Annual 2013 China COSCO Holdings Co Ltd Analyst Briefing (Mandarin and English)
Mar 28, 2014 AM EDT
601919.SS - COSCO SHIPPING Holdings Co Ltd
Annual 2013 China COSCO Holdings Co Ltd Analyst Briefing (Mandarin and English)
Mar 28, 2014 / 08:30AM GMT
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Corporate Participants
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* Runjiang Tang
China COSCO Holdings Company Limited - CFO
* Huawei Guo
China COSCO Holdings Company Limited - Secretary of the Board
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Conference Call Participants
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* Yao Sing
- Analyst
* Chang Tau
China Merchant Securities Co. Ltd. - Analyst
* John Longtin
Goldman Sachs - Analyst
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Presentation
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Operator [1]
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Ladies and gentlemen, good afternoon. Welcome to the China COSCO Holdings Company 2013 annual results presentation.
First of all, let me introduce the members of the management to you. Mr. Jiang Lijun, the Executive Director and President; Mr. Runjiang Tang, Chief Financial Officer; Mr. [Zia Jing]; Mr. [Wan Jing] also participates in Hong Kong; and we also have Mr. [Hiang Ja,] the [Tungsan] Group. Mr. Hiang Ja and we host our meetings both in Beijing and in Hong Kong in order to meet the demands of our investors.
We now go over to you the 2013 annual results and also, we would be happy to answer any questions that you may have.
We will conduct this presentation in Putonghua, but we do accept questions in English, which will be translated into Putonghua.
So shall we invite our CFO, Mr. Tang to walk you over some of the financial highlights?
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Runjiang Tang, China COSCO Holdings Company Limited - CFO [2]
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Ladies and gentlemen, good afternoon; welcome to the China COSCO Holdings Company Ltd 2013 annual results presentation.
First of all, we will go over four parts. First is the financial review; then there is the business overview; and also, marketing and operations overview; and the fourth part would be outlook.
Now, let me walk you over the 2013 performance which will be based on Asia's data. In 2013, our Company realized a revenue of RMB66.113 billion, which is a decline of 3.12%; and the net profit attributable to equity holders is RMB235 million, which is a 102.5% increase over last year; and the earnings per share is RMB0.25 (sic - see slide 5, "RMB0.023") and we recommend a final dividend.
Now, the financials. In 2013, we have sold [Tianhongli] Logistics Company and also another company. We took over [RMB290] million and also in Qingdao and Shanghai, two assets, total income is [RMB369] million; and to cut off deducting the deductions, the attributable part is [RMB6.9] billion in [20] -- Revenue has also decline of 1.5% being in the range of [RMB442.5] billion.
Our shipping revenue has declined by 12.6% and our gross profit declined by [63.8%] and our terminal income increased by 9.5%. It's a year-on-year increase of [1.4%].
Now, as of December 31, 2013, our total asset is RMB161.9 billion and interest to the mother company is [RMB23.5 billion] and as of our cash and cash equivalents is RMB48.2 billion which is an [RMB1.8] billion increase over last year, of which our operating activities net outflow is negative RMB2.3 billion which is huge improvement over last year and our investing activities is in the range of RMB811 million.
Financing activities cash flow is RMB4.11 billion, which is a decline of RMB9.8 billion over last year.
Now, the third part would be the market and operational review. The demand continues to be weak and the larger vessels continues to be delivered and we continue to see an environment where supply is larger than demand.
CCFI continues to be low; it's a negative 7.6% over last year, at the average rate of 1082. The BDI was 1206, which is an increase of 31%. However, the first three quarters continues to be below 1,000 points. In 2013, the 380CST declined by -- it was at an average of $618, a decline of 7.6% over last year.
As of the end of last year, there are 4 vessels on an order. We have a total current capacity of 173 vessels at 786,000 TEUs as of end of last year; we have on order book 4 vessels, those would be delivered in 2014; and in 2013, we do not have any new orders for new vessels.
