Earnings Call: H1 2024

Aug 29, 2024

Summary

Equity throughput rose 6.3% and total throughput 8.2% year-on-year in H1 2024, with strong growth in China and overseas terminals. Profit attributable to equity holders declined 7.4%, but net finance costs fell 2.4% amid high interest rates.

Investors, media friends, guests, ladies and gentlemen, good afternoon. I am Zhu Tao, Chairman of the Board of COSCO SHIPPING Ports Limited. First of all, welcome to our 2024 interim results announcement. On behalf of the company, I would like to express our sincere thanks and welcome to all of you here. Thank you for your long-term interest and support for our company. I would like to take this opportunity to have face-to-face communication and exchanges with you. Today, our presentation includes five parts. One, key highlights. Two, financial performance. Three, operational review. Four, strategy and outlook. To conclude, there will be a Q&A session. First, let me go over the company's key highlights during the first half of 2024. Since 2024, China's economy has continued to rebound and improve, and under the expectation of interest rate cuts by central banks of Europe and the U.S., world trade is in a rebound phase. With improvement of external demand, as well as sustained efforts of domestic policies, volume of China's import and export of goods has hit a new record high. The trend has continued to be favorable. In the first half, our highlights include, first, the company, with its global efficient terminal network, continued to capitalize on synergistic advantages with the dual brands of China COSCO Shipping, Ocean Alliance, and other major shipping companies, with equity throughput rising by 6.3% year-on-year in the first half of the year. The subsidiary terminals actively strengthened marketing strategies, adding 41 new routes and increasing throughput volume by about 1.02 million TEU. In the future, with the further optimization of China's export structure, while increasing trade volume with traditional markets such as Europe and the U.S., trade with ASEAN, Latin America, and other emerging markets is increasing at the same time, which will bring significant opportunities for development of the port industry. In terms of lean operations, cost control measures continue to help terminal operations to improve quality and efficiency. In the first half, average operating cost per TEU at subsidiary terminals decreased by 3% year-on-year. By strengthening financial management measures, net finance costs have been reduced by 2.4% year-on-year. Secondly, in terms of global portfolio, the company steadily pushed forward construction of Chancay Port in Peru, and the construction works are progressing as planned. In addition, the company completed the project to acquire a 25% stake in the Sokhna New Container Terminal, Egypt, and will continue to focus on key emerging markets such as Southeast Asia, the Middle East, South America, and Africa in the future. In terms of building regional hub ports, throughputs of CSP Abu Dhabi Terminal in the Middle East rose 35.7% year-on-year in the first half of the year. Throughput of Wuhan Terminal in the middle reaches of the Yangtze River rose 38.8% year-on-year, further strengthening its capacity as a regional hub. Third, in the first half of the year, our supply chain businesses continued to expand rapidly. Market expansion of green supply chain products has begun to bear fruit with completion of about 7,000 TEU in throughput. Throughput of consolidation and deconsolidation businesses reached 36,000 TEU, an increase of 34% year-on-year. Domestic subsidiary terminals completed sea-rail intermodal transportation of more than 100,000 TEU, a twofold increase year-on-year. In the future, we will continue to accelerate allocation of logistics infrastructure resources by adopting integrated development model of shipping plus port plus logistics, further attracting more industrial customers and leading more industries into cooperation. Fourth, the company has entered into fast track of development in smart ports and green low-carbon transformation. Unmanned container trucks have entered into full commercial operations at Xiamen, Wuhan, Quanzhou, and CSP Abu Dhabi Terminal, with operation volume reaching about 310,000 TEUs in the first half, soaring nearly three times year-on-year, which greatly improved operation efficiency of terminals and yards. In first half of the year, utilization rate of shore power exceeded 70%, double the rate compared to the beginning of the year. In terms of installed capacity of solar power panels, cumulative total exceeded 10 megawatts. On the whole, global economy recovered better than expected. Domestic market continued to improve. Manufacturing industry in Europe and U.S. recovered significantly, leading to a sustained rebound in global trade. In the first half, the company showed good development momentum, and in the second half, we will continue to make every effort to promote sustainable and high-quality development of the company. Please welcome Mr. Zhao to introduce the financial performance in the first half of the year. Thank you, Mr. Zhu, for your introduction. Good afternoon, friends from the media and the investment community. Now, let me present the second part, the company's financial performance in the first half of the year. In the first half, the company's overall business performance was favorable. Excellent performance of China's subsidiary terminals drove our company's overall container volume, revenue, and gross profits to grow significantly, up 8%, 3%, and 2.5% year-on-year respectively. Among them, throughput revenue and gross profit of China's subsidiary terminals rose by 10%, 6.2%, and 6.6% respectively year-on-year. Although EUR and USD lending rates remain high, the company strengthened centralized management of overall capital debt and internal financing, and took various measures to cope with high-interest market environment. The company's net finance cost in the first half of the year decreased