Cosco to grow offshore business

Cosco Corp. Singapore Ltd. aims to draw one third of its business each from ship repairs and conversion, new shipbuilding and offshore marine engineering services. The three key businesses contribute S$653.1 million ($481.2 million) or 91% of the company’s S$717.6 million ($528.8 million) revenue during the January to March quarter.

Of the total revenue from the three key business segments, 21% comes from ship repairs contracts, half of its 42% share last year. The smaller revenue share from ship repairs business is in line with Cosco’s move to secure higher value contracts in new shipbuilding and offshore marine engineering services. Maintaining a balance between the three identified key earning streams will serve to shield the company from an increase in competition among Chinese shipyards, particularly in ship repairs business.

Cosco drew 21% of its revenue from offshore marine engineering services during the first quarter, up from 10% during the same period last year. Revenue from conversion projects forms 39% of the turnover from the three business segments, up from 31% last year. During the first quarter, the company secured 13% of this share of revenue from new shipbuilding business including construction contracts for oil rigs.

Cosco recently won a $131.8 million contract to build the hull of an oil rig destined to operate for an American client in the U.S. Gulf of Mexico. The shipbuilder lost an earlier contract with Norwegian Red Flag A.S. as it is not able to deliver the client’s new requirement for a turnkey project including a drilling package.

Cosco intends to build up its rig building capacity to address this shortfall in future and is also undertaking an aggressive plan to increase its yard space at four locations in China – Dalian, Nantong, Zhoushan and Guangdong from the present 2.31 million m2 to 3.45 million m2 by 2010.