In 2013, our container shipping segment achieved a revenue -- achieved a cargo number of 8.7 million TEUs, that is an 8.7% -- 8.5% increase. Our revenue was RMB425 million which is a negative 1.5% year on year.
Revenue from container shipping and related business was $68.6 million which is 0.5% (sic - see slide 14, "0.3%") better than last year. Our cost declined by [6.6%], however. Because of the increasing cargo amount, our costs have increased by 5.8%.
Our voyage cost declined by 8.5% (sic - see slide 15, "11.2%") of which fuel cost and fuel consumption declined by [8.9%] and [6.2%] and our vessel cost increased by 11.37% (sic - see slide 15, "11.6%") that's as of end of last year.
Our dry bulk vessel has 319 vessels and as of end of last year, we have 12 vessels for new dry bulk vessel orders. And our fleet in 2013, we completed 210 million tons.
We also have a decline of [13.3%] decline in terms of cargo and coal, as well as iron ore both declined. Iron ore declined by [9.3%].
In 2013, our dry bulk business as well as related cost declined by 23%. And that's because of the overall cargo quantity has declined.
As far as voyage cost, it also declined, of which fuel costs was [RMB45.7]. That's a 24% decline year on year.
Of our leasing, our vessel cost and our leasing cost declined by [30%]. And also, as of the same period last year, it was [RMB3.9] billion for the provisions.
As far as terminals is concerned, our throughput increased by 10.1%. As far as leasing is concerned, as of the end of last year, our leasing income was RMB2.1 billion, which is a 1.5% increase over last year. And TEU amount increased by 1.8%, which is higher than the market level.
Now outlook, container shipping; the gap between supply and demand has become smaller. Based on Clarkson's report, we expect that the demand will increase by 6% and capacity would increase by 4.6%. However, there is still a gap in between. And also, the larger vessels would take about 41% of total capacity.
As for dry bulk, also according to Clarkson, the 2014 demand for dry bulk is [3.9%] and the capacity would grow by [4.4%]. That is [1.7%] lower than last year.
Now, as of SSY anticipation, the global dry bulk demand would increase by [5.8%]; capacity by [4.7%]. Again, demand would grow faster than supply and the market would improve. However, the accumulated risk [is big] and that will continue to impact the market and it will take a while before the supply and demand shortage would be recovered.
And looking into the next year, we will continue to optimize our fleet structure and to take away obsolete fleets, in order to manage and also to enhance our efficiency and also to form our alliance structure.
As for dry bulk, we will continue to focus on our VIP strategy and also to seek synergies with our external parties to welcome on reinforcing the alliance and also, to enforce on our abolishing of older ships.
And as far as peer -- terminal control is concerned, we have four changes to make to improve our offerings and services. As for leasing, we'd like to extend into international, as well as domestic markets in order to build a world-class containership leasing team.
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Unidentified Company Representative [3]
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Thank you, Mr. Tang; now you're questions are welcome. The management is delighted to answer your questions.
Because this is a joint meeting of Beijing and Hong Kong, so I'd like to ask -- each side to ask one question in turn. And I suggest that each time, do not ask more than two questions and now please be as concise as possible, in order to allow more time to answer more questions. Now allow Beijing to ask the first question.
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Questions and Answers
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Unidentified Audience Member [1]
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I am [Yao Sing], an analyst. I have two more detailed questions. The first relates to in 2013, the freight has declined by 10% for shipping containers. This is just like with your other peers. They have a larger decline. I don't know whether this is to do with the strategy or the structure of your fleet.
And also with dry bulk 2013, it's around 10 million tons into 2014. Of the 10 million tons, how much would come into full term in 2014? And also, as of your -- there was 11 billion tons of dry bulk leasing; is that the total for 2013?
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Unidentified Company Representative [2]
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Now allow me to ask Mr. (inaudible) to respond to the first question.
