Dear Shareholders,
In 2022, in face of the challenges to the container shipping industry brought by the global political, economic and trade situation, the Group upheld its positioning as a “global digital supply chain operation and investment platform with a core focus on container shipping” and further adapted itself to industrial trends and customers’ demands. As such, we made a rapid progress in digital transformation and low-carbon development and made proactive efforts in creating a digital supply chain service ecology. We achieved remarkable results in improving quality and efficiency, global deployment, digital intelligence transformation, low-carbon development, capital operation, risk prevention and control and giving back to the society, and have stepped into a new era of reform and transformation that is oriented to the market and featured by high-quality development.
Lay a solid foundation for value creation and high-quality development by improving quality and financial results
Pursuant to the Hong Kong Financial Reporting Standards, during the Reporting Period, the Group recorded EBIT of RMB170.857billion, a year-on-year increase of 29.83%; total profit before tax of RMB167.176 billion, a year-on-year increase of 30.60%; net profit of RMB131.417 billion, a year-on-year increase of 26.48%; and net profit attributable to equity holders of the Company of RMB109.684 billion, a year-on-year increase of 22.76%, achieving another best record in our history. The Group actively reduced its interest-bearing liabilities, continued to optimize its financial structure and reduced its asset-liability ratio to 50.46%, a decrease of 6.22 percentage points as compared to the beginning of the period, which further consolidated the foundation for our high-quality development.
During the Reporting Period, after a comprehensive consideration on the profitability of the Company, the returns for Shareholders and the needs for future development, the Group formulated a dividend distribution policy for the years from 2022 to 2024 and decided that the total distribution of cash dividends in a year shall account for 30%-50% of the net profit attributable to the Shareholders of the Company for a particular year. The Board recommends the Company to distribute a final cash dividend of RMB1.39 per Share (tax inclusive) to all Shareholders. Based on the total share capital of the Company as of 31 December 2022, a final cash dividend for 2022 of RMB22.372 billion shall be distributed, together with the interim cash dividends of RMB32.350 billion already distributed to all Shareholders for 2022, a total cash dividend of RMB54.722 billion will be distributed for 2022, representing approximately 50% of the net profit attributable to the Shareholders of the Company for 2022.
Promote the new development pattern of “dual circulation” by making global deployment
During the Reporting Period, the Group, together with OCEAN Alliance, has launched brand new products, including Far East services to/from Europe/Mediterranean, Trans-Pacific, Trans-Atlantic and Far East to/from Middle East/the Red Sea, to further consolidate its advantages in its east-west trunk services. The Group actively captured the business opportunities brought by the “Belt and Road” initiative and regional economic and trade agreements such as the RCEP, and put more efforts in serving for overseas regional markets, emerging markets and third-country markets, and reached 7.5 million TEUs in terms of the freight volume of our third-country services. The Group actively participated in the constructions of the China Western Land-Sea Trade Corridor and the Hainan Free Trade Zone, and provided customers with efficient and smooth full-range transportation services by leveraging our sea and land logistic resources. As such, the rail-sea cargo volume of the China Western Land-Sea Trade Corridor carried by the Group achieved a year-on-year increase of 29% and the Group’s cargo volume loaded and unloaded at the Yangpu Port in Hainan achieved a year-on-year increase of 38%. As of the end of the Reporting Period, the China domestic trade fleet of the Group continued to rank first in the market in terms of fleet size and played an active role in contributing to China domestic economic recovery and linking domestic and international dual circulation.
Create a global digital supply chain service system through digital intelligence transformation
During the Reporting Period, the Group facilitated the in-depth integration of industrial chains and supply chains in related industries, and created personalized and customized full-process logistics solutions for customers, by way of highlighting the value of shipping, deepening the global full-process cooperation and data resource sharing with its strategic partners. The Group efficiently completed the preparation of the top-level planning for the digital supply chain with a view to providing clear guidance for the long-term digital transformation and development path in the future, and optimized its organizational structure to better match its internal demands for understanding customers’ needs and building a digital supply chain. The Global Shipping Business Network (GSBN), as an independent non-profit blockchain technology ecological platform jointly initiated by the Group, continued to help improve global trade efficiency and customer service experience, and was recognized as a “Future Leader in Industry Ecosystem” in the selection of the 2022 IDC China Future Enterprise Award. The Group and the Bank of China jointly launched an electronic bill of lading service to facilitate the transition into “paperless” trade settlement. The transaction volume on the SynCon Hub e-commerce platform grew rapidly. It has launched four product modules: ocean shipping, land transportation, customs declaration and warehousing and distribution, and has recently launched its first combined supply chain product - “Talent Pegasus” to provide customers with further options. The port automation improvement of the Group further accelerated. The “Full-process Automation Upgrading Project” of the container terminal in Tianjin was fully put into operation and was recognized as one of the “Top Ten Application Cases of the 2022 World 5G Conference”.