by 2.4% year-on-year. Profit from joint ventures and associates remained largely stable, up 1.1% year-on-year. Profit attributable to equity holders of the company declined by 7.4% year-on-year. Dividend payout ratio remained unchanged at 40%, with dividend of $0.0156 per share for the first half of the year. Next, let's take a closer look at revenue and gross profit of subsidiary terminals. Revenue in the first half of the year was up 3% year-on-year. Gross profit was up 2.5% year-on-year. For subsidiary terminals in China, revenue rose 6.2% year-on-year, and gross profit rose 6.6% year-on-year. Most of the China subsidiary terminals recorded year-on-year increases in both revenue and gross profit. Among them, Tianjin Container Terminal's revenue rose 6.8% year-on-year, and gross profit was up 11.6% year-on-year. The company will continue to strengthen Tianjin Container Terminal's logistics efficiency and network service capability in the northeast corridor in the future and increase domestic trade volume. Revenue from Guangzhou Nansha Terminal rose 2.5% year-on-year, with a slight decline in gross profit. The company will continue to steadily push forward development of bulk to container conversion at Guangzhou Nansha Terminal to form a specialized product. Revenue of Xiamen Ocean Gate Terminal rose 4.4% year-on-year. Gross profit rose 10.6%. Our company will continue to build Xiamen Terminal and Xiamen Haitou supply chain according to the port plus supply chain new model to strengthen its role as a regional hub. As for overseas subsidiary terminals, revenue increased by 0.1% year-on-year, and gross profit decreased by 5.9% year-on-year. Piraeus Container Terminal in Greece was mainly affected by the Red Sea incident. Revenue and gross profit declined. However, the company flexibly responded to the situation in the Red Sea and strengthened infrastructure upgrading and marketing development so as to continue to consolidate Piraeus Container Terminal's hub position in the Mediterranean region. Revenue of COSCO SHIPPING Ports (Spain) Terminals, S.L.U. rose 14.9% year-on-year, and gross profit rose 39.4% year-on-year. The company will continue to focus on increasing rail shipment volume and utilize regional advantages to play a more important role in the land and sea corridor between China and Europe. The CSP Abu Dhabi Terminal benefits from an accelerated pace of development to turn it into a Middle East hub port and continue to strengthen its roots. Throughput rose 35.7% year-on-year. Revenue and gross profit also rose simultaneously, up 14.5% and 38.2% respectively. In the second half of the year, the company will continue to improve operational efficiency, increase revenue, and reduce costs, and enhance operation and profitability of its overseas subsidiary terminals. Now let's look at the regional distribution of profits. Terminal profit was $203 million in the first half, of which China's terminal profit in the first half amounted to $183 million, up 1.7% year-on-year. Of which Bohai Rim Region is the company's largest profit contributor by region, up 5.1% year-on-year. In the future, the company will continue to grasp the opportunity of the comprehensive revitalization of the Northeast to further explore inland hinterland market in this region. Yangtze River Delta region's profits were down 10.2% year-on-year. The main reason for the decline is the greenfield project, Wuhan Yangluo Terminal, was recently put into operation incurring higher fixed costs. In the future, we'll continue to take advantage of the terminal's railroads and strengthen marketing efforts to build its role as a hub and distribution center in the middle and upper reaches of the Yangtze River to improve utilization rate of the terminal in Wuhan and the level of revenue. Profits of the Southeast Coast are up 9.1% year-on-year, mainly due to Xiamen Ocean Gate Terminal driving up the profit share in the region. Profits of the Pearl River Delta region were down 5% year-on-year, but volume of foreign export is expected to rebound in the second half, driven by expected rebound in demand in the European and American markets. Profits of Southwest Coast region were up 4.6% year-on-year, with profitability in regions set to improve further in the future, driven by the new land and sea corridors in Western China, as well as favorable economic development in RCEP and Southeast Asia. As for overseas terminal profits in the Mediterranean region declined year-on-year due to impact of the Red Sea incident. However, as mentioned earlier, the company continues to strengthen market development of the Piraeus Container Terminal in Greece, and its position as a Mediterranean hub will continue to be consolidated. As for CSP Abu Dhabi Terminal, we will accelerate process of regional hub construction and improve its trunk and feeder route network. In Northwest Europe, year-on-year rise in profit of 60.5% was mainly due to strong growth of the COSCO SHIPPING Ports (Spain) Terminals, S.L.U. In Southeast Asia, profit of COSCO-PSA Terminal in Singapore remained stable, up 2.2% year-on-year. Other regions currently account for less profit share, but in the future, the company will vigorously expand into Africa, South America, and other overseas emerging markets, of which COSCO SHIPPING Ports Chancay Perú S.A. is our most anticipated project in the near future. It is expected to be put into operation on schedule. In the future, we will continue to develop the Chinese market, strengthen cooperation with Ocean Alliance, continue to deepen the synergies between ports and shipping companies, and promote linkage between trunk and feeder routes, as well as strike a balance between domestic and international trade so as to promote the stable growth and improve efficiency of the terminal portfolio. In terms of the balance sheet, as of the first half 2024, the company's cash and bank deposits amounted to $980 million, of which RMB accounted for about 47%, EUR 15%, and USD 34%. Total debt amounted to approximately $3.16 billion, of