) 7,355 17.5% 6,260 YANGTZE RIVER DELTA Shanghai Terminals 3,647 0.1% 3,650 Shanghai Pudong Int l Terminals 2,472 5.7% 2340 Zhangjiagang Win Hanverky 377 14.9% 328 Terminal Yangzhou Yuanyang Int l Port 157 33.1% 118 Najing Port Longtan Container Co. 179 N/A - BOHAI RIM Qingdao Qianwan Terminal (Phases I, II, III) 20 5,443 20.1% 4,533 Qingdao Cosport Int l Terminals 606 57.0% 386 Dalian Port Container Co. 2,467 13.6% 2,172 Dalian Port Terminal 133 N/A - Yingkou Terminal Tianjin Five Continents Terminal 634 88 61.2% N/A 393 - OVERSEAS COSCO-PSA Terminal 611 6.8% 572 Antwerp Terminal 70 N/A - Total throughput 26,080 16.2% 22,449
Container Terminals Port Acquisitions in 2005 Further strengthened our container terminal network via organic growth and further investments in China Container terminal New terminals Joint venture company established 1. Nanjing Longtan Terminal Joint venture contract signed 2. Guangzhou Nansha Port Phase II 3. Yangshan Port Phase II Terminal 4. Suez Canal Terminal Letter of intent signed 5. Ningbo Jintang Island Terminal 6. Tianjin North Basin Port Terminal 7. Ningbo Beilun Terminal Phase IV 7# New berths acquired by existing joint ventures 8. Zhangjiagang Win Hanverky Terminal 17# 9. Dalian Dayaowan Phase II 13# - 16# 10.Yantian Terminal Phase II, III Equity interest 20% 59% 10% 20% 20% 30% 20% 51% 20% 4.45% - 5% Capacity (TEUs) 1,000,000 1,000,000 9,600,000 4,200,000 3,200,000 2,200,000 6,000,000 3,500,000 2,100,000 400,000 9,100,000 500,000 3,200,000 5,400,000 No. of berths 5 5 14 6 4 4 10 5 4 1 11 1 4 6 21
Container Terminals Sustainable Demand The rise of global container transportation volume will be driven by relatively balanced container trade growth and shipping industry capacity expansion. Container trade volume TEUs in million 180 160 148.0 136.0 140 125.0 115.2 120 100 80 60 40 20 0 2006 2007 2008 2009 CAGR: 8.7% Shipping industry capacity TEUs in million CAGR: 8.8% 14 12 10.1 11.2 11.9 10 8 6 4 2 0 13.0 2006 2007 2008 2009 Source: Drewry 22
Container Leasing Increasing in Market Share 5yr CAGR=14.3% Container fleet (TEU) 1,200,000 1,000,000 800,000 600,000 400,000 8.40% 610,019 9.30% 707,890 9.70% 808,825 10.10% 919,128 10.90% 1,042,852 11.0% 9.0% 7.0% 5.0% 3.0% Market share 200,000 1.0% 0 2001 2002 2003 2004 2005-1.0% Container fleet(teu) Market share 23
Group Outlook 24
Group Outlook Conclusion Healthy world economy China to maintain strong economic growth Continuous expansion in shipping capacity High oil price put pressure on shipping cost Opportunities and challenges coexist 25
China COSCO An Integrated Container Shipping Services Provider 26
Appendix 27
Group business structure COSCO Group 63.5% China COSCO Holdings Other businesses 100% 52% COSCO Container Lines Container shipping Freight forwarding & shipping agency (COSFRE,COSA and overseas network companies) COSCO Pacific Terminal operations Container leasing (Florens) 28 Logistics Container manufacturing (COSCO Logistics) (CIMC) Bulk shipping Tankers Specialized carriers Other shipping related businesses Other businesses
Investment highlights II. Market leadership China No.1 Container shipping: World No.5 Terminal: World No.5 Container leasing: World No.3 Container manufacturing: World No.1 Logistics: China No.1 I. China story III. Integrated business model Rapid economic growth Favourable foreign trade Secular outsourcing trend China story Market leader Presence across the container value chain Risk-mitigating business mix Tangible synergies Unique position Integrated model VI. Our unique position Strong parent Blue-chip subsidiary Experienced management High quality services Extensive coverage IV. Extensive coverage Unrivalled PRC network Extensive international network V. High quality services Well-recognized brand Reliable and differentiated services IT and e-commerce 29
I. China story Container shipping sector in China benefits from rapid economic growth and favorable foreign trade environment Rapidly growing GDP Favorable foreign trade environment 50 World GDP World trade China GDP 45 Import and Export Export Import 40 35 30 25 20 15 10 5 2001 2002 2003 2004 2005 2006 0 1996 2001 2002 2003 2004 2005 2006 Source: IMF Source: IMF 30
II. Market leadership Prominent market leader across all of our businesses Container Shipping Terminals World No. 5 Leading member of the largest global alliance Global trade lane network World No. 5 Unparalleled terminal portfolio in China Global liner customer base Container leasing World No. 3 High quality customers and well-established brand Container manufacturing World No. 1 with over 50% market share Global customer base Logistics Topped the 100 PRC logistics companies list Well established market position 31
III. Integrated businesses model One-stop door-to-door service to maximize value to our clients, thus enhancing customer loyalty Container manufacturing Container leasing Supply chain Related activities Factory Outbound sales and customer service COSA; COSCO Logistics Truck/rail/barge/ logistics Warehouse/ depots Terminals COSFRE,COSCO Logistics, Overseas network, Inland river barge COSCO Pacific Ship Door to door COSCO Pacific Inbound sales and customer service Terminals COSCO Pacific COSCON COSCO Pacific COSA; COSCO Logistics Warehouse /depots China COSCO Holdings involvement via ownership, JV or long term contract/relationship Truck/rail/barge/ logistics COSFRE,COSCO Logistics, Overseas network, Inland river barge Retailers 32
IV. Extensive network Extensive trade lane and global network coverage Trans-Pacific Trans-Atlantic Asia-Europe Intra-Asia (inc Aus) Asia-Africa Asia-South America Major freight forwarding and shipping agency sales and service points COSCO Pacific container terminals Representative offices of Florens 33
V. High quality service High quality, innovative and differentiated services Selected large customers Reliability and punctuality 1st 1st All-time leader in reliability and punctuality Safe and Reliable Vessels awarded by Ministry of Communication of China Innovative services Real-time e-commerce platform The Grain Express High quality and fast delivery of grain Schedule enquiry Fleet data Cargo tracking The Electrical Appliances Express High quality and fast delivery of electronic products The Fashion Express Email notification Online quotation E-pickup High quality and fast delivery of textile products The Green Express service Sino-Japan transportation of refrigerated agricultural products Account statements Online printing of bills of lading Slot booking assistant 34
VI. Our unique status Leading SOE in China Strong relationships with Chinese corporates and the Government Well-known brand Parent is No. 2 shipping company worldwide The largest Chinese shipping Group Leader in all types of fleet in China Bulk-cargo shipping fleet Tankers Specialized fleet Blue-chip subsidiary COSCO Pacific Well recognized by the market since its listing in 1994 Corporate governance is widely praised by investors In June 2003, became a Hang Seng Index constituent Recent share price performance reflected investors confidence China COSCO will be COSCO s overseas platform and flagship 35