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Unidentified Company Representative [3]
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You asked mainly about 2013, the overall decline of the shipping container business and when compared to other companies, what are the differences and what are the difference in measures that we've done; I'd like to answer in two parts.
One is that we have actively controlled our capacity because everybody hopes to have increases in both quantity and price. From this perspective, we see that in the past year, in terms of controlling of our capacity, we actually stopped some voyages, restructured some routes. That is beneficial to the improvement on quantity and price, and we sought for more opportunities for ourselves.
And also, from visiting of customers and seeking their feedback, we actually pushed/launched some specific measures, including special attention paid to VIP customers and the improvement of our integrated services.
In the middle of last year, starting from the booking of space to collection of our fees, we actually committed to five different areas of service standards.
And we also structured some shipping routes, in order to seek further market share. We also innovated in some of our domestic lines. For example, we were the first to seize the opportunities with our network, as well as the e-commerce. We launched the online booking platform. This is something of a pioneer in Mainland China and it has been largely welcomed by our customers. So these would be mainly the differences.
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Unidentified Company Representative [4]
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Second and third question, Mr. [Hua] will take them.
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Unidentified Company Representative [5]
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Leasing, we have 11 vessels I guess this year. As for the 10 billion ton commitment, I do not think that it was for this year. I recall that for 2013, the commitment was 3 billion tons and that includes all the contracts that would complete this year. That's my understanding of the data. You were looking at 10.3 billion tons, correct?
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Unidentified Audience Member [6]
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No, it's 11.5 billion rather.
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Unidentified Company Representative [7]
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You're talking about the contracts that we have on hand, all of the commitments. That number would describe all of our commitments. Can you understand the answer? Meaning that this is a total amount for all the contracts including two to three-year contracts, so it's not only to be attributed to 2014. It would also extend into 2015 and 2016 because each vessel would have a different term, different contract --
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Unidentified Audience Member [8]
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Okay. Thank you.
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Runjiang Tang, China COSCO Holdings Company Limited - CFO [9]
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Now let's take a question from Hong Kong. Can you hear us? Do you have a question? Not for the moment, okay. Thank you.
Okay, let's come back to Beijing. Do you have any questions regarding the performance and the reports that we have made?
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Unidentified Audience Member [10]
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Yes, I have a question. I'm from [Joshi Funds]. We have so much commitment to leases, and that would be probably booked in the balance sheet as liabilities, I guess. How does that compare to the BDI index? And with the current BDI level, would you anticipate some new losses?
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Runjiang Tang, China COSCO Holdings Company Limited - CFO [11]
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So this liability is based on BDI 1,500 standard. Now, it's not to say that we are booking all these as liabilities for all the contracts. According to accounting principles, we only took those that are already locked in and those that are within a year; we only booked those. As for the longer contracts, it's harder to anticipate.
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Unidentified Audience Member [12]
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Do you [rule] any further losses?
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Runjiang Tang, China COSCO Holdings Company Limited - CFO [13]
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Yes. Within a year, our exposure is estimated according to 1,500 BDI and also, we base on this to calculate the locked-in losses.
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Unidentified Audience Member [14]
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So how much are those locked-in losses?
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Runjiang Tang, China COSCO Holdings Company Limited - CFO [15]
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Really not too much.
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Unidentified Audience Member [16]
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When you talk about the locked-in part, what I mean is of all the contracts, how much does the locked-in part take -- compose of?
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Runjiang Tang, China COSCO Holdings Company Limited - CFO [17]
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I guess that's around [RMB1 billion]. So you understand the answer. Thank you.
Any questions from Hong Kong? There's no question from Hong Kong, so let's come back to Beijing again.
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Chang Tau, China Merchant Securities Co. Ltd. - Analyst [18]
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[Chang Tau, Merchant China]. I'd like to ask what is your outlook of the container shipping market? How do you look at the impact of the FMG and the iron ore prices?
Also, the alliances, the three companies that would align themselves together in order to enhance their pricing power for iron ore. What is your view on that?