which RMB accounted for about 32%, EUR 17%, USD 49%. CapEx in the first half of the year amounted to about $330 million, of which approximately $74.52 million was spent on investments, including an increase in shareholding in Beibu Gulf Port Co. for approximately $50.74 million. About $250 million was spent on fixed assets, mainly on COSCO SHIPPING Ports Chancay Perú S.A. and COSCO SHIPPING Ports (Spain) Terminals, S.L.U., amounting to about $220 million and $11.67 million respectively. In the first half, the net debt to equity ratio was 31% and has been stable at a low level in recent years. In the future, we will continue to capitalize on the advantage of our low leverage and focus on emerging markets with high development potential. At this stage, USD and Euro lending rates are at high, and the company's average bank borrowing costs have risen to 5.43% as a result. However, in the first half of the year, we enhanced overall capital utility by appropriately controlling CapEx and reducing the size of our debt, with the exception of terminals under construction. At the same time, we capitalized on market differences by replacing high-interest US dollar loans with offshore RMB loans. Through these various measures to further expand financing channels and optimize debt structure, net finance costs in the first half decreased by 2.4% year-on-year, despite the fact that interest rates in Europe and the U.S. are still at a high level. In the future, as Europe and the U.S. step into a potential interest rate reduction cycle, it will be more favorable to the company's financial control and capital management. Now, I would like to invite Mr. Chen to present the operational review of the company. Thank you, Mr. Zhao, for giving us a detailed overview of the financial performance. Good afternoon, investors and friends from the media. Now let me introduce the performance on the operational side. In the first half of the year, the company's total throughput reached 69.86 million TEU, up 8.2% year-on-year, with a steady overall growth rate, of which the total throughput of China terminals reached 53.34 million TEU, up 9.5% year-on-year, mainly driven by the strong growth of the Bohai Rim and Southwest coast regions, which are expected to continue to benefit from the Beijing-Tianjin-Hebei synergistic development. The comprehensive revitalization of the Northeast and expansion of industrial chains to the central and western regions of China, as well as other major national strategies in the future. Total terminal throughput in overseas regions amounted to 16.52 million TEU, up 4.1% year-on-year, with CSP Abu Dhabi Terminal continuing to perform strongly. Equity throughput rose 6.3% year-on-year to 22.05 million TEUs, of which equity throughput of China terminals rose 9.1% year-on-year to 15.84 million TEU, with significant year-on-year increases in the Yangtze River Delta and Southeast coast regions. Going forward, we'll further strengthen construction of Wuhan Terminal's sea-rail intermodal transportation corridor, broaden the scope of our products and services, and strengthen our hub function in the middle and upper reaches of the Yangtze River. Xiamen Ocean Gate Terminal and Quanzhou Terminal will further enhance their regional roles according to their own target positioning and improve their ability to provide integrated supply chain solutions for industry leaders. Equity throughput of overseas terminals was 6.2 million TEUs, a slight decrease of 0.4% year-on-year. In the future, we'll continue to strengthen port and shipping synergies with the dual brands of China COSCO Shipping, proactively contacting other shipping companies, striving for the introduction of new routes and extra ship berths, so as to maximize throughput growth. In the first half of the year, container volume of subsidiary terminals as a whole was positive, up 8% year-on-year, with largest contribution coming from domestic routes, up 28.5% year-on-year, with foreign routes throughput up 6.7%. Against the backdrop of the significant increase in domestic trade volume, the average revenue per container of domestic subsidiary terminals continued to remain stable, up 0.6% year-on-year. In terms of overseas terminal rates, we have been closely following the development of the shipping market and have formed business negotiation programs by combining factors such as terminal operating objectives, internal cost changes, and customers' long-term contributions. Throughput of the company's eight major subsidiary terminals also showed steady growth, with total throughput rising 8.4% year-on-year in the first half of the year. Benefiting from the dual brand strategy, COSCO SHIPPING Lines and OOCL contributed significantly higher volumes, up 10% and 8.3% respectively. The volumes of other shipping alliances also saw varying degrees of growing. Looking ahead, in China, we will focus on the optimization of cargo type structure in line with the objectives of preserving and promoting growth and efficiency, and strive for continuous expansion of container volume, revenue and profit. Overseas, we will continue to strive for more ad hoc vessel calls in the short term. In the medium to long term, we will continue to pay attention to the demand for routes and the development of feeder routes, taking into account the long-term value of our customers. We'll also combine needs of key industry customers, give full play to our own strengths, provide better services for upstream and downstream industries, and strive to achieve synergies and maximize value for all parties. In terms of integrated development, the company has accelerated construction of a globalized logistics supply chain ecosystem. We follow the latest developments of the global industrial chain closely and have created a full chain service centered around ports. In the first half, the Wuhan Terminal railway station incorporated a number of sea routes, intermodal transportation corridors to Europe and Southeast Asia, and markets for paper pulp, green supply chain