COSCO SHIPPING Ports Ltd

HKEX:1199

Earnings Call Transcript 2021-Q1

[Operator]

Lady and gentlemen, thank you for joining COSCO SHIPPING Ports Limited 2021 First Quarter Results Announcement Conference Call. [Operator Instructions] Kindly be reminded that replay will be available upon request after the call.

I would now like to hand the conference over to speakers, Ms. Margaret Siu, Executive Deputy General Manager of Finance Department; Mr. Ricky Ng, General Manager of Investor Relations Department; and Mr. William Chiu, Senior Manager of Investor Relations Department.

Mr. Ricky, please go ahead.

[Ricky Ng, executive]

Hello. Welcome to COSCO SHIPPING Ports 2021 First Quarter Results Investor Conference Call. I'm Ricky, the General Manager and Head of Investor Relations. In the call, we also have Margaret Siu, the Executive Deputy GM of Finance Department; and William Chiu, the Senior IR manager.

This presentation consists of 5 parts. First, recovery and stable dividend policy; second, financial highlights; third, operational review; fourth, forward strategy and outlook; and finally, there will be a Q&A session.

Let me begin from the smooth resumption of operation of the Chinese New Year. At the rebound of international trade in 2021, we recorded satisfactory results in the quarter. Although the global macroeconomic conditions is facing major challenges, and the countries around the world are still facing uncertainties caused by the COVID-19 epidemic, the company successfully grabbed opportunities from rising demand starting from the second half of last year.

We saw that the strong growth momentum continued in the first quarter 2021. The overall equity throughput record, an increase of 7.2% year-on-year to approximately 9.3 million TEU in the first quarter. Terminal profit surged by 76.2% year-on-year to USD 93.9 million in the first quarter of 2021, marking the strongest quarterly year-on-year growth since first quarter of 2020.

Now let's move to the Page 5 of our presentation slide. That could be downloaded on our website. Okay. Page 5. On the back of the effective implementation of our Lean Operations strategy and macro environment improvement in first quarter 2021, we recorded the highest first quarter terminal profits of USD 93.9 million as well as terminal profit per TEU of USD 10.1 per TEU since 2016.

Together with our new operating strategy and cost control, we target to further improve our volume and profitability.

As you can see on Slide 6, our dividend yield is fully maintained at about 5% and has been higher than our peer's average in last 3 years. We are confident of staying one of -- being one of the best new player in the industry to better reward our shareholders. Our company has accumulated nearly 30 years of management experience and established a global terminal network over the years. Meanwhile, our business remains solid as the company's continuous enhanced terminal assets and increase the profitability of the terminals. Together with the competitive advantage of COSCO SHIPPING Group in the global shipping market, our business will be able to sustain under market uncertainties supporting us to seize the opportunities of the robust market demand in the future. Next, I will introduce the financial highlights for the first quarter. On Page 8, the company capitalized on a strong momentum in the demand for the domestic and foreign trade. The revenue of the first quarter of 2021 record a robust increase of 20.3% year-on-year to USD 265.3 million, driving the gross profit to increase by 35.9% year-on-year to USD 61.9 million.

The gross profit margin for first quarter was 23.3%, increased by 2.6 percentage points as compared with the first quarter last year. Excluding one-off items in the first quarter 2020, the net profit attributable to shareholders in the first quarter 2021 surged by 140.1% to USD 73 million.

In respect of our subsidiaries, the revenue for first quarter of 2021 increased by 20.3% year-on-year, of which the revenue in the Greater China region increased by 27.9% year-on-year and the cost of sales in the Greater China region only increased by 16.4%. The revenue recorded a higher increase than the cost of sales, demonstrating the positive impact of our lean operation strategy on revenue growth and cost reduction.

During the period, Guangzhou Nansha Terminal and Xiamen Ocean Gate Terminal enhanced their marketing efforts, and successfully introduced several shipping services for foreign trade, driving their revenue for first quarter 2021 to increase by 32.6% and 38.3%, respectively.