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Runjiang Tang, China COSCO Holdings Company Limited - CFO [19]
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Well Mr. Hua, perhaps?
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Unidentified Company Representative [20]
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Iron ore prices actually has come up this week. When it was low, it was slightly above [RMB100], and it has already rebounded -- bounced back. The fall previously was because of several reasons. The first was that the inventory was too high. The aggregate amount was in excess of 10 billion.
Also, there were seasonal reasons. The demand has not come back; therefore, the price has been at a low level. Also, because of the macroeconomic data of China being not so strong, that has also an impact on the iron ore prices. But you all know this cost around RMB100; if anything goes below that, imported ore would immediately -- takes replacement.
Also, because of environmental issues, the iron ore prices continue to drop and lately we -- however, we have seen a rebound lately. But it's not very strong. We don't know how much it will increase.
Last year, mainly it was Australia; there weren't much increase from Brazil. This year, the Australian players, FMG and also some of the smaller mines invested by Chinese companies like Citic and Anshan, these were all exporting. So I guess it's around 70 million exported from Australia this year.
For Brazil, they were also increased and the [Classic] mine in February this year is already into operation. Therefore, we anticipate that we will have a lot of supply, therefore, exerting pressure on ore prices to come up.
Now, how does it impact our cargo and importing volume? It's because of the substitution effect that I just now talked about. The demand still exists, however -- despite the fact that it seems quite weak now, but as weather becomes warmer, demand would come back.
Also, with the increase in steel prices, I believe the demand would continue to grow. It was 820 million tons last year, so I believe this year we should somehow expect around 900 million tons. We are quite optimistic in fact.
Second question.
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Chang Tau, China Merchant Securities Co. Ltd. - Analyst [21]
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Last October, the Maersk and SGM and another ocean liner announcing that they would align themselves in terms of the Pacific and European lines. From the data that we see now, altogether they would contribute 250 vessels into these routes. And they would cooperate in all aspects.
They put the vessels into a pool, a common pool, a common operation platform; this is a very close cooperation. So, after the announcement, it of course had a lot of impact in the shipping industry. The FMC in America is now voting and of the five committee members, only one objected.
So they were concerned that for suppliers and for cargo owners, this may be a negative impact. However, from our perspective, this definitely has a large impact on the overall shipping industry, and the impact would be in different perspectives.
First of all, it will fundamentally change the competitive landscape, which means that the originally quite dispersed carriers, ship owners, they are aligning themselves, strategically and operationally. That is going to enhance our concentration in the industry, and it will also raise the threshold of competition.
Now secondly, the three companies, the three companies, they are currently three of the largest carriers in the world. So once they are aligned, basically, they have a very strong position in terms of cost competitiveness. As you can see, they have a lot more larger vessels. And they are still having new vessels done, or made.
In 2014, the new capacities would reach 1.46 million tons, which is larger than last year. And for upcoming orders, you can see even more, up to the 4 million ton rank.
Of course, they would then enjoy cost competitiveness, but of course, they would have to reach a very high cargo volume in order to realize these economies of scale.
Therefore, the cost per [ETU] would be lower by $250. This definitely is a very good advantage for controlling operating costs within the alliance. And also, on such a big alliance, it definitely has the ability to stabilize freight and they have a good pricing power.
Because it has cost competitiveness, it probably or it may try to maintain a low freight for a longer period of time, which is a rather big danger for the other carriers. So this is what the other carriers would go into; new alliances or new integration, in the future.
Another area of impact is relating to terminals and related services, as well as for cargo owners. With the P3 alliance, which has already made an application with the Chinese Government, which is being with the Ministry of Commerce and other ministries, it's -- the application is being processed.
The terminals would make use of this opportunity to try to seek the business of these alliances vessels. This would also increase the competition between different terminals.
So any further supplement? So any questions from Hong Kong? The one at the back, I just can just see a hand waving.
