COSCO SHIPPING Ports Limited (1199) Earnings Call Transcript & Summary

Dear shareholders, investors and friends of the media, good afternoon. I am [indiscernible] from the PR and Investor Relations Department. Welcome to our 2025 annual results announcement. Welcome, and we also have participants online. Today, we're very happy to have invited the following members of the management to be with us. They are Mr. Zhu Tao, Chairman of the Board; Mr. Chen Yipeng, Deputy General Manager; and Mr. Zhao Fengnian, our Chief Accountant. Today's presentation is divided into 2 sessions. First, our management will take you through the performance of 2025 and future outlooks to be followed by the Q&A session. We welcome questions from all of you. I invite Mr. Zhu, Chairman of our Board, to take us through the performance of the year and future outlook. Mr. Zhu, please.

Good afternoon, investors, members of the media and distinguished guests. I'd like to welcome you all to our company's annual results presentation. On behalf of the company, I would like to extend our sincere gratitude and a warm welcome to everyone here today. We thank you for your continued interest in the company and support of our company. We hope to use this presentation as an opportunity to engage in direct communication and dialogue with all of you. Today's results announcement will be divided into 5 sections, highlights of the full year results, financial performance, operational review, strategy and outlook and finally, Q&A session. First, let's take a look at the highlights of our performance. In 2025, the global economic and trade landscape underwent sharp adjustments and entered a period of profound restructuring. Despite multiple challenges, our economy remained generally stable with total import and export value reaching a record high, allowing the country to retain its position as the world's largest goods trading nation. According to the statistics from the General Administration of Customs, total value of China's goods trade in 2025 reached CNY 45.47 trillion, representing an increase of 3.8%. Exports amounted to RMB 26.99 trillion, up 6.1%. Imports reached CNY 18.48 trillion, up 0.5%. Trade with emerging markets such as Africa, Asian and Latin America maintained strong growth momentum, rising by 18.48% and 6.5%, respectively. We focused on core businesses, fully leveraged synergies with the group, deepened lean operations and enhanced competitive advantages. We recorded growth in throughput revenue and profit. Total throughput reached 150 million TEU, up 6.2%. Revenue reached USD 1.67 billion, up 11%. Profit from joint ventures and associates, USD 340 million, up 7.3%. Profit attributable to equity holders, $310 million, up 1.1% against the backdrop of profound adjustment in the global economic and trade landscape and complex and volatile geopolitical conditions. We proactively seized market opportunities, continue to strengthen our core hub layout and improve operational efficiency, adhere to high-quality development to actively address the uncertainties of external environment. Leveraging on our global terminal network with efficient connectivity, we continue to capitalize on synergies with our parent company. Next, please welcome Mr. Zhao to present full year financial results.

Thank you, Mr. Zhu, for your introduction. Good afternoon to all of our friends in the financial media and investors. I'll now move on to the second part of our presentation of financial performance for the full year. Driven by factors such as increased container volume and sustained growth in freight rates and storage revenue, our overall business performance was strong, achieving steady improvements in operational quality and efficiency. We continue to achieve results in improving quality and increasing revenue with revenue rising 11% year-on-year. Our non-subsidiary terminals, we continue to optimize management and profitability, driving synergistic development, resulting in a 7.3% year-on-year increase in our share of profits from joint ventures and associates. Profit attributable to equity holders increased by 1.1%. Dividend payout ratio maintained unchanged at 40%. Annual dividend, [ USD 0.03256 ] per share. Now let's take a look at the revenue and GP margin of our subsidiary terminals. For those in China, revenue increased by 2.9% year-on-year and gross profit margin remained at a relatively high level of 34.3%. GP margin of our 3 major subsidiary terminals remained above 38%, with Guangzhou Nansha terminal achieving GP margin as high as 46%. Moving forward, we will implement the following measures. At the Tianjin Container Terminal, comprehensively promote standardized services, combining container loading and unloading, warehousing and distribution and value-added services within the port to boost growth in both domestic and international trade. At Xiamen, we'll continue to improve feeder service development and expand rail hinterland connections, transforming the terminal into a new green and smart international railways transfer hub. At Guangzhou Nansha Terminal, we continue to strengthen logistics efficiency and network service capabilities, linking it with other subsidiary terminals such as Xiamen and Wuhan to form a large intermodal rail sea transport triangle network. Regarding overseas subsidiary terminals, revenue increased by 18.5%. PCT Terminal Greece revenue growth by 16.7%. Moving forward, the terminal will leverage the opportunity presented by the gradual reopening of the Red Sea to promote resumption and introduction of new routes, continuously expanding the market, consolidating its position as a hub. CSP Spain revenue rose by 8.6% with container volume reaching record high, establishing it as one of Ocean Alliance's primary ports. CSP Abu Dhabi Terminal will focus on developing regional transshipment cargo to enhance our region influence. Our terminal in Peru will continue to expand feeder and mainline network and develop rural and general cargo operations at high-quality development in the Asian and Latin America land sea new corridor. Full year terminal profit reached $440 million, representing 4.5% growth. Terminal profits in China reached USD 365 million for the year, increase of 1.3%. Domestic perspective shows fundamental trend of China's long-term economic growth remains unchanged. Regional coordination strategies such as coordinated development of Beijing, Tianjin, Hebei region, Yangtze River Delta integration, et cetera, are being vigorously advanced. Initiatives to expand domestic demand and build a unified national market have created vast opportunities. Overseas terminal profits reached $78.59 million, an increase of 22.9%. In the Mediterranean and Middle East region, PCT terminal in Greece rose by 40.5%. We further advanced synergies with our dual brand fleet to support the development of China Europe Land sea corridor. Since Abu Dhabi terminal we strengthened internal and external marketing efforts, optimized layout of the Middle East feeder network and enhance regional logistics distribution center. In Spain, we'll continue to leverage regional advantages to improve hub efficiency and boost container throughput. Balance sheet. By the end of the year, our cash and bank deposits stood at $1.33 billion, maintaining a stable and healthy position. Total CapEx for the year amounted to approximately $386 million, about $164 million was allocated to investments, $222 million allocated to PP&E. Net debt-to-equity ratio stood at 25.1%, remaining at a relatively low level in recent years. Moving forward, we'll continue to leverage our low leverage advantage and focus on emerging markets with high growth potential. Concerning borrowing costs, we implemented a multipronged approach, including refinancing existing loans, optimizing the debt structure and using internal funds to repay a portion of high interest loans, which drove the average cost of bank borrowing down to 4.54%. We will now invite Mr. Chen to present the company's operational review.