Benefiting from the throughput improvement and effective cost reduction, terminal profit in first quarter was up 76.2% year-on-year to USD 93.9 million. The composition of terminal profit was further optimized, and you can see it on Page 10. Terminal profit contributed by overseas terminals account for 11.3% of the total terminal profit in the first quarter of 2021, of which CSP Zeebrugge Terminals show a turnaround to profit with addition of the new shipping service and effective cost control. The throughput of CSP Zeebrugge increased by 42.9% year-on-year in the first quarter.

This profit recorded USD 596,000 as compared to a loss of about USD 593,000 in the first quarter last year, showing the significant results of our Lean Operations strategy, driving up business volume as well as financial results. Looking into our balance sheet. The net debt-to-equity was 27% at the end of March 2021, and our cash position maintained healthy with cash and cash equivalents of about USD 1.27 billion.

Now let's turn to Page 12 about CapEx. The total CapEx amounted to USD 54.9 million in the first quarter of this year and the expenditure improved, mainly PP&E. The company will continue to cautiously identify suitable projects to create long-term value for our shareholders, and we expect the total CapEx will be around USD 900 million this year.

Next, I will introduce the company's operational results. Page 14. [indiscernible] from the further rebound of global trade activities, our total throughput for the first quarter increased by 9.9% year-on-year. Throughput from subsidiaries was up 5.3% and throughput from nonsubsidiaries was up 10.9% year-on-year. Equity throughput increased by 7.2% year-on-year in the first quarter 2021, mainly driven by the growth of equity throughput in Pearl River Delta and the South West Coast regions, which were up 16.2% and 49.9% year-on-year, respectively.

Our company is committed to building a global terminal network and will continue to identify M&A opportunities in the regions of Southeast Asia, Middle East, Africa and South America with a target total range of, at least, low double-digit equity IRR to create value to our shareholders.

So let's have a look to Page 16. In the first quarter of 2021, throughput from the OCEAN Alliance, 2M and THE Alliance and others in our 7 major subsidiaries increased by 6.6% year-on-year, of which OCEAN Alliance contributed 52.9%, while 2M + THE Alliance contributed 29.9%. The contribution from these 3 alliances remains at a similar level as compared to the last year first quarter. In this year first quarter, throughput from OOCL surged by 20.2% year-on-year, of which PCT, CSP Zeebrugge Terminal, Xiamen Ocean Gate Terminal and CSP Spain-related companies benefit the most. Going forward, we will continue to increase the percentage of container volume from other customers by introducing new shipping lines to correlate our terminals to optimize our customer portfolio.

Page 17. Our subsidiaries are proactively developing terminal expansion business, including high-end warehouse business and accelerating the development of the expanded supply chain business, with an aim to building up a logistic network to better attract and retain customers and bringing in new revenue growth point. We will continue to develop cost, expand the business to provide value-added services to our customers. CSP Abu Dhabi CFS Phase 1 covering an area of about 273 -- 274,000 square meters finished with the latest facilities and Information Technology system is expected to commence operation in the first half of this year. Besides, CSP Zeebrugge CFS covering an area of about 42,000 square meters is now operating at utilization rate at 100%. Guangzhou South China Ocean Gate Terminal and Xiamen Ocean Gate Terminal are also developing high-end warehouse services, which are expected to commence operation in 2022. In addition, the company is developing the terminal expanded services as the terminals in Nantong, Wuhan and other regions to further enhance profitability.

Okay. Apart from that, we are actively leveraging on technology development to facilitate Lean Operations strategy. Meanwhile, we are also actively applying the latest N4 operating system in our subsidiaries, which is expected to improve efficiency and reduce costs. It is expected that Wuhan Terminal and Nantong Terminal will also implement latest N4 system this year. To further enhance our -- information start, our technology service level, we have joined the Global Shipping Business Network, GSBN, which is a blockchain alliance. We will collaborate with the alliance to promote the transformation and innovation of traditional workflow. The company continuously implements the application of 5G smartphone. Xiamen Ocean Gate Terminal as a demonstration for 5G smart applications is actively carrying out research and development of driverless container truck system.

Next, I will introduce company strategy and outlook. On Page 20, in terms of our strategic planning, first of all, the company will continue to seize opportunities of global development and identify potential projects as well as explore investment opportunities in strategic subsidiaries and profitable non-subsidiaries to build a balanced global terminal network. Besides, the company will also carry out -- carry on participating in the restructuring of domestic ports and strategic disposal of assets to enhance terminal portfolio and increase efficiency. The company will also continue to optimize the terminal portfolio to increase the total asset.