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Unidentified Audience Member [22]
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I am (inaudible) from [Gongyi International]. Containers, shipping, you were good in terms of reducing cost, and as far as margin is concerned, you are only 2 or 3 percentage points close to break-even.
Now, since last year, from -- or this year, the beginning several months, it doesn't look as if the freight would improve, despite that, especially in the European lines.
However, the price hike in March does not seem to be successful. And for American lines, after one round of price increase, the demand seems to be quite weak.
So what is your view on this? Including with European lines in the busy seasons, what is the price that you are expecting? And some consultants have said that this year, it seems that using short-term charters, or short-term contracts, that ratio would come up, and freights would continue to fluctuate. Now, that's my first question.
Second question is regarding the negotiation of contracts. That has already started, I believe and can you disclosure more details?
And all in all, I'd like to understand the 2 to 3 percentage point of losses that the shipping container segment suffers this year. Is there any chance that it could reach break-even this year?
And the third question is with the throughput. Can you provide more details about throughputs for different lines, so that we can analyze better? Thank you.
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Unidentified Company Representative [23]
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Thank you for your question. May I answer your first question first? For the first two months of this year, just like you said just now, judging from the business results, it is as we have expected, it is an improvement over last year.
And what -- and the second question relates to freight for European lines. Now, this is where we are right now. First, this year we continue to have four vessels of 13,350 to use, ready to use, that would be delivered this year.
So the capacity would reach 1.4 million, of which there are a lot of larger vessels; around 67% would be larger vessels. So we are quite concerned, the delivery of larger vessels.
Basically there are two ways that we would use them. One is with Asian-European lines, and some shipping companies are using them in the Far East, as well as American lines.
So, with the larger vessels going into operation, especially within a context where there is an excess in capacity, we are concerned that freight would continue to fluctuate and the downward pressures.
Now despite of this, the measures that we have put in is that we urge for the reasonable attitude amongst ship owners. We hope that ship owners would try to control overall capacity.
We, through various measures, including management styles and management and technical improvements, and cost control measures, to also try to control the situation. Now, ever since the start of the year, we are concerned about the -- how we maintain our basic European clientele.
With the assumption that we will have the same volume of cargo, of course, one being our basic customers, because our European customers in European market, 40% would be our basic customers. So we like to enhance our services and to understand better what customers' needs are, in order to try to maintain these customers.
And on the other hand, we would actively try to raise freight, in order to maintain relative stability. Of course, we will have to promote more and communicate more and build relationships.
Just like what you have said just now, the performance for last year, despite that we have not reached the high level that we anticipated last year, but overall it has been quite good.
So this year with our European lines, it is one that both comes with challenges, meaning fluctuations, as well as opportunities.
This year we must pay attention to keep or to maintain a certain level of cargo volume because the vessel has to be 80% loaded, or maybe 90%, 95%, or even 100% loaded. This is actually very important criteria, however, for us to improve our prices.
However, the supply and demand conflict continues, the gap continues to be large this year. Therefore, we hope that through our active attitudes and measures, and customer relations building, we hope that we can support our freight. Of course, quantity has a lot to do with freight.
We also have to pay attention to fluctuations. Two weeks ago, the TS meeting at Dubai, it has already been decided that, starting April 1, there will be an increase of $300 per TEU. This is already March 28, so I guess we probably would be successful in raising the price by -- the freight by RMB300.
Now, secondly, you talked about contracts, American service contracts. You asked for details for throughput and cargo volumes for different lines, right. So yes, thank you for your questions. In our previous presentations, we did include such detail, and it's also in our annual report.
Now, with investor relations/management is concerned, we definitely have the obligations to disclose such information to our investors and analysts in order for you to analyze yourself. And this is also a matter of transparency.
However, we do encounter some difficulties. Frankly speaking, some of our directors, as far as disclosing management data to investors, they hold different views. Your suggestions are good and we will reflect that with our Board.
