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| Wei Jiafu, chairman of China Ocean Shipping (Group) Co, resigned after the company saw two years of losses following a slump in the global shipping industry. (File Photo) |
Company faces being delisted if it cannot navigate into profitability
Wei Jiafu, chairman of China Ocean Shipping (Group) Co - COSCO - the nation's largest shipping business, has resigned. His successor will have to carry on the unfinished task of returning the company to profit to avoid being delisted.
The central government and the State Council made the decision in light of Wei's age. He was born in 1950. After quitting his role as COSCO chairman, Wei will be succeeded by the group's general manager, Ma Zehua, according to a statement on the company's website.
Ma Zehua, general manager of COSCO, has been appointed as the next chairman of the company. Ma said he would lower costs to minimize losses by optimizing routes and services. (File Photo)
Meng Xiangjun, head of COSCO's securities department, said China COSCO Holdings Co Ltd, the listing arm of parent COSCO, had not yet been officially notified of the change, adding that any leadership reshuffle will adhere to legal procedures.
Wei, who holds a doctorate in the design and manufacture of naval architecture, outperformed his captain-turned-manager peers by developing COSCO into the country's top shipping conglomerate and the world's largest dry bulk company.
But the slump in global shipping demand and supply glut in the industry has resulted in two years of losses for China COSCO Holdings. If the company cannot return to profit this year it may be delisted from the main board.
In 2011, China COSCO Holdings recorded a loss of 10.45 billion yuan ($1.69 billion), followed by a loss of 9.56 billion yuan a year later.
"Now Ma Zehua has to be more cautious in making any investment decision and he is required to put more effort into strengthening internal management," said Qu Linchi, dean of the school of economics and management at Shanghai Maritime University.
During a business performance briefing, Ma said the company will try its best to minimize losses in its core business and will optimize routes and product designs to meet market demand. Ma said he would also seek to reduce costs by cutting expenditure on fuel.
To cope with the industrial downturn, China COSCO Holdings, the world's largest bulk shipper, decided to sell its wholly owned China COSCO Logistics Co Ltd to the parent COSCO Group.
The sale will generate investment proceeds and help lower delisting risks, according to an unnamed source from the company speaking to the Shanghai Securities News.
China COSCO Holdings is still bullish on the outlook for the shipping industry and it will have the preemptive right to buy back COSCO Logistics once conditions are ripe, said the insider.
Since the fourth quarter of 2011, the China Shipping Prosperity Index has remained below the demarcation line for six consecutive quarters, indicating that the overall situation of the shipping industry and related businesses is going from bad to worse, according to a Shanghai International Shipping Institute report.
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