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A.
Strategies
and General Introduction
B.
Management participation
C1.
Economic
C2.
Environmental
C3.
Product
C4.
Labor
C5.
Human rights
C6.
Social

Assurance
Statements
 
    Part I. Statement of the Chairman and Strategies
  I. Statement of the Chairman
II. Strategies
III. Analysis on Primary Influences and Measures of Sustainability
    Part II. General Information of COSCO Group
    Part III. Basic Profiles of COSCO Group¡¯s Subsidiaries
    Part IV. Awards
    Part V. General Information of the Report
 
 

 

 

Statement of the Chairman
First of all, I would like to, on behalf of the Board of Directors and management team of COSCO Group, express my sincere appreciations to customers who have pay attention to and support the development of COSCO Group. I would also express my appreciations to our ship- and shore-based employees who have worked hardly and diligently to promote business development of COSCO Group.

In 2014, total operating revenue of COSCO Group reached RMB169.336 billion, up 2.75% year-on-year. Of which, the accumulative revenue of shipping industry reached RMB74.949 billion. The accumulative operating revenue of ship-building and ship-repairing industry had increased by 16.02% year-on-year to RMB22.931 billion. The accumulative operating revenue of logistics business had decreased by 6.08% year-on-year to RMB4.022 billion. The accumulative revenue of terminal and container leasing business had increased by 5.39% year-on-year to RMB7.248 billion, and the accumulative revenue of trade supplying business had decreased by 12.61% year-on-year to RMB82,171 billion.

During the reporting period, the imbalance of supplies and demands of international shipping industry had no significant improvements. The freight rate of shipping market was stood at low level. The average figure of BDI was 1,105 points, down 8.3% compared with the previous year. The average figure of CCFI was 1,086 points, almost the same with 1,082 points in the previous year. In the meantime, operating cost of shipping industry increased continuously due to rigorous increase of port fees and other fees. Although international fuel price dropped greatly in the fourth quarter, the influence on annual performance was limited and the enterprise still faced great operation pressure.

In face of fierce challenge, COSCO Group took active measures to increase the income and reduce the expenditure. The main shipping business had reduced the deficits greatly and the cash flow of operating activities was improved significantly. In the meantime, the sale of equity assets and subsidiaries for ship retirement also increased the revenue.

In 2014, freight rate of international shipping market was still at low level due to weak economic recovery of the world, slowdown of growth of demands and surplus carrying capacity. In this year, COSCO Group continued to adjust the fleet structure, control the leased bulk shipping capacity. Leasing agreement of some bulk ships will not be renewed upon expiry, and some old ships were retired. This resulted in reduction of overall scale of bulk carriers. The size of oil tanker fleet and general cargo fleet also reduced due to termination of leasing agreements of some carrying capacity. Scale of container fleet was increased due to delivery of new orders. In 2014, shipbuilding enterprises of COSCO Group overcame the double pressure of market and cost, tried to elevate the ship-building and ship-repairing skills, enhanced the technical R&D and cost control, strengthened self-inspection mechanism, implemented automation reform, coped with opinions of ship-owners high-efficiently, elevated the quality of ships constantly, and ensured on-time delivery of existing orders. As of early December, COSCO Shipyard had successfully completed the shipbuilding tasks for the whole year. The growth of world trade had slowed down due to global economic downturn. Although the growth of import and export volume of China had slowed down in 2014, the container throughout of COSCO Pacific at domestic and overseas terminals also increased. Piraeus Port invested by COSCO Pacific achieved outstanding results in market expansion, operation & management, cost reduction and benefit increase. The port saw sharp increase of container volume and made profits continuously. These favorable factors promoted the continuous growth of total container throughout of terminals invested by COSCO Pacific. Affected by world economic situations, the growth has been slowed down. Under the background that shipping market was in depression, COSCO Logistics tried to expand the business, and achieved growth in container canvassing volume, general and bulk cargo agent volume and railway transportation volume. While trying to increase the cargo canvassing volume, it promoted the classified management of customers and layered tracking and development mechanism, enhanced the construction of chemical, railway and other professional platforms, and made breakthrough in development of core customers. At the 2014 HP Global Supplying Chain Summit, COSCO Logistics awarded the Annual Innovative Logistics Supplier and Outstanding Strategic Partner in Chongqing.