We do have this data if you need them. We can supply them because these data are not disclosed with our annual report, and this presentation has also to be put online. So if we include this in our presentation, while it's not in the annual report, it might be not so appropriate. However, if you need, then our colleagues would contact you and provide you with the data. We are aware of this issue and we will try to improve them.
Just now, we have very clearly indicator that we used to have such information in our annual reports, but we no longer do. And because of this, we cannot disclose it in our PowerPoint presentation. However, if you need such information, we will provide them to you on individual basis.
Now, is there any question from Beijing?
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Unidentified Participant [24]
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Respected management, I have two questions. First is about our balance sheet. In the past two years, we have seen some so-called blown up situation with our balance sheet that has come into the industry.
Now, I'd like to ask you what are your measures to manage your liabilities, your debts; and what are the methodologies of doing that?
And second question is regarding your US dollar revenue and US dollar cost. Now, the currency -- exchange rate changes of RMB, how sensitive is it to your -- how is your balance sheet sensitive to such fluctuations?
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Unidentified Company Representative [25]
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A lot of the revenue are in US dollars. We have about $40 billion cash, so we do have to take consideration of this issue.
Let me try to explain. As of December 31, 2013, our debt to asset ratio is 74%. 70% is because in the last couple of years, on the one hand, we suffered losses, and also, the committed capital expenditure does put pressure on our debt. This is something that we are very well aware of and are concerned with.
The operating loss has -- the net outflow will improve this year. As for CapEx, with the restructuring of our fleet and our new vessel plans, we will try to adjust our debts and cash flow.
We are highly concerned about this and we are also in close touch with changes in the capital market, and also the traditional bank loan, credit market, both domestically and internationally. We will try to improve our asset to debt ratio, as well as mitigate our exposures and risks.
Now, as far as RMB, our $48 billion for COSCO Pacific, it takes up a large part of that. And also, with our dry bulk and container shipping, these two segments, despite last year, both of them suffered losses.
However, looking at the past few years, we still have to say that the business pressure is still quite large, and we are hoping to make use of this low market point to perform reforms. And you may already know that we have planned for our fleet restructuring.
So looking at these factors, we believe that holding more cash in hand would mean a better guarantee on CapEx and expenditure. So each year, as far as -- based on our expectations on capital supply as well as exchange rates, we will do some exchange as well.
Our report says we have $48 billion; however, we will look at the ratio between RMB and US dollars in order to achieve a balance.
Any further questions from Hong Kong? If not, then let's come back to Beijing.
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Unidentified Participant [26]
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I have several more questions. First, with our current shipbuilding plan, the 2015 and 2016 CapEx, how will that be?
And also, last year there's a subsidy. I don't know whether in 2013 and 2014 the scrapping of vessels. What is your plan as far as total tonnage? And also, on page 13 the capacity for container shipping, if -- assuming that there will be no further orders in the next coming two years, the capacity will decline.
Would you try to stop this trend through the building of new vessels, or what are your plans?
Then I also see that in your annual report, saying that you will continue to push for an O-to-O, online-to-offline platform, just like some of the other players.
I don't know whether as the largest shipper in a shipping company in China, what is your e-commerce plan?
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Unidentified Company Representative [27]
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Can you first explain about the e-commerce for shipping containers segment please?
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Unidentified Company Representative [28]
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With 360 (inaudible) and the fast development of [Taubow] or [Timo], well we hope that one day the turnover's RMB30 billion.
This is an age of fast development of e-commerce and the Internet. Last year, we tried to seize this opportunity in finding an e-commerce platform for domestic trade, domestic businesses.
In Mainland China, there are good fundamentals for e-commerce, and the e-commerce trend would also ensure success of our platform.
And our e-commerce platform looks into different situations in China; some customers prefer very much to use e-commerce or Internet platform.
The other customers, they actually prefer to book for vessel space, cargo space physically, especially customers from the Mainland provinces. So we will try to suit the needs of different customers.