Adapt to new trends in the industry and emerging demands of customers by pursuing low-carbon development
During the Reporting Period, the Group set up a special team for dual-carbon actions and green and low-carbon transformation procedure, and kept a close eye on the new environmental protection regulations issued by, among others, the International Maritime Organization (IMO) and the European Union, etc. The Group ordered 12 units of 24,000-TEU methanol dual-fuel container vessels, explored the pilot usage of biofuels on operating vessels and accelerated the construction of green fleet to enhance the momentum for sustainable development. The Group actively participated in the project of the first 700-TEU electric container vessel for the trunk line of the Yangtze River, and worked with its partners to set up demonstration for green zero[1]carbon shipping. With reference to the calculation rules of the Energy Efficiency Existing Ship Index (EEXI) and the rating rules of the Carbon Intensity Indicators (CII), the Group formulated a technical transformation plan for vessels to meet the latest regulatory requirements on environmental protection. The Group accelerated the construction of green ports, actively promoted the use of shore power at container berths and introduced distributed photovoltaic power generation projects at the terminals in Wuhan.
Strengthen the links of upstream and downstream resources in the industry through capital cooperation
During the Reporting Period, the Group newly established a Capital Management & Operation Division to carry out a series of capital operation projects centered on our principal businesses, which aimed to create an industrial ecosystem by linking industrial resources and improve the quality of its business operations and future earnings at the same time. By holding shares in the supply chain company of COSCO SHIPPING Logistics, the Group strengthened the integration of the comprehensive container logistics service network and the fundamental resources within the COSCO SHIPPING Group, and expanded the boundaries for customer service. By introducing SAIC as a strategic investor, the Group promoted the in-depth collaboration between SAIC and the Group in terms of vehicle export, parts import and export, etc. Through equity acquisition, the Group increased its shareholding percentages in SIPG Group and Guangzhou Port to 15.55% and 6.50% respectively, and increased its shareholding percentage in COSCO SHIPPING Ports to 58.36% through share trading in the secondary market, which allowed the Group to deepen port collaboration and enhancing the quality of its own operations and earnings. On 16 January 2023, the Group subscribed for 5.81% of the shares of COFCO Fortune, with an aim to further explore intersections of business cooperation by capital investment and achieve in-depth integration of modern service industry and modern agriculture industry.
Pursue stable and long-term development through risk prevention and control
During the Reporting Period, in response to the complex and constantly-changing external operation environment, the Group strengthened its bottom-line awareness, maintained its strategic focus and further strengthened its risk prevention and control mechanism to pursue stable and long-term development. In respect of stable development, the Group adhered to the essence of shipping services, maintained its fleet size and the proportion of self-owned vessels/chartered vessels at a reasonable level, and effectively prevented the risk of significant fluctuations in charter hire. The Group enhanced the proportion of contracted cargo to optimize the structure of cargo sources and strengthened the engagement of direct customers to optimize customer structure, which to a certain extent prevented the risk of significant fluctuations in market freight rates. In respect of safety and stability, by centering on the core concept of “preventing risks, ensuring safety and promoting harmony”, the Group carried out investigations and rectifications of potential safety risks to improve its corporate governance and ensured the safety and stability of its overall production and operation situation.
Demonstrate corporate responsibility and commitment by giving back to the society
During the Reporting Period, the Group removed the breaking points and blocking points in the supply chain for its “large arteries” of land-sea linkages, opened up the major channels of material transportation, and unblocked the “microcirculation” of the supply chain, and therefore discharging the responsibility of leading enterprises in the industry. The Group has made it easier for medium, small and micro customers to obtain product information, by creating a one-stop front platform with features such as one-click order placement, slot-and-container-guaranteed services, online settlement, flexible order signing, and extended services. The Group actively participated in the domestic public welfare, continued to consolidate and further the achievements of poverty alleviation, and promoted the revitalization of the rural areas, with an expenditure of approximately RMB44.39 million. During the Reporting Period, COSCO SHIPPING Holdings, COSCO SHIPPING Ports, and OOIL were all included in the Hang Seng Sustainable Development Enterprise Benchmark Index; COSCO SHIPPING Holdings and OOIL were included in the Hang Seng ESG50 Index; and OOIL was awarded the “Singapore Environmental Achievement Award” by the Singapore Environment Council.
With the growth in recent years, the Group significantly improved its modernization level in terms of corporate governance, made its market-oriented mechanism more flexible and efficient, steadily adjusted its business structure, continuously optimized its global layout, significantly increased its economic benefits, fully released its reform dividend and strengthened its global influence, which recorded remarkable achievements after tremendous efforts. On behalf of the Company’s Board of Directors, I would like to take this opportunity to extend my high respects to all the onshore and offshore employees who have always been fighting on the front line, and express my sincere gratitude to the global customers, shareholders of the Company and people from all walks of life who have always cared and supported the development of COSCO SHIPPING Holdings.