In 2014, COSCO Group deepened the comprehensive budget management, strengthened the cost control and achieved significant results in cost reduction work. With respect to fuel cost control, it saved 665,200 tons of fuels (about RMB400 million) through low-speed navigation, scientific dispatch and management, and ship technical reform. With respect to control of operating cost, it tried to enhance the control of voyage cost, engine cost, rents, port fee, transshipment fee and reparation fee. With respect to procurement, business outsourcing and supplier management, all shipping companies enhanced the

concentrated procurement of spare parts and management of shipbuilding and ship-repairing business, and the procurement value of spare parts of ships had dropped by 10.8% year-on-year. The group has implemented the system of ¡°repairing ships of COSCO Group at the ship-repairing companies of COSCO Group¡± strictly, generating good collaboration effects.

In 2014, COSCO Group accelerated the adjustment and optimization of fleet structure, customer structure and market structure. With respect to adjustment of fleet structure, it accelerated the retirement of old ships, and ordered a batch of energy-conservative and high-efficient new ships, further elevating the energy efficiency and market competency of fleet and optimizing the overall structure of carrying capacity. With respect to adjustment of customer structure, it deepened the VIP customer strategies, and tried to increase the proportion of strategic customer, director customer and high-contribution customer. It strengthened the canvassing of basic cargo source to increase the proportion of basic cargo source and direct customers. With respect to adjustment of market structure, it actively explored the third country business, explored the new emerging markets in Southeast Asia, Central and East Europe, South America, Africa and Middle East. It also explored the markets in middle and upper reaches of the Yangtze River and the central and west regions with the opportunity of ¡°one belt and one road¡± strategies and the strategies of Yangtze River economic belt.

In 2014, COSCO Group made ceaseless efforts to innovate on the service mode and to promote long-term and sustainable development of the company. COSCON tried to improve customer experience and elevate customer loyalty by enhancing the customer service guarantee system. It made ceaseless efforts to promote the strategies of cross-border convergence of traditional industry and e-commerce industry. The Pan-Asia e-commerce platform received recognition of more and more customers, and made breakthrough in terms of number of users and transaction volume in the second half of the year. China COSCO Bulk innovated on marketing concept with customer as the center, deepened the reform of marketing system by setting up a marketing center and adopting the responsibility system of account manager for marketing, and established global marketing system. In 2014, China COSCO Bulk made significant progress in cooperation with large customers such as VALE, and gradually established long-term and stable cooperation mode.

In 2014, COSCO Group followed the requirements of UN Global Compact, and made active efforts to build up an environment-friendly, ocean-protective and resource-conservative enterprise. In 2014, COSCO Group saved 521,900 tons of fuel through energy conservation technical reform, low-speed navigation and optimization of shipping lines, and reducing the carbon dioxide emission, sulfur dioxide emission and nitrogen dioxide emission by 1.6231 million tons, 266 million tons and 454 million tons respectively. Moreover, COSCO Group brought into full play the humanistic spirits, and participated and assisted in many rescue activities.

In 2015, domestic and overseas economic situations will still be complicated. The uncertainties of world economy will increase and China will face economic downturn pressure. WTO predicted that global trade volume will grow by 4% in 2015, lower than the average growth rate of 5.3% in the past 20 years. Affected by this, global shipping market is entering a new normal with low-speed growth of demands and the surplus carrying capacity can¡¯t be changed in short period of time. It is predicted that the low-level fluctuation of shipping market will last for a certain period of time. In face of new normal of global economy and shipping market, COSCO Group will pay more attention to the collaboration of all companies in the business cluster, and tried to take a lead in terms of profitability, anti-cycling ability, globalization and scaled growth.

With the emerging of new technologies, new economy and new business status, as well as higher and higher requirements on transportation mode, transportation safety, service experience and environmental protection, shipping market will be more complicated in the future. Cooperation, innovation and rational operation will become the common understandings of shipping industry. Supported by all shareholders, COSCO Group will seize the opportunities of ¡°one belt and one road, collaborative development of Beijing, Tianjin and Hebei, strategies for development of Yangtze River Economic Belt and the national policies to promote development of shipping industry¡± under the background of economic reform and innovation of China, made reform, innovative and struggling, and made ceaseless efforts to promote sustainable development of COSCO Group, provide high-quality services for customers and return to the shareholders continuously.
¡¡

 

Chairman Ma Zehua
May 30, 2014

 
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