Thank you, Mr. Zhao, for your detailed overview of the company's financial performance. Good afternoon, investors and members of the media. I will now provide an overview of our operational performance. In 2025, our total throughput reached 153 million TEU, an increase of 6.2%. Both domestic and overseas terminal throughput recorded year-on-year growth with the following highlights. Total terminal throughput in China reached 115 million TEU, an increase of 4.6%, driven primarily by volume growth in PRD and Southwestern coastal regions. The company has intensified its marketing efforts, continue to expand route networks and engage in customer outreach increased terminal container volume and revenue. We will implement the Hub+ Corridor+ Network strategy to drive the optimization of domestic supply chain. In overseas regions, total terminal throughput reached 38.16 million TEUs, an increase of 11.5% year-on-year. The company has accurately seized the opportunities presented by the restructuring of global industrial and supply chains. optimized our industrial structure and regionally layout and built a globally integrated network for coordinated development. In terms of equity throughput, it rose 3.4% to 46.85 million TEU. Equity throughput at terminals in China reached 32.79 million TEUs, up 1.6%, mainly driven by growth at terminals in PRD and Southwest regions. We will coordinate dual container shipping brands to channel incremental cargo from a domestic interland to Southeast Asia and Middle East, expanding business volume and serving both domestic and international customers. In overseas regions, equity throughput reached 14.06 million TEUs up 7.9% as cooperative frameworks such as the RSP continue to take effect. They provide broader cooperation opportunities and diversified pathways for global trade. Emerging markets such as Southeast Asia, Middle East and South America have become the primary sources of growth in the container market. We will prioritize expanding our terminal footprint in these high-growth regions. In 2025, container throughput at company subsidiary terminals increased by 1.8% year-on-year, with throughput of international routes rising by 4.6%. Benefiting from the dual brand strategy, container volumes contributed by COSCO Shipping Lines OOCL increased significantly, rising 13.3% and 7.4% year-on-year, respectively. We actively responded to market changes and route adjustment by innovating marketing models, continuously introducing new routes and expanding cooperation with other alliance fleets to optimize the structure of our route portfolio. In terms of ASP, European control terminals increased by 9.2% in euro terms, primarily due to the strong performance of PCT terminal in Greece and terminals in Spain, which drove continued growth in revenue per container. This year, we will actively respond to internal, external market changes, focusing on strengthening domestic and international trade corridors, network development and expansion of new business opportunities. We'll continue to increase our business scale, optimize our cargo mix and improve ASP. We're capitalizing on the opportunities presented by the restructuring of global industrial and supply chains to accelerate the expansion of our global port logistics network. There are some achievements. First, CSP Haitou Supply Chain project has made new breakthroughs in the development of cross-border e-commerce operations, maintaining consistently high average utilization rates. In the future, we will continue to expand our supply chain business in Southeast Asia. Second, Xiamen Haicang CFS will establish a freight train plus liner Rail Sea Express network and premium intermodal routes developed the sea [ rail ] premium route from Wuhan to Xiamen. Third, CSP Abu Dhabi CFS will continue to develop intermodal rail sea transport products, optimize warehouse and distribution layouts to improve space efficiency and enhance food chain service capabilities and overall profitability. Fourth, CSP Zeebrugge CFS. We will strengthen rail operations, improve quality and increase volume, integrate internal and external resources and expand profit channels. Global port and shipping industry is shifting from point-to-point competition to chain integration and network synergy. We will strengthen technological innovation and promote deep integration of AI with port operations. To continuously improve the efficiency and scale of automated equipment, unmanned container truck operations are fully entered commercial operation at 5 terminals, Xiamen, Wuhan, Quanzhou, Abu Dhabi and Chancay with the average cost per container reduced by about 10% compared to traditional manned container trucks. Cumulative throughput of unmanned container trucks reached 1.27 million TEUs in 2025. representing an 88% year-on-year increase. Moving forward, we'll continue to deepen the integration of AI with core port operations, including cargo handling, scheduling, equipment maintenance and security to empower these functions. We'll advance projects such as smart terminals and intelligent security systems, actively promote large-scale application of smart technologies. We transition from traditional operations to new ecosystem-based competitive model, actively embrace technological applications such as digitalization, AI technological innovation. We'll continue to accelerate innovation-driven development focus on building replicable modern ports and comprehensively forge a paradigm of efficient and intelligent development. Now Chairman Zhu will introduce our development plans and outlook.