products, as well as consolidation and deconsolidation of containers and other businesses have been further opened up. In the future, we will continue to build a new generation of integrated logistics hub ports, mainly focusing on the following. First, Xiamen Haito CFS project will string together core infrastructure such as terminals, yards, warehouses, and logistics park, continue to maintain high occupancy rate, enhance utilization rate through intensive management, and strengthen cross-border e-commerce supply chain services platform, and expanding the whole chain of logistics for Southeast Asia routes. Second, Abu Dhabi will focus on full-chain logistics services of chemicals, vehicles, home appliances, and other industries, and at the same time accelerate warehouse turnover rates through the development of special container businesses, which will divert volume from terminals and yards. Third, Zeebrugge will be committed to the construction of overseas warehouses for cargo types such as solar power panels and home appliances, and build a distribution center for automotive exports to Northwest Europe. We will continue to increase development of emerging markets, leading industry customers, provide customized full-chain solutions for customers, build a highly efficient, safe, and reliable supply chain logistics system, and promote globalization and scale development to achieve a new leap forward. The company has made great strides in digitalization, green and low-carbon transformation. In terms of intelligence and interconnected innovation, we focus on the construction of smart ports and strive to achieve a new reality of technological transformation and upgrading through the following measures. First, we have driven the commercial implementation of driverless container vehicle projects at Xiamen, Wuhan, Quanzhou, and Abu Dhabi terminals, with a total handling volume in first half 2024 increasing nearly 3 times year on year. We will promote further development of 5G smart ports at other terminals in the future, and also the use of AI. We will do replication in other subsidiary terminals. Secondly, the company has continued to improve enterprise asset management, EAM system, and is currently in place at 9 domestic subsidiary terminals. It will improve the maintenance and upkeep abilities of the headquarters and terminals, lowering procurement and maintenance costs. Third, implementation of MIS information management system can provide a visualized management tool to assist in operational decision-making. In this way, we can have better digitalized and process-based AI upgrading. Fourth, the company's warehouse management system, WMS, has been officially implemented at Abu Dhabi CFS to drive expansion of supply chain projects. Fifth, promote the use of GSBN and blockchain technology, increasing the IT technological and service levels at terminals, and improving synergy between ports and shipping companies. Upgrading from traditional operation model to the new operation mode of digital intelligence requires vigorously promoting construction of port digitalization. Therefore, we will continue to focus on building a replicable and scalable, intelligent and efficient type of modernized ports, and move towards large-scale application, forging a new advantage of sustainable and high-quality development. Now I would like to invite Mr. Zhu to introduce the strategic plans and outlook. Thank you, Mr. Chen, for presenting the operational review. Now let's take a look at the company's strategic plan and outlook. While our global network continues to expand in the face of a complex external environment, we need to take a holistic, proactive, and systematic approach to promote stability through progress, integrate growth in scale and efficiency, and accelerate innovation and transformation through synergy and capacity enhancement. The company's development strategy is centered on four major areas, namely: first, optimizing global terminal network. Continue to grasp opportunities from globalization, build a global terminal network, grasp investment opportunities in greenfield and brownfield projects with potential, and focus on development potential and opportunities in emerging markets. Second, grasping market opportunities. We'll utilize internal and external synergies to make continuous efforts to achieve substantial progress. At the same time, we'll seize opportunities brought by flexible business terms and differentiated services to guide overall improvement of container volume, revenue, and efficiency. Thirdly, improving operational quality. Accelerate green and low-carbon upgrading through the company's lean operation strategy and digital intelligence innovation, starting from automation of port operational processes and information management intelligence. Fourthly, we are committed to improving operational performance of terminal assets, deepening integrated operations, responding to upgrading of industrial chain structure, and transformation of customer demand, realizing the integrated operations of shipping plus port plus logistics, comprehensively optimizing resource allocation, and speeding up the construction of a new supply chain channel. While expanding our global business, we are committed to integrating concept of sustainable development into our daily operation and management corporate culture in order to fulfill our corporate responsibility and commitment to the environment and society. We have broadened our approach to sustainable development to be based on governance, resilience, agility, nature, and dynamic. We'll continue to improve energy conservation and carbon reduction, accelerate our path towards carbon neutrality, steadily push forward the construction of smart ports, and help build a green shipping industry chain that creates shared value for stakeholders. We have been actively supporting the United Nations Sustainable Development Goals and have identified the UN SDGs that are most relevant to our business operations and integrated them into our five