Secondly, the company will further implement the Lean Operations in 3 ways. Cost reduction. The company focused on the controlling cost per TEUs and enhancing our cost competitiveness. Second, revenue boost. The company continues to bring forward new ideas of operations. In virtual context, the company leverages on the advantage of the global terminal network by expanding single terminal services to network marketing, in an attempt to provide shipping companies with a budget and efficient services. In horizontal context, the company actively collaborates with other players to reduce costs and increase the efficiency and have a great bargaining power in the industry. Finally, the company has set up a COE, Center of Excellence, team to enhance the port operations and management.

In terms of the globalization. The company has announced 3 acquisitions recently. First, the Beibu Gulf Terminal. It is expected to share the benefits of long-term prosperous economic growth in Southwestern China and Southeast Asia. Secondly, RSGT, it is located in the Red Sea regions and have a wide coverage of container market in Middle East and East Africa with annual [indiscernible] of 5.2 million TEU. It is expected to bring growth momentum in terms of the throughput and profitability. Thirdly, Tianjin Container Terminal, that will further enhance our synergy with OCEAN Alliance and strengthen our cooperation with common party, expanding the room for development for both parties.

While we have acquired new assets, we have also disposed some non-core assets with lower profitability. In 2020, the company completed the disposal of 3 terminals whose profit book ratio ranging between 1.5x and -- to 1.7x. While the company is currently only trading at around 0.5x. approximately.

Page 22. In respect of our Lean Operations strategy, the company has developed a cost management system and incorporated cost per TEU in KPI to enhance cost competitiveness and cost reduction. Also, the company facilitates the technology system, unifies the key operational and business indicators and drive the terminal automation. The company will continue to enhance organizational structure of marketing and support terminals to maintain relationship with shipping lines in a systematic manner. Also, we actively develop supply chain business to facilitate terminal extended supply chain platform to develop terminal-oriented supply chain warehouse services with an aim to bringing better service to our customers.

We will continue to play the role of the business partner through the measures such as the COE team to promote the revenue growth and cost reduction and strengthen our terminals operation and management.

Page 24. Our terminals attach great importance to cost control, which focuses on cost per TEU, including the enhancement of lean operation and cost control ability in order to enhance our asset quality and efficiency. So this page, you can see some measures about the cost control.

And then the next page, Page 25, you see that we have developed a customer value analysis model based on container type, business types, revenue and profit contributions from each customer. This model is expected to help the terminals facilitate the diversification of customers and improve the terminal efficiency in a targeted manner.

In first quarter this year, 17 new shipping services were added to our subsidiaries, which are expected to strengthen the marketing of the third-party customers. Going forward, we will continue to diversify customer base and strive to increase our bargain power in the industry to raise ASP. For example, ASP of PCT increased by about 10% in the first quarter this year compared to the -- compared with that in last year.

Page 26. With the effective implementation of strategic planning, we have set a 5-year target plans based on the current economic environment and trend. By the end of 2025, our total equity throughput is expected to surge by 48% to 57 million TEU compared to the equity throughput at the end of 2020 with a 5-year CAGR of around 8.2%. The operational cost per TEU will decrease by 15% to 20% in 5 years, representing 3% to 4% reduction per year. And we boost the business scale and product to bring a better return to our subsidiaries.

Okay. So let's move to the final page, Page 27. We expect the growth of our total throughput to outpace our peers in this year. Despite the negative impact of the global economy due to COVID-19 epidemic, we see that an impact on the port industry has gradually eased. The growth of demand further accelerated in the first quarter this year.

Going forward, we will proactively enhance the overseas terminal network and focus on expansion opportunities in the major markets such as Middle East, Africa, Southeast Asia and South America. The company will also actively participate in the consolidation of the domestic port resources and keep strengthening the Lean Operations to increase asset quality and efficiency. Meanwhile, we will accelerate the expansion of supply chain projects to expand the scale of overseas investment and enhance the terminal portfolio, on the back of the Lean Operations as an aim to increase our total asset revenue.