With the growth in recent years, the Group significantly improved its modernization level in terms of corporate governance, made its market-oriented mechanism more flexible and efficient, steadily adjusted its business structure, continuously optimized its global layout, significantly increased its economic benefits, fully released its reform dividend and strengthened its global influence, which recorded remarkable achievements after tremendous efforts. On behalf of the Company’s Board of Directors, I would like to take this opportunity to extend my high respects to all the onshore and offshore employees who have always been fighting on the front line, and express my sincere gratitude to the global customers, shareholders of the Company and people from all walks of life who have always cared and supported the development of COSCO SHIPPING Holdings.
But meanwhile, China’s proactive measures to promote economic recovery, further reform and opening up will contribute to the recovery of the world economy and formation of a more open, diversified and stable world economy order. The implementation of the new IMO environmental protection regulations may accelerate the dismantling of old container vessels and impose restrictions on the speed of certain low-efficiency vessels, and may also impose restrictions on the effective supply of the shipping industry for a long period of time in the future. In recent years, as the Group has also achieved remarkable results in promoting high[1]quality development of the corporation and properly responding to market fluctuations, and also significantly enhanced its ability to sustainably develop, resist risks, and create intrinsic value, laying a solid foundation for its work in 2023.
In 2023, the Group will adhere to its fundamental purpose of serving customers, further develop a global resource network layout, promote technological innovation and digital intelligence transformation, put into practice the concept of green and low[1]carbon sustainable development, and further enhance its adaptability to customers’ increasingly diversified, reticular, digitalization and low-carbon service needs, with particular focus on the following aspects:
Firstly, the Group will improve global deployment and consolidate the foundation for providing quality services to customers. The Group will rely on its own global network and resource advantages to maintain an organic growth in the size of the container fleet, optimize the layout of the global route network and various parts of the logistics nodes resources, and seizing the opportunity of China’s economic recovery to continuously services for emerging markets, regional markets, and the third[1]country markets, and contribute to the establishment of a new development pattern of domestic and overseas “dual circulation”. The Group will continue to improve the quality of customer services, help customers to quickly obtain more abundant product information and realize reliable flow of goods and consolidate strong connections with customers in the process of mutual trust and cooperation.
Secondly, the Group will strengthen the empowerment of digital intelligence and accelerate the construction of digital supply chain. The Group will continue to focus on customers’ needs, promote the connection with customers’ systems, and provide customers with more intelligent and visualized container full-chain service products and solutions. The Group will replicate and promote the successful cases of “sea transportation + overseas warehouse + secondary distribution transportation” in the home appliance industry, as well as the “end-to-end transportation of whole-vehicle container transportation” in the automobile industry, so as to provide more convenient and mature services and products to drive the construction of digital supply chain. The Group will further exert its function as an investment platform to integrate investment, construction and operation and provide more competitive resource guarantee and infrastructure support for the improvement and extension of supply chain service functions.
Thirdly, the Group will accelerate the transformation and upgrade process to achieve innovative breakthroughs in green and low-carbon development. The Group will continue to pay attention to the legislative process and related requirements of green and low-carbon shipping regulations worldwide and continue to improve the top-level design of its own green and low-carbon transformational development strategy. The Group will steadily implement the construction of 12 units of methanol dual-fuel container vessels, and follow the principles of “mature technology, reasonable cost and reliable supply” to prepare a route reserve for the overall fleet to achieve a steady low-carbon green transformation. The Group will steadily promote the EEXI and CII performance of its own fleet, optimize the allocation of transportation capacity, and promote the technological transformation of vessels to contribute to the sustainable and healthy development of the industry.
Fourthly, the Group will implement cost control and make further efforts to improve operational efficiency. In 2023, facing the normalized operation of the container logistics supply chain and the more challenging external operating environment, the Group will take practical measures to enhance its management and control of operating costs such as container management costs, fuel procurement costs, and cargo transportation costs, in order to improve the competitiveness of its main businesses. The Group will promote the integrated operation of the Dual Brands revenue management team, the information technology team and the global shipping operations team to help reduce costs and increase efficiency
In the new year, the Group will adhere to its market-oriented, customer-oriented and problem-oriented approach to actively respond to changes in the global economy and trade and accelerate the transformation and upgrading of its main businesses. Through improving global deployment, strengthening digital intelligence empowerment, accelerating low-carbon transformation, implementing cost control and other specific business measures, the Group will strive to provide low-carbon, intelligent and reliable container logistics supply chain solutions for various industries and sectors, build an efficient, smooth and safe circulation system for global trade, provide better services to customers, and create greater value for the Shareholders.
WAN Min
30 March 2023