major sustainable development areas. Our sustainability efforts have been recognized by the industry, including our continued inclusion as a constituent of the FTSE4Good Index Series in 2024, amongst other ESG-related indices. We'll continue to be socially responsible and are committed to achieving carbon neutrality by 2060. In the first half of 2024, although the global economy has shown a mild recovery trend and the trade volume continues to stable, overall growth rate is still relatively low. Looking ahead to this year as a whole, the global trade situation is expected to improve further and is expected to show a steady recovery. Focusing on China, we see opportunities brought by the long-term improvement of China's economic fundamentals. Exports are expected to maintain stable growth, which in turn will support the market demand. Combined with the rapid development of emerging market economies in Southeast and South Asia, Middle East, Latin America, and Africa, future growth is expected to be strong, which will unleash a new growth potential for the company's businesses. This year, we will continue to grasp development opportunities. In addition to taking government policies into account and actively seizing opportunities of national port resource integration, we will also accelerate the expansion of investment in ports with high development potential around the world. In addition, we will continue to expand the space for cooperation between ports and shipping companies, open up new business models, control costs by taking advantage of scale, and improve company's management to improve the quality and efficiency of terminal operations. We will closely follow the latest developments of the global manufacturing industry, continuously improve efficiency and utilization of our logistics resources, transform ports from a single terminal function to a comprehensive logistics supply chain hub, and improve the ability to serve customers' needs in an all-round way. COSCO SHIPPING Ports will continue to focus on new global development patterns, strengthen our global layouts and lean operations, and accelerate the speed of integration, digitalization, green and low carbonization. We will also strive to realize sustainable development with higher competitiveness, so as to accelerate progress towards the goal of building a customer-oriented, global leading integrated port logistics provider. Right. About our 2024 first half market and our operating results, that is all in my presentation. Once again, thank you investors and reporters for your interest in COSCO SHIPPING Ports Limited. We do understand that you have expectations about our development. In the future, we will seize global market opportunities and make contribution to global logistics supply chain. Through promoting our sustainable and high-quality development, we hope to maximize shareholders' value. Now we will proceed to Q&A. You are welcome to ask questions. Thank you for the presentation. Now Q&A session. You are welcome to ask questions. Before you speak, please state your organization as well and introduce yourself. Now we will invite questions. Greetings, management. I am from Oriental Daily News, and I have two questions. Just now, apart from the interim results, you also issued an announcement on disposal of the Tianjin Container Terminal, 20% stake to OOCL. Why such an arrangement? Is it because in the past few years after you get back the proceeds, are you going to have some M&A plans in the future? Will there be more shareholding of terminals to be sold to OOCL? That is my first question. Second, regarding the Red Sea crisis. The situation is still in a crisis right now. Regarding your overseas business, it has been influenced to a certain extent. In the second half of the year, how are you going to face up to this situation? Thank you. Right. Let me briefly answer your question. First, we sold part of the Tianjin Container Terminal stake to OOCL. This is to create more value for the company, and we can further reinforce our leading position in China. That is the reason. We want to reinforce our control in the Tianjin Container Terminal. This disposal does not affect our port's stake or shareholding in Tianjin Container Terminal. After completion of such transaction, there will be better international connection and also strategy synergy between COSCO SHIPPING and OOCL. For Tianjin Container Terminal business, other investments and its business can also be enhanced. OOCL's resources are mainly in green, smart port cooperation. This will be beneficial to our own Tianjin Container Terminal's own development. Our profitability of that terminal will be enhanced. The sale of such stake and also the share transfer and the related deal terms are regarded as fair and reasonable. They are in line with usual commercial logics, and they are also in line with our usual business practice and in compliance with our overall shareholders' interests. Perhaps you are more concerned about, starting last year, there was the Red Sea crisis, and also the Ukraine-Russian war and other geopolitical conflicts that may cause impact to the whole world, especially the logistics sector. In fact, since the crisis up till now, for our ports business, it is true that there has been some impact. However, we think that within the short run, we are quite good in responding to such changes in geopolitics. Basically, we have our unique competitive advantages, because behind us we have COSCO SHIPPING, OOCL, and Ocean Alliance. All these routes are our foundation. When we face up to these changes in geopolitics and also routes and lines change, and also changes in operations, we have realized the synergy between the shipping company and the ports. At the Mediterranean terminal, perhaps you are interested in Greece terminal. The volume has come down. However, comparing with other ports that are affected in the same way, our decline is the smallest, thanks to our group and also the synergy between the shipping company and the ports. The Red