Okay. So that's the end of our presentation. Let's come to our Q&A section.

[Operator]

[Operator Instructions] A question from HSBC Hong Kong,

Mr.[indiscernible].

[Unknown Analyst]

Congratulations on the strong first quarter. I had a couple of questions. The first question is about the revenue growth, which appears to be much faster than your volume growth implying some improvement in ASP. Could you please provide some color on what drove this improvement? And then how sustainable this increase in ASP is likely to be? The second question is about the overseas terminal profits, which rebounded sharply year-on-year. I think you mentioned some terminal CS ports. Was that Abu Dhabi, which you were mentioning that turned profitable? If you could repeat it would be very helpful.

[Ricky Ng, executive]

Thank you very much for your questions, [indiscernible]. Yes, about the -- yes, you are right that for the first part, our revenue growth was very strong. Yes. One of the major reason is because of the ASP improvement. I think for the ASP improvement, there should be several reasons to draw this. First of all, is -- you know that something from the last year, we -- our company management is carrying out the Lean Operations strategy. So we are committed to improve our ASP by a lot of measures such as the increasing the proportion of the third-party customers.

And also given the macro environment that you see that our customers, like the shipping companies, already improved a lot in the profitability based on the last year, they announced the results. So our bargain power and we've discussed the pricing, it's actually easier. And I would say it's more favor to our company compared to the last several years. So ASP improvement driven by the macro environment and also the main Lean Operations strategy is one of the reasons.

Another reason is that at some of the terminals, the product mix actually improved. I mean there are more [indiscernible] box compared to the last several years. So the product mix also mattered to improve the ASP. And then the third driver will be related to the currency because if you track the currency, euro, and also RMB method versus U.S. dollar actually appreciated in the first quarter this year. So given these 3 reasons and so that you can see that our revenue growth is actually very outstanding. And it also drives our terminal profit to improve. And being the best terminals profit in the first quarter since 2016, okay?

And sorry, Deepak, would you mind, repeat your second again?

[Unknown Analyst]

Yes. The second question was about the overseas terminals. You said that the profit rebounded sharply. And you mentioned a particular terminal, which drove the profitability. You mentioned some numbers saying that it was a loss-making last year and now it turned to profit, some $500,000 or something. If you could repeat that, it was not very clear. I couldn't catch it then.

[Ricky Ng, executive]

Overseas, first in terminals, you know that we have some greenfield projects that we started operations in commercial operations like Abu Dhabi in -- and it start commercial operation in the fourth quarter 2019. And yes, so the profitability, actually, this terminal is improving. It still not yet become profitable, but the loss is actually strength if you compare the last year. But something encouraging is that the profitability of the Zeebrugge Terminal in Belgium. As I mentioned in the presentation, it's already on the line to contributing a positive earnings. Again, if this terminal is actually showing that our synergies with our parent companies and also our work hard -- we are hardworking to improve the throughput in the terminal. So you see that the throughput improvement, actually, in the first quarter, was up like 44% year-on-year for Zeebrugge Terminal. It also drive our -- Zeebrugge Terminal profit is -- reaching at to a profit. Yes -- So yes. So as we discussed in the NSB thing and also at several meetings before, that the depreciation cost for -- over this terminal, the impact remains, but significantly looks smaller because our Zeebrugge port has start operating at a improving utilization rate. So yes. So that's why overall probability of our overseas terminals also improved.

[Unknown Analyst]

Okay. Great. And then maybe if I can squeeze in one more or maybe two more. We are already almost towards the end of April. What are the volume trends which you are witnessing for the second quarter? Has the demand -- the global container trade demand sustained in this quarter? What are the trends?

[Ricky Ng, executive]

Okay. Now we see that in the first quarter, the [indiscernible] is very strong, right? I mean we -- Okay. So we are actually cautiously optimistic about the trade -- about the throughput outlook. And also, our management believes that our company's throughput growth will be higher than our peer's average. So I think it's a high...

[Unknown Analyst]

Any [indiscernible] on your guidance? What are trends?

[Ricky Ng, executive]

Sorry?

[Unknown Analyst]

Any numerical guidance? Like any range of growth which you are targeting?