For e-commerce, you will have to decide on -- we will make available vessel schedules, and also, when booking space, we are allowed the confirmation to be done online, this also a pioneer in Mainland China.
And also, when conditions are being met, we can even accept online payment. Also, the entire order-making process, the order, we actually offer tracking services; you will know where the shipment is and what is the status.
This is also new, this is what we call the online-to-offline platform, meaning a combination of both online and offline services because we have a good network.
This is possible because we have a good network in China, and it is our plan to build this new service model in order to suit the needs of different customers.
Now, this year, we like to place -- attach importance to two areas of work. One is to standardize e-commerce operations; second is to try to concentrate our cluster of customers; and the third one, let me take a look, and that's standardization.
We discovered that since our launch of that service last year, the other -- in all the different departments where they provide services according to different standards, and it is our goal to try to standardize the procedures in the coming year.
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Unidentified Company Representative [29]
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You were just now asking about the scrapping of old vessels, MDRC, Ministry of Commerce, as well as MIIT, they have jointly promulgated a guideline regarding the scrapping of obsolete vessels.
In this document, it stipulates that if you were to scrap these older vessels, subsidies would be made available.
Now, in 2014, there is another document. As I have told you we were restructuring our vessel fleet and therefore, we are considering, based on the actual fleet situation of our Company, because each of the company, each of the fleet will need to be constantly planned and restructured in order to suit the changing needs of the Company.
So we are considering scrapping some of our vessels. In 2014, CapEx-wise, we have 1.947 billion from shipping -- I mean TEUs from container shipping and 6.8 billion from dry bulk. These capacities would be scrapped in order to enhance our competitiveness.
Scrapping of old boats/vessels, we are planning to have -- to take away or take down 30 vessels.
While not immediately, we would not immediately scrap it, but we have already announced it, to scrap it, we need to have contractors, and there will need to be contracts and planning.
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Unidentified Company Representative [30]
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The speaker is not using a microphone.
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Unidentified Company Representative [31]
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Are you asking about investment in terminals, and also high-standard containers, is that what you're asking? Any further question?
No, well we can take one last question. Any from Hong Kong? Yes, there's one. Okay, that would be the last question from Hong Kong.
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Unidentified Participant [32]
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[John Longtin], Goldman Sachs. I see that you have signed a lot of strategic agreements with other companies. So what are the areas that you are cooperating with; and would there be any further domestic or international cooperations with [Junghei]?
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Unidentified Company Representative [33]
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I have already said that with Junghei, our cooperation started in -- since 2012, and that is to exchange cargo space, both domestically and internationally.
Now, this year, we are also cooperating in the American lines, and the -- we signed the strategic incorporation agreements about two to three years ago and this contract continues to be valid and we are pursuing further business cooperations.
Now, under such a framework, we think we will cooperate further in terms of domestic and international business, especially international business.
And with some routes, international routes, we are negotiating and we do not have a fixed proposal at this moment, and when we do, we will disclose them in time.
Now, last question?
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Unidentified Participant [34]
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We are all working on international reform to introduce private equities, etc., what is your view of that?
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Unidentified Company Representative [35]
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We're already doing that, I am already working as an employee for all the shareholders. We are already a Company run as a private company; the management side, what I mean is.
And as for the -- we are also working and trying to analyze how -- what are the reforms to be made in order to meet market changes and demands, including a review of our strategy to segmentize in detail and to adjust our business strategy to meet current market demand and changes.
Now, as for absorbing private capital, I think we're already quite okay, we -- and the rule of the game is already quite open.
So thank you very much and thanks for your time. If there is anything unclear, please feel free to contact us, both in Hong Kong or in Beijing, and we would be willing and happy to answer your questions.
Your understanding would mean a lot in terms of supporting us. Anything that we can say, we will say.
Thank you. Thank you friends from Hong Kong, and thank you [Miss Chew]. Thank you. So we will finish here. Thank you.
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Editor [36]
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Statements in English on this transcript were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.
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