The appreciation of China's RMB has wiped 28 million yuan (about 3.5 million U.S. dollars) from the balance sheet of a Chinese shipping company.

China Merchants Energy Shipping Co., which listed in Shanghai on December 1 last year and published its annual report on Thursday, suffered a currency exchange loss of 47 million yuan by renting bulk carriers from Japan, according to China Business News.

Currency losses combined with cost hikes to eat up a swathe of profits. The company's net profit decreased by 38 percent -- or 511 million yuan -- in 2006, though only a moderate decline of 257 million yuan was reported in sales.

The company is working on risk management measures to avoid losses as the RMB appreciates, the newspaper said.

The profit slump in 2006 can also be explained by one-off factors such as the purchase of an oil tanker, and higher fuel costs tied to soaring international oil prices.

In 2006, the company's fleet carried 27 million tons of petroleum for oil companies in China, Japan, Korea, the United States and some southeast Asian countries, and handled 6.2 million tons of bulk cargo, including coal, grain, and iron core.

China Merchants Energy Shipping Co. was established in 2004. Its predecessor China Merchants Steam Navigation Company can trace its origins back to as early as 1872, with oil giants such as Sinopec as its strategic shareholders.