[Ricky Ng, executive]

We do not have the numerical number for you as a reference. But if you track the journal report, the third-party independent [indiscernible], yes, I mean the -- based on the numbers they published in the end of the last year, they are forecasting the full year 2021 throughput may grow at about a 8.9% year-on-year. That's the global throughput...

[Unknown Analyst]

Average?

[Ricky Ng, executive]

in '21. Yes. So as you know that we have some new port projects and also we have allowed several acquisitions in the beginning of the year. So that's why we expect the growth of our total throughput will outpace our peers in 2021.

[Unknown Analyst]

Okay. Okay. Okay. That's clear. And one last question before I fall back. You mentioned that you have better bargaining power with shipping lines now and you've been able to improve your realizations, your ASP on that count. So I just wanted to understand, is this only for the overseas terminals or also reflective of in the Mainland China portfolio as well?

[Ricky Ng, executive]

Would you mind repeat your question against. Sorry I cannot...

[Unknown Analyst]

Yes. So what I mean is -- what I mean is, is the ASP increase for shipping lines only in overseas terminals or also in China terminals?

[Ricky Ng, executive]

Well, I think -- okay. Okay, so regarding the ASP of the shipping lines, certainly, it will be better to ask the shipping companies.

[Unknown Analyst]

No, no, no. What I mean is the ASP which you were charging the shipping lines, you said you were able to increase the ASP from shipping lines, right, for your container handling. Is that also reflected in the China terminals also for you? Are you able to increase charges for shipping lines in the China terminal? That's my question.

[Ricky Ng, executive]

I think -- okay. So first of all, okay. So I need to clarify that the negotiation is still ongoing. It's still at the -- but some terminals could get higher could get a higher ASP for particular types of containers. Yes, but it's -- when we're talking about the negotiation about the pricing to our customers, it's including both domestic and also the overseas market. Yes. Because let me talk about the -- when we discuss with them -- and actually they are -- all the customers, they are also having the global shipping lines. So yes, I mean, there's no geographical differentiation, And we discussed about the ESP, whether that's in China, whether that's in overseas. I think we talked about everywhere.

[Operator]

Next question we have from Simon Cheung from Goldman Sachs.

[Simon Cheung, analyst]

Just a couple of questions from me. Back to your ASP, you gave some example that the price has been quite hiked. You managed to hike the price. Can you give us some example, like which port you managed to hike how much? That's the first question. Second one, related to your acquisitions, can you again remind us the time lines of the completion of these acquisitions, the pro forma earnings as well as the pro forma gearing ratio for the company after all these acquisitions, particularly for Tianjin, which I think you need to consolidate it. And lastly, I think on -- obviously, one of the key focus globally has been decarbonization. So I wanted to get a sense, your equipment -- up to these points, how much of your equipment needs to be upgrade or need to be replaced because of these trends? And the implication on the CapEx as well longer run?

[Ricky Ng, executive]

Okay. Let me answer your second question. That for The Tianjin Container Terminal, we target to complete the transaction in the first half. Okay. And then for the RSGT, we target to complete the transaction in this year.

Okay. So we're coming to the pro forma earnings or pro forma net gearing levels, we do not have the numbers to disclose to you, so sorry about that. And then regarding to your questions about the equipment upgrade. And in fact, the carbon reduction is actually, we continue to work hard on it. And in fact, we have also published our sustainability, we post on our website.

And second measures that we have done, we are continuing to be doing, it's like we have the onshore powering system so when the ships are parking at our ports, then we will provide onshore power system to them so that it could reduce their carbon emissions. And also, we have -- a lot of the cranes have already converted to -- by using [indiscernible] rather than diesel.

So yes, it's a continuous PP&E CapEx. And also, we have installed some LVP lighting that is important, too, also. Yes, the carbon emissions reduction is actually -- its coming down at a good trend. And the PP&E CapEx -- I think we do not have a detailed breakdown for the carbon emission or carbon emission measures for the CapEx. But we have done -- we have been doing in the last several years. Okay.

