The reason and logic: (1) BDI recent seasonal fluctuations will stabilize in the second quarter rebound. BDI fluctuations in the first quarter mainly to seasonal factors, we expect the second quarter to stabilization and recovery: a quarter of BDI index decreased by 26%, we believe that the seasonal factors are the most important pre-BDI fundamentals continued to fall; property from the financial perspective, August 2013 and the trend is similar to September - less than two months time, up nearly 150 percent, followed by a further decline to around 1000 points. With the season approaching the transport of China's economic stability maintenance and implementation of policies, we expect freight rates will stabilize in the second quarter rebound. (2) shipping company in 2014 to reduce the uncertainty faced. Under further confirmation of economic stabilization and recovery in Europe and the background, the liner industry's top three shipping companies Maersk, Mediterranean and CMA CGM if successful alliance formed P3, Evergreen join CKYH set up a new CKYHE, both will help to ensure the stability of the industry tariff levels .
REVIEW OF OPERATIONS: Gross margin continued to rise, to validate our preliminary judgment. (1) The 2014 first quarter gross profit margins continue to rise shipping. 2014 a quarter of A-share listed shipping companies to achieve net profit attributable to -18.20 billion loss rate year, the chain are substantially narrowed; excluding the impact of income outside of business, industry gross profit of 1.616 billion yuan, corresponding to a gross margin of 5.2%. (2) old ship dismantling subsidies to encourage the elimination of old ships.
With the second half of 2013 the dismantling of old ships and the introduction of subsidies subsidy rules for the implementation of early 2014, shipping update old ship early retirement intensity also increased. From the financial data, the fourth quarter of 2013 and first quarter of 2014, "Net loss on disposal of non-current assets" far higher than the same period a year ago. Partial dismantling of old ships, while some shipping companies along with new orders for new ships. 2013 fourth quarter and 2014 first quarter CAPEX added rebounded from the previous month, reaching 6.316 billion yuan and 5.064 billion yuan. (3) With the "Camp changed to increase" expand the scope of business tax and surcharges shipping rates continue to decline. 2014 first quarter sales tax and additional shipping industry was 0.1 percent, a record low.
2014 first quarter financial costs shipping industry rate rose to a new high of nearly 5 years - 5.0%; rise is largely due to: operational risks as the industry expanded, the shipping companies to obtain bank loans more difficult, the cost of bank loans risk weighted continue to rise.