Sea crisis in relation to the trunk routes, for example, to Far East and other areas, the Mediterranean trunk routes were affected. But we seized the opportunities to work on intra-Europe and also other European routes so that we can do a better job with the resources. We have increased the call at port. That is extra cost. Comparing with other companies that were affected, to us, the impact was smaller. Of course, for the Spain terminal, there will be new opportunities because after the change, you can see that this year in Malaysia, the business volume increased fast. In all crisis, there are opportunities. We minimize the impact of the threat, and we seize the opportunities to the utmost. In the long run, from geopolitic point of view, and if you look at Red Sea incident, Ukraine-Russia war, they may continue for some time. We have some long-term strategies in place. We want to increase supply chain service extension and strengthen synergy with the shipping company. We need to seize opportunities from China exports and cross-border e-commerce, and those related products and customer demands. At the same time, we focus on global trade potential and hotspots and seize emerging markets. If our network and if our business scope is limited or restricted, then in the future we will be affected by uncertainties. Those are the black swan incidents will be more affected by then. But the world is big. If we have global layout, if we continue to extend our scope, then our ability to withstand unforeseeable risk will continue to strengthen. Thank you. Right. Thank you, management for the answer. Now, let us invite an online question. He is from HSBC. He has three questions. First question, about port, recent throughput. How is it recently, and what is your outlook, please? Yes. Let me briefly review. In 2024, in our presentation, we said already that overall trade, including port throughput, trade volume was stable. It has slight increase based on data that we have got. In the first half, global container freight volume was up 7.1% year-on-year. Port throughput, according to Q2 report in the first half, container throughput was up 6%. It is matching the 71% number for China ports in the first half. For container throughput completed 160 million TEUs, comparing with same period last year up 8.5%. In the top 10 ports in China, Shenzhen, Suzhou, Zhuhai Port, Beibu Gulf Port Co., Rizhao, well, they exceeded double-digit growth. In Europe, in the first half, throughput was up 5% year-on-year. We think that when European central banks will end the interest hike stage, they will go into interest cut. Companies need to advance their plan about destocking. We hope that throughput will continue to grow. In U.S., with high inflation and high inventory pressure, when this pressure is being alleviated, Transpacific East-West demand for two consecutive years has been negative growth. Now, we are going to see a rebound. In the first half, in North America, throughput came down 13%. When global manufacturing industry is going to recover, there is the Belt and Road Initiative, a deeper integration and emerging countries rise, well, for rapid growth in global trade demand, there will be some strong driving force because of the factors I mentioned. In the first half, Southeast Asia throughput was up 7% year-on-year. Latin America up 9% year-on-year. Africa, throughput rose 9% year-on-year. That's about the first half, about our ports and our industry. These numbers are about throughput. Looking at the whole year this year, because of geopolitical impact Economy and trade and also industrial chain shifts. Well, there would be some restructuring, so there would be many uncertainties. Overall speaking, regarding shipping and port business, there will be both challenges and opportunities. The good thing is, looking at now, basically, freight volume has stabilized, and we have seen some sign of recovery. Now, according to statistics, for the whole year 2024, global throughput would be rising by around 10% in China. Second half of the year, based on 8.5% growth in the first half, will continue to sustain this positive trend. For Europe, throughput may achieve a mild recovery. For the whole year, growth rate will be 4.5%, and Western, Northern Europe are more or less the same. In overseas ports, our major focus is on West and North Europe. We hope that the growth may reach 4.5%. In Mediterranean, growth rate will be even higher at 7.3%, with recovery of global economy better than expected. Well, now in the U.S., in September, there will be rate cut expectations. We think this will promote continuous recovery of global trade. In the future, in the shipping market, there will still be difficulties and challenges. We will seize opportunities and focus on global layouts, and then face up to changes in the overall supply chain. We will develop Southeast Asia, South Asia, Middle East, and also Latin America, these emerging markets. We hope to achieve increase of growth amidst stability. Thank you. Second question. In the coming few quarters, what is your outlook about revenue per segment, and what do you think? Okay, let me answer this question. Looking at first half this year for the unit income, well, that is denominated in RMB, mainland subsidiary terminals up 0.6%. For overseas, there is slight decline by about 0.5%. Mainland terminals, well, for domestic trade business, there is quite big growth, so we're still able to maintain a slight increase. As you know, for domestic trade, unit income overall is lower. But for domestic trades having increased, our unit income can still grow. Main reason is our source of cargo structure has optimized. So in other words, our ratio of local port cargo has increased. For overseas terminals, there is slight decline because this year, overall supply chain is quite smooth. In the past, there was a lot of stockpiling at terminal, and so this had been alleviated. So as a result, our income from stockpiling has been affected. Besides last year, for the consolidation and