For your first question about the ASP. Yes. So I would say that it's a revenue per TEU that you can actually also can calculate it. And PCT, the first quarter was roughly about 11.6% in Guangzhou -- Nansha was up about 11%. So this is the number of revenue per TEU. So again, I mean, the revenue per TEU increase consists of several reasons, as I previously mentioned, right? I mean the ASP improvement, the currency reasons and also the product mix as well. So yes, so this is something that could be for your reference. Yes. And also Nantong, up about 11%. And yes, in Spain, up about 5% to 7%, yes, it's something for your reference.

[Simon Cheung, analyst]

So I'll get back to your CapEx number. So historically, your maintenance CapEx, I think, is offering about, what, $200 million, $300 million. Is there any indications that trend going to go up? Or any -- or like all these upgrades, I suppose you need to do? Or is still very luminary that you to think about potential upsides on the CapEx?

[Ricky Ng, executive]

Okay. So for our PP&E CapEx and turn to Page 12. And we are -- our full year target or our expected CapEx was about USD 500 million at the PP&E CapEx. And -- but you see that this number is a little bit higher compared to 2020 -- or 2020 was like USD 214 million. But if you compare 2019 and also 2018, its increased a little bit. The reason is that, of course, we will start to have more CapEx on the Peru project in the South America. So that's why the PP&E CapEx is a little bit higher compared to the year -- the last several years. But we actually believe that or expect that the maintenance CapEx or PP&E shouldn't be -- certainly have a large room to increase, should be more or less relative stable in the next several years, generally speaking.

[Operator]

[Operator Instructions] Our next question is Robin from UBS.

[Unknown Analyst]

I've got actually a few questions. Maybe I'll probably start one by one, if you don't mind. The first question is probably still following up on the domestic ASP. I didn't hear it very clear, but I mean, in terms of Nansha, what did you say about the -- in terms of weather being revenue per TEU or in terms of the contract terms? Can you give us an update on Nansha stream?

[Ricky Ng, executive]

Guangzhou Nansha, the revenue per TEU was up 11.3%.

[Unknown Analyst]

Okay. And how much is that because of the tariff terms?

[Ricky Ng, executive]

Sorry. We do not have the particular numbers for the breakdown of -- from the revenue that [indiscernible]

[Unknown Analyst]

But is there any -- like because of the weather being the higher tariff or lower volume discounts that's driven this like 11% ASP increase?

[Ricky Ng, executive]

I think, yes, as I mentioned, some of the terminal's still under the negotiation stage. And so yes, we do not have the numbers to share with you at this stage.

[Unknown Analyst]

And would it be possible to give us like a timetable of when are we going to expect a finalization of this tariff negotiation?

[Ricky Ng, executive]

I think probably after 1 or 2 months later, then we should have a clear picture about it, yes. Because the negotiations depends on different terminals. And yes, so we will target to give more ideas to the [indiscernible].

[Unknown Analyst]

Okay. Okay. Sorry, the second question was on the cost per TEU. Obviously, you highlighted that some 15% to 20% cost per TEU is a reduction in the next 5 years. But then if you're looking at Q1, can you -- please correct me if I'm wrong, but because it seems your cost of goods sold was up 16%, but volume was only up some 10%. So it seems that cost per TEU is up?

[Ricky Ng, executive]

Yes. I mean the cost per TEU was up a bit. Again, one reason is because of the currency as well. So one of the reasons is the currency. And certainly, some terminals you have particular reasons for Terminal PCT, we have to [indiscernible] stock -- the depreciation in the -- around of the last year. So if you compare to the current cost of sales of PCT for the first quarter continue, that will be biggest. And another reason why it will be higher than the last year, first quarter. And currency and some particular reasons for some terminals, like the depreciation cost would be the reason.

[Unknown Analyst]

And are you still guiding like maybe by the end of the year, some 3% to 4% of a decline?

[Ricky Ng, executive]

We are still confident to target, on average, 3% to 4% cost reduction.

[Unknown Analyst]

Okay. Okay. And the next question is, can you remind me of your previously -- you've got this 5-year target and 2021 should be the fifth year of that 5-year target. Is that target of net profit to be some $360 million? And if so, like your Q1 versus that full year target is probably somewhere around maybe 20%. Are you on schedule to deliver that 5-year target?

