Sinotrans Shipping : Annual Report 2016

ANNUAL REPORT 2016‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌‌

(Incorporated in Hong Kong with limited liability)

Stock Code : 368

COMPANY PROFILE

COMPANY PROFILE

Sinotrans Shipping Limited and its subsidiaries (collectively known as "the Group") is one of the largest shipping companies in China and leading shipping enterprises of the world. Headquartered and listed in Hong Kong, our Group has subsidiaries or offices in Beijing, Shanghai, Shenzhen, Canada, Singapore, the United Kingdom, Germany and other places, with businesses and customers spreading all over the world. We dedicate to providing professional, high-quality and comprehensive shipping services for our customers, and have established a strong reputation and brand image in the industry.

The Company is an integrated shipping enterprise involved in investment, operation and management of vessels with dry bulk shipping and container shipping as our core businesses. Our dry bulk business is engaged in transportation of bulk cargoes such as iron ore, coal, grain, steel and other break-bulk cargoes along the major trade routes of the world. The container shipping business focuses on Intra-Asia market which has a relatively high-potential development, and our core competence lies particularly in Taiwan routes and Japan routes.

In addition, the Company actively looks for opportunities that can provide long-term stable returns, and has successfully realized the diversification by expanding its business into the LNG shipping market in 2015.

We own, operate and manage a scaled modern fleet. As at 31 December 2016, the total controlled fleet of the Group was 107 vessels with an aggregate capacity of approximately 7.155 million DWT, among which, 48 vessels were owned by the Group, including 37 dry bulk vessels with an aggregate capacity of approximately 3.417 million DWT (9 Capesize dry bulk vessels, 11 Panamax dry bulk vessels, 13 Handymax dry bulk vessels and 4 Handysize dry bulk vessels) and 11 container vessels with an aggregate capacity of 9,537 TEU. The average age of our self-owned fleet was

6.38 years.

CONTENTS

Company Profile

1. Financial Highlights

2. Chairman's Statement

7 Business Review and Outlook 13 Financial Review 19 Environmental, Social and Governance Report 43 Corporate Governance Report 54 Directors and Senior Management 84 Independent Auditor's Report Consolidated Financial Statements

1. Consolidated Statement of Profit or Loss and Other Comprehensive Income

2. Consolidated Balance Sheet

92 Consolidated Statement of Changes in Equity

1. Consolidated Cash Flow Statement

2. Notes to the Consolidated Financial Statements

58	Report of the Directors	159	Definitions
161	Glossary
164	Corporate Information

FINANCIAL HIGHLIGHTS

2016 US$'000		2015 US$'000
Results	841,461	999,774
Revenues
Loss for the year	(242,114)	(81,537)
Loss attributable to owners of the Company	(229,579)	(66,334)
Basic and diluted loss per share	US(5.75) cents	US(1.66) cents
Loss attributable to owners of the Company excluding non-cash
vessels impairment and provision for onerous contracts, net (1)	(58,605)	(64,328)
Dividend	20,472(2)	-
Financial Position	2,074,342	2,353,225
Total assets
Total liabilities	278,099	296,231
Equity attributable to owners of the Company	1,788,437	2,035,380
Available fund (3)	693,068	655,003
Interest bearing liabilities	70,888	78,617
Interest bearing debt ratio (4)	3.4%	3.3%

(1) Non-cash vessels impairment and provision for onerous contracts are US$177,709,000 (2015: reversal of US$1,591,000), of which US$170,974,000 (2015: US$2,006,000) is attributable to owners of the Company.

(2) Representing the proposed final dividend of HK4 cents (equivalent to US0.51 cents). Details are set out in Note 15 of the notes to the consolidated financial statements.

(3) Include bank deposit, cash and bank balances and debt securities.

(4) Interest bearing liabilities divided by total assets.

ANNUAL REPORT 2016

001

CHAIRMAN'S STATEMENT CHAIRMAN'S STATEMENT DEAR SHAREHolDERS, I HEREBY PRESENT THE ANNUAl REPoRT oF oUR GRoUP FoR THE FINANCIAl YEAR ENDED BY 31 DECEMBER 2016 FoR YoUR REVIEW.

BUSINESS REVIEW

In 2016, with the frequent occurrence of Black Swan events, the world economy was still struggling to recover. The growth of the international trade and the shipping demand slowed, while the supply of vessels continued to increase. The imbalance between supply and demand led to a continued fall of freight rates, which resulted the bankruptcy and reorganization of many shipping enterprises. It was a year full of risks and challenges for the Group.

For the dry bulk shipping market, the shipping demand was weak at the beginning of the year, and the overcapacity led to a further imbalance between supply and demand. The Baltic Dry Index (BDI), which reflects the condition of dry bulk shipping market, hit a historical low of 290 points. Due to the rebound of major dry bulk commodities' price and the effect of grain season, the market improved gradually afterwards. The average BDI was only 673 points for the year, which dropped a further 6.3% as compared with the once historical low point in 2015, setting the lowest record.

002 SINoTRANS SHIPPING lIMITED

For the container shipping market, in the first half of 2016, the market was confronted with severe challenges as the revival of the world economy and international trade were below expectation, while the capacity of fleet continued to grow. The China Containerized Freight Index (CCFI) dropped to a historical low of 632 points in April. The freight rates recovered under the influence of shipping companies' control of ship utilization, and the shipping demand picked up afterwards. The annual average CCFI recorded its lowest level at 712 points dropping by 19% year-to-year.

Facing the severe economic and industrial environment, we dedicated ourselves to control the cost as well as to optimize the resources and structural adjustment according to our general principle of "Maintaining cash and stability first." We put more efforts on marketing so as to maintain our market share. We also improved ship management, and strived for innovation. The above measures have provided a strong foothold for the Group's sustainability. At the same time, we managed to maintain a strong balance sheet and a sufficient available fund so as to lay a foundation for Group's sound development.