Investor
Relations

Unaudited Full Year Financial Statement for the Financial Year Ended 31 December 2007

Click here for the complete Full Year Financial Statement 2007
Click here for the previous Third Quarter Financial Statement 2007

Review of Performance

Overview

The Group rang in another strong showing in FY2007 with financial results surging to a record high. Turnover soared 86% to top $2.3 billion while net profit attributable to equity holders of the Company jumped 64% to $336.6 million. This was on the back of robust growth in ship repair, ship building and marine engineering business, in particular, strong contributions from the promising shipbuilding operations.

Turnover

Group turnover swell 86% to $2.3 billion in FY2007 well supported by solid growth across key business segments.

Turnover by activities

The Group's biggest business, ship repair, ship building and marine engineering operations, grew 97% to $2.0 billion buoyed by strong flow of high-value conversion and offshore projects. The 2 new dry docks which became operational at Cosco Zhoushan in H1 FY2007 also contributed considerably to the increase in revenue.

The Group began its maiden progressive earnings recognition from the building of its first dry bulk carrier in Q3 FY2007, ahead of the originally expected FY2008. This was supported by high efficiency and capability in its shipbuilding operations. With just less than 2 quarters of inaugural contributions, this nascent new growth driver delivered turnover of $504 million in FY2007.

Dry bulk shipping business provided another source of strength for the Group in FY2007 rising 40% to $207.9 million. The increase was boosted by firmer Baltic Dry Index despite a smaller fleet size.

Ship repair, ship building & marine engineering business represented the bulk of Group turnover with 89.8% contribution in FY2007 while dry bulk shipping and shipping agency and others accounted for the remaining 10.2%.

Profitability

Gross profit rose 62% from $377.6 million in FY2006 to $610.2 million in FY2007 lifted by higher turnover.

Miscellaneous gains comprised gain from the disposal of scrap metal, interest income and foreign exchange gain. The foreign exchange gain of S$18.1 million was mainly due to forward currency contracts.

There was no exceptional item in FY2007 compared with an exceptional gain of $24.1 million in FY2006 arising from the disposal of 4 old bulk carriers in FY2006.

Distribution and administrative costs rose in line with the expanding business volume. Interest expense decreased as the Group has less bank borrowings.

Lower income tax expense is due to tax incentive rebates from the People's Republic of China ("PRC") tax authorities relating to purchase of property, plant and equipment made in PRC for ship repair, ship building and marine engineering operations.

Minority interests increased due to higher contributions from its PRC subsidiaries, involved in ship repair, ship building and marine engineering operations.

Overall, net profit attributable to equity holders of the Company rose 64% from $205.4 million in FY2006 to $336.6 million in FY2007 on successful expansion into ship building business.

Had the non-recurring exceptional gain of $24.1 million in FY2006 been excluded, net profit attributable to equity holders of the Company would have risen 86% from the adjusted $181.2 million in FY2006 to $336.6 million in FY2007.

The return on shareholders' fund improved significantly from 34.5% in FY2006 to 41.8% in FY2007.

Balance Sheet and Cash Flow

Cash and cash equivalents increased from $277.9 million to $1.1 billion mainly due to more advances received from customers as the Group secured more shipbuilding contracts. Please refer to item 1(c) Cash Flow Statement for more details.

The increases in Trade and other receivables, Inventories and Construction contract work-in-progress are mainly due to the increase in volume of ship repair, ship building and marine engineering businesses.

Property, plant and equipment increased from $1.1 billion to $1.5 billion as a result of facilities expansion of the major shipyards in Cosco Shipyard Group Co., Ltd ("CSG").

Trade and other payables soared from $529.7 million to $2.4 billion as more advances are collected from shipbuilding projects.

Total borrowings fell from $412.1 million to $176.4 million due to repayments during the year.

Shareholders' equity rose from $670.1 million to $939.9 million. The increase was due to the transfer of FY2007 profits to retained earnings and issue of shares under the Scheme. This was partly offset by dividends paid out in FY2007.

Commentary

To sustain long-term organic growth and strong project flow momentum, the Group is positioning to be a key player in ship repair, ship building and marine engineering in the PRC.

In ship repair, the Group is progressively adding capacity to cater to the overwhelming global demand. The Group announced on 4 January 2008 that it has set up a joint venture ("JV") with the Port of Authority of Lianyungang with CSG owning 60% of the equity. The JV has a registered capital of RMB180 million (S$36 million) and operates a shipyard in Lianyungang, Jiangsu. It has three new berths of 220 metres each and a land area of 220,000 square metres. The yard had started its ship repair and conversion operations immediately following the date of joint venture. It has added one 80,000 dwt floating dock to bring in additional ship repair and conversion revenue. The Group expects this new yard to contribute to its earnings from FY2008.

In addition, contributions from the two new Zhoushan dry docks with total capacity of 380,000 dwt (that commenced operations in the H1 FY2007) will also increase as they begin their first full-year contributions in FY2008.

On 16 January 2008, the Group announced that through Cosco (Nantong) Shipyard, it had acquired a piece of land at Qidong, Jiangsu province. When fully developed in 4 phases by 2011, it will have 8 new berths for ship repair, conversion and offshore operations.

As the Group continues to enhance its shipbuilding order book, capability, efficiency and capacity, this segment is expected to add substantially to earnings going forward. As of 31 December 2007, the Group has a healthy order book of US$6.5 billion to be progressively recognised up to Q1 FY2011. Out of the 113 dry bulk vessels that the Group had been contracted for, it expects to deliver the first batch of 10 bulk carriers in FY2008.

With the right resources and organic growth path that the Group had laid out, it is confident of achieving a well-balanced revenue stream from its 3 quality earning pillars by 2010.

Barring unforeseen circumstances, the Board of Directors is confident of the Group's prospects in FY2008.

Balance Sheet