[Ricky Ng, executive]

We are talking about the 5-year target, we elaborate since 2016, right, toward 2021, right? Okay. That's on Page 31. Second one, yes, I mean, first quarter due to being the low season, if you compare to the second quarter and third quarter. So general speaking, yes. I mean, I would say, if you see that the last year, our net profit in 2020 compared with the net in 2016, already up like 92% so yes. We are still comfortable with our 5-year plan, I mean, we set in 2016.

[Operator]

Okay. All right. And next question is on this pay book. Obviously, the company hasn't resulted -- sorry, you're not going to tell us the Q1 numbers. But just to confirm that for this Q1, the book of -- is an associate? And last Q1, how much is -- does it book any fair value gain or loss last Q1?

[Ricky Ng, executive]

This one, I will ask Margaret to answer this.

[Kim Shan Siu, executive]

Yes. Actually, the pay book of Gulf port -- we will treat as an associated company since 2020. So for last year first quarter, we already -- equity picked up the profit from the Gulf port. With no -- any fair value of the share price or any change on the share price.

[Unknown Analyst]

Okay. Okay. Great. And maybe a follow-up is like to me, did we book any fair value gain this year, Q1, if anything, on which port?

[Kim Shan Siu, executive]

No. No.

[Unknown Analyst]

Okay. Yes, that would be great. And my last question is on Taicang disposal. And when would you expect -- are you expecting to complete by like mid of the year or maybe more second half of the year? Can you remind me if you tell us it before in terms of the post-tax disposal gains?

[Ricky Ng, executive]

We target to complete the potential disposal by end of this year. Yes. So we do not have any numbers to share with you at the moment, but you can have a look to the throughput numbers of this terminal to compare to -- regarding with the group or the scale of operations compared with the terminals that we have disposed in the last year.

[Operator]

The next question, we have Kevin from Goldman Sachs.

[Unknown Analyst]

First of all, I like to ask regarding the ASP as you just share with us, you have -- there are several indicators that drive the ASP increase. So can you give us more detailed color regarding how much percentage is driven by, for example, shipping customer profitability increase? Or resulting in our increase in bargaining power? And how much is from the product mix from improvement from some of the terminals? Yes, this is the first question.

[Ricky Ng, executive]

Okay. I think -- okay. So we thank you for your questions. We do not have the detail numbers on at the moment to disclose to you. However, you can track about the currency appreciation in the first quarter regarding the euro and also the RMB against the U.S. dollars. But don't forget that some of the overseas terminal, certainly the revenue per TEU will be affected more because that revenue could be euro. But domestic terminals, the impact will be smaller because they are receiving RMB. And a rough idea for you is that euro was some like appreciated about 8% in the first quarter compared to the...

[Kim Shan Siu, executive]

Last year.

[Ricky Ng, executive]

Last year. And RMB was up like 6.9% in the first quarter this year compared to the last year. Okay. So this is some numbers for your reference. I mean the currency is only one parameter, but the point is our Lean Operations and our operations has improved based on our strategy as well as the macro environment improvement.

[Unknown Analyst]

Well noted. As you just mentioned on the shipping customers, our bargaining power, owner shipping customers actually, it seems that the market is expecting that the overall congestion problem will continue in -- maybe in the mid of next month. So that means probably the shipping lines, they might gain more profit. Does it mean that we may have more bargaining power maybe over the next quarter, so as to increase our ASP?

[Ricky Ng, executive]

We do not know the bargaining power or we don't know the profitability of the shipping down in the next quarter because we are just focusing on our ports business. But in first quarter, we've seen that the bargaining power to discussing the ASP with our customer is a much better compared to the previous years.

[Unknown Analyst]

One last question on dividend policy. Can you share more color on this year's dividend policy?

[Ricky Ng, executive]

The dividend policy remains unchanged compared to the last year. That is 40% of our reported net profit, may be our payout ratio.

[Operator]

[Operator Instructions]

As there's no further questions, I will now hand the session back to Mr. Ricky. Please go ahead.

[Ricky Ng, executive]

Okay. So thank you very much, everyone, for joining this investor conference call. If you have any further questions, please feel free to contact us. Thank you very much for joining. Thank you.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for participation. You may now disconnect.