deconsolidation revenue, last year the base was low, and this year on a year-on-year basis, this kind of income has changed. These two factors together, our overseas terminals unit income slightly declined by 0.5%. Right. Thank you, management, for the answer. The third question is, in terms of CapEx, how much would it be, and what is your future guidance? Let me take this question. In 2024 first half, actual CapEx was USD 1.327 billion. There are two parts. First, headquarters equity investment, USD 73.52 million, mainly to increase stake in the Beibu Gulf shareholding, USD 50.74 million, and the Sokhna Greece project, USD 8.75 million. Then for terminal fixed assets, USD 252 million, mainly in the Spain terminal, USD 220 million, and USD 11.67 million in the other terminal. For 2024 whole year investment plan, we have made some adjustment. After adjustment for the whole year, the budgeted CapEx would be about USD 890 million. This amount is the upper range of the yearly CapEx. Actual amount will depend on progress of various projects. For the whole year, the completed, the actualized figure will not be higher than that. So USD 890 million is divided into two parts. One, whole year equity investment that is expected to be USD 230 million. The other part is fixed asset investment, USD 660 million in Peru and Spain terminals and also Guangzhou Nansha Terminal fixed asset investment. Thank you. Thank you, management, for the answer. Let's see whether there are questions from participants on site. Okay, then let's continue to take questions from online investors. There are four questions here. First question is about unit operating cost. So how much is it? Our operating expenses and operating costs since the first half of 2024, comparing with 2023, in RMB terms, in the first half, domestic subsidiary terminals units operating cost was down 3%. This is mainly because of two factors. One, business volume increased. So based on our data, in the first half of this year for mainland subsidiary terminals, throughput increased by about 8%. The second reason is, even though there are other factors, CPI increase and so on, for our ports, there is lean operation. Then we use digitalization and automation to control costs, to save costs. So as a result, some costs and expenses have become more effective. So in the first half of this year, our overall unit operating costs, comparing with last year in RMB terms, has come down by 3%. In the future, we'll continue to improve our operating efficiency. So we will increase revenue and lower costs, especially in terms of cost control. We will make use of our scale advantage and technology to promote lean operation and management. Thank you. Second question from China International Capital Corporation. In the first half, mainland ports and terminals throughput performed well for the whole year. This year, what is your outlook for the whole year throughput? Okay, I will answer this question. As presented in our report, this year, in the first half, overall volume increase reached 8.2%. This performance is better than the whole market. The market is at 6%. It is divided into domestic and overseas. For domestic, first half growth was 9.5%. This is better than the 8.5% being announced within China. For overseas, we reached 4.5%. Comparing with the whole market, we are better than the overall market. That is the report on volume. Thank you. The third question is, for Peru Chancay project, after it is commissioned, what will be the impact on your profit, and how much increase will there be in your profit? Let me take this question. As you know, for the COSCO SHIPPING Ports Chancay Perú S.A. terminal, it is a greenfield subsidiary terminal. Right now it is in construction stage. According to our high standard and specifications, and for our estimates, at the end of this year, construction will be completed. It will start operation. For COSCO SHIPPING Ports Chancay Perú S.A. terminal, well, it is not only about regional development. It will be our important logistics port in South America. In the long run, in terms of our business and our future profit development, it will be an important support point. But as you know, a terminal's development from a greenfield terminal, gradually, it will be moving towards brownfield. There will be this transitional period. During this transitional period, we need to put in a lot of effort and work. We believe that with our effort, with our nurturing, we have confidence, because in the past few years, for our port company, we have done a lot of greenfield, controlling share terminal projects like CSP Abu Dhabi Terminal. With higher utilization rate of terminals, higher efficiency, and more effective cost control and revenue increase measures, overall business revenue profitability, all these can be enhanced. Thank you. Thank you, management. Last question is, in terms of new investment project, do you have any plan? Thank you. Let me take this question. Just now, in our interim results presentation, we said that in the first half, we completed Egypt Sokhna New Container Terminal investment project settlement. Right now for the Chancay greenfield construction, now it is almost towards the end. Towards the end of the year, it can start operation. These two projects can help us in Suez Canal and South America and fill some loopholes in our network. For future investment, we will have global layout, and we will gradually build our global operations. That is an important strategic support. We will pay attention to investment opportunities in the emerging market. According to our overall strategy and plan, and also logistics trends, we will also support route design of liners and also seize the opportunities from third country, region, and other various regional markets. Thank you. Let's see whether there are any questions on-site. Because of time, we will answer last two questions. Any questions from attendees on-site? Okay. Let me see whether there is question online. Here's a question from Singapore United Overseas