Thank you, Mr. Chen and Mr. Zhao for your introduction. Now let's take a look at the company's strategic plan and outlook. In recent years, the company has achieved rapid expansion in our global network. Moving forward, we'll focus on the growth of emerging markets, enhance regional diversification of our asset portfolio and reshape our core competitiveness for the future. First, we'll focus on strategic leadership and optimize global development layout. We will adhere to the guiding principle of expanding our global footprint externally while deepening operational efficiency internally, accelerating the construction of a global terminal network that promotes coordinated development of mature and emerging markets, greenfield and brownfield terminals and hub and gateway ports. Second, deepen our operational synergy to comprehensively enhance quality and efficiency. We'll build on lean operations, strengthen marketing and internal coordination and seize opportunities arising from the release of shipping capacity through flexible commercial terms and differentiated services. We'll continue to broaden perspectives and dimensions of cost control, leverage economies of scale, reduce costs and identify opportunities for value enhancement. Third, we'll strengthen network integration to enhance comprehensive service capabilities. We'll focus on upgrading from point-based development to network synergy, continuously strengthening the feed and Chunaline networks and corridor development at key hubs to improve transshipment and radiation capabilities. Fourth, strengthen innovative development and drive green and smart upgrades. In terms of digital intelligent transformation, we will align with new development philosophies to gradually establish our digital system and complete implementation plans for AI across short, medium and longer term. Regarding green and low-carbon initiatives, we will expand promotion and application of new energy equipment to explore new pathway for green development. Our company will continue to be guided by 5 pillars of sustainable development, integrity and mutual benefit, resilience for the future, agile innovation, [indiscernible] nature and dynamic progress and integration to systematically promote deep integration into ESG governance with production and operational management. We help the company and its value chain achieve coordinated economic, social and ecological development as well as high-quality progress. Thanks to our long-term dedication and governance practices in the ESG field, we have earned a high recognition from leading domestic and international ESG rating and index agencies. Our wind ESG rating has been upgraded from A to AA. CDP climate change rating has improved to B. Our sustainability ESG rating remains at A+. Our Morningstar ESG risk score continues to remain at an A low risk level. The company remains steadfast in its long-term commitment to achieving carbon neutrality by 2050. We adhere to sustainable development as our core guiding principle, actively promote innovative practices and are dedicated to continuously contributing value towards building a modern port ecosystem that includes digitalization, smart tech and green low-carbon development. We expand our global footprint and resolutely advance digital and smart empowerment alongside transition to a green low-carbon future. The company achieved several significant milestones in the field of sustainable development. Greenhouse gas emissions intensity decreased by 38.5% compared to the base year energy consumption intensity decreased by 22.2%. We completed the first climate-related financial impact analysis and conducted nature-related assessments of the company's major control assets in accordance with the TNFD framework. Our Tianjin terminal has -- was awarded a double 4 star destination as a smart and green port. Wuhan Terminal became the nation's first smart port to integrate communication transmission with real-water intermodal transport. These achievements are a good reflection of our strategy to use digital intelligent development as a key driver, strengthen innovation-driven growth and accelerate transition to a green and low-carbon future. Looking ahead to this year, with the expansion of the BRICS Group and accelerated rise of the global South, the development potential of emerging economies will continue to be unleashed, and they are expected to become a key driving force for global economic growth. Locally speaking, our economic foundation remains solid, advantages are numerous, and there continue to be strong resilience and fast potential. Underlying conditions and fundamental trends supporting long-term positive growth remain unchanged. In global port market, emerging economies transition from participants to engines of growth with global industrial chains. Dominant position of Asian ports continue to stabilize, fostering a more balanced and diversified global economic system, which all inject new momentum into global trade. Global port logistics resources serve as a core pillar of our 3 integration strategy and are crucial to cost chip and cost enhancement of core functions and improvement of our global competitiveness. We accurately seize the opportunities presented by restructuring of global industrial and supply chain, accelerate expansion of our global port logistics network, optimize operations to maximize the investment value of our global network and move swiftly toward the goal of becoming a globally leading logistics service provider with core resources. We will now enter the Q&A session. We welcome questions from all of you.

