Yangzijiang's Q4 profit falls 15% on lower shipbuilding margins

YANGZIJIANG Shipbuilding on Friday reported that its net profit for the fourth quarter ended Dec 31, 2014, fell 15 per cent to 636.56 million yuan (S$138.8 million), from 746.30 million yuan a year ago.

Revenue rose 12 per cent to 3.78 billion yuan but gross profit fell 41 per cent to 848.51 million yuan after cost of sales rose 50 per cent to 2.93 billion yuan. During the quarter, the shipbuilder delivered nine vessels, compared to the six delivered a year ago.

"As compared to 4Q2013, the group's shipbuilding related segment registered a lower gross profit margin of 17% in 4Q2014, mainly due to completion of construction and delivery of orders secured prior to financial crisis in 2013, and vessel prices for orders placed post-crisis were comparatively lower than pre-crisis orders," Yangzijiang said.

Other income got a boost from 108 million yuan in advances from previous shipowners of terminated shipbuilding contracts recognised. Yangzijiang said the point of recognition of such income is two years after the vessel was delivered to the new ship owner.

For the full year, the China-based shipbuilder's net profit rose 13 per cent to 3.48 billion yuan, while revenue rose 7 per cent