Bank, and the question is about the company's terminal throughput. He would like to ask about four terminals and the actual operations. Xiamen Ocean Gate Terminal, Guangzhou Nansha Terminal. Can you first talk about the operations of these terminals? Thank you. Let me take these questions. In the first half of this year, for these two terminals, they maintained growth trend. But according to our observation, the Xiamen terminal's growth was only 2.5%, smaller than our overall growth. The main reason is because of the Red Sea crisis. Many shipping companies have reorganized their shipping routes, especially the Ocean Alliance. There is a group of European routes, which were restructured, reorganized, or even canceled. They call on Xiamen and the contribution to the business was big. With cancellation of such routes, throughput growth for Xiamen was weak. Based on communication with shipping companies, there would be an end to the Red Sea crisis, and in the future, there would be more capacity being released to the market. For Xiamen terminal future growth, we have quite strong confidence. For the Guangzhou Nansha Terminal, its situation is more or less the same as Xiamen Terminal. Its growth was 6.5%, smaller than our company's overall growth. In Europe, there are changes in the route business lines, so that caused the most impact. He also wanted to ask about two other terminals. The first is the Euromax Terminal Rotterdam. The other is the Waalhaven Container Terminal. For these two terminals, the throughput declined year over year. What do you think of these two terminals? Let me answer your question. For these two terminals, one is the Waalhaven Terminal, the other is the Euromax Terminal Rotterdam. I think they are mainly affected by the Red Sea crisis, especially the Waalhaven Terminal. In the past, there used to be an Egypt to Waalhaven Terminal feeder line, and the business volume went through Suez Canal to Mediterranean. That supports the business there. Because of the Red Sea crisis, the business volume through Suez Canal was much affected. Concerning throughput at Waalhaven Terminal, there was negative impact as a result. In the future, together with our shareholders, we are in active communication. We hope that by means of rail and other connections, other measures, we can enhance business volume of the Waalhaven Terminal. For Euromax Terminal Rotterdam, again, it was impacted by the Red Sea crisis, and there are some routes that have been changed. For the Euromax Terminal, the routes lead to impact in business volume. There is slight decline, not reaching 2% decline. When Red Sea crisis was alleviated with release of capacity, the Euromax Terminal throughput and business volume should increase. Thank you. Let us see whether there are any questions on site. Okay. There are still quite many questions online. Here is a question. In the future, in Europe and the U.S., interest rate will be cut. What will be the impact on the company? Do you have measures to lower costs, please? Thank you. Let me take this question. You can see that in 2024, actually in the first half, USD lending rate is still at a high level. Given such circumstances, we have done a lot of work. We enhanced our overall centralized management of our debts and capital. Our company, well, did a lot of internal integration work in terms of capital. Apart from the terminals being constructed, we exercise management and control of CapEx to compress our business scale, which led to good results. For bank loans, we did a debt reorganization and replacement to lower the interest spread between lending rates. Besides, we use the advantages of different markets like RMB market, USD market. We looked into some feasible options. In terms of duration and currency structure, we have put in place different measures. Our approach is very flexible to face up to the high interest rate environment. In the first half, through all these different efforts and approaches, in the first half, our net financial cost came down 2.4%. In the future, in terms of rates hike, how can rate hike turn into a rate cut corridor? For our debt structure, USD accounts for bigger share. If there is rate cut, then to our finance cost, that would be favorable. In terms of fund management, wealth management, we have more room to do more work. Thank you. Thank you, management. Last question is about MIS system and EAM system. How is the utilization of these systems? Are there ways to quantify your operating efficiency improvement and also cost control effectiveness? Overall speaking, for our terminals, we are doing digital transformation. At the headquarters of our terminal company, it is an EAM system and MIS system. For the MIS system, in terms of digital governance platform on the mobile end, and also COSCO SHIPPING Ports data port integration, we have seen some preliminary effects already. For EAM, we are in the front stage. After all the nine terminals deployments was completed, then in terms of digitalization and AI analysis, we will be moving towards all these. Overall speaking, these systems are running in a stable way. When it comes to quantification, if you look at EAM, this system is mainly about equipment maintenance. Through online EAM maintenance system, up till June this year, comparing with the same period last year, we realized that for most terminals, the inventory cost had come down on average by 12.5% for maintenance costs at different terminals, especially those with bigger scales like Guangzhou Nansha Terminal. When it comes to components and spare parts maintenance, the cost came down to 39%, and for Tianjin, down 13% year-on-year. With informatization system and also advanced tools being used for our lean management and also cost and expenses management, I think we have done a lot and the outcome is satisfactory or even exceeded our expectation. Thank you. Thank you, management. Because of time, we will conclude the results announcement here. Thank you very much for your long-term support and interest. Thank you.