Thank you, Chairman and other members of the management for your detailed introduction. We'll now move on to Q&A to raise first invite questions from on-site participants and we will then invite questions from those online. And finally those calling in over the phones. Please only raise one question from each organization. Let's invite in-site -- on-site participants to raise your hands if you have a question. Please briefly tell us your name and who you represent before you ask your questions. And the same applies to those who are calling in and raising questions online. This gentlemen, thank you.

Thank you very much, the 3 of you for your introduction. Concerning the performance of the company in the past year. And also, we looked at some future projections. And from DBS, I'm Senior President responsible for the China team. I'm delighted to be here today. Actually, I have a question, which is probably on everyone's mind around the world for the port industry, what is the outlook? And what about the situation and the war in the Middle East? What are the impacts on our business? Thank you.

Okay. Outlook. Mr. Chen, please take that question.

Thank you. I am honored to offer some insights about ports around the world. According to IMF's latest projections, 2026 will be a year sustaining growth with economic growth at around 3.3% around the world. Concerning shipping industry, because of some previous tariff movements and also accelerated shipment in 2025, we saw a higher trend and then it gradually came down. But this year, in 2026, around the globe, the growth is about 1.8% to 1.9%. That is the overall figure. To be more specific for different regions in Europe, it will stay at a relatively stronger performance, 7.8% at the moment for Latin America, there will be some new growth engines with great potential. In Southeast Asia, because many activities have been shifting from China to Southeast Asian areas. They are looking at a growth momentum of 8%. Concerning the Pacific region, some routes from the U.S. are under pressure. 2026 may show a negative growth trend. Our company is paying very close attention to the situation and taking necessary measures. I will take your second question. I understand that we are all quite concerned about the situation in the Middle East and the Red Sea. And also among the U.S. and Israel and Iran, many conflicts have broken out. We do have the terminal in Abu Dhabi in that region. With the guidance of our group, we pay close attention to the development of the situation. And we have already made necessary actions to stay well informed of the latest development. We will continue to work very hard. So far, Abu Dhabi terminal, our assets and also our staff members, they are safe. So in terms of operations of terminals, which have been affected, we are exploring new channels or corridors, new routes so as to bring updated solutions to our customers. So what is happening in the Middle East? Yes, there will be some impact on the throughput level for Abu Dhabi. But for the entire region, our business level should not be much impacted.

Let's take a second question from the lady, please.

Thank you very much for your sharing. I. I am [indiscernible] I want to follow up on the latest deal that you are involved in, do you have any update.

No response. Let's invite the third question. Perhaps I can turn to some questions online. We'll come back to you. The first one from [indiscernible] of Pinnacle. 2025, what are the movements concerning profitability and the contribution from different regions. I think Mr. Zhao, you can take that.

All right. I will give a brief answer to that. For 2025, domestic and international assets, USD 440 million. So for the former in Greater China region, for terminals, the profit, USD 365 million, up by 1.3%. In this segment, the outstanding performance -- the contribution in relation to the overall profit dropped from 84.9% to 82% this year. Particularly our terminals in Xiamen, Tianjin Wuhan, the profit level came down -- that is why the trend is a declining one. Concerning storage and also non-subsidiary terminals, there are very good performances. Yantian Terminal and Dalian, Containerboard, Nansha, they have driven up the overall profit level. For international assets, the profit, USD 78 million, up by 22.9%, which is a very substantial increase. They are mainly affected by the terminals in Spain and Greece, which have all gone up. For non-subsidiary terminals, they are mainly affected by the Suez channel, the profit level has gone up by 28.5%. So that is the analysis for domestic and international assets.

The second online question from [indiscernible] at the moment, there's a lot of innovation in relation to the Internet, big data and AI. How do you use such capabilities to drive down your emission and realize the construction of green ports to achieve synergized development with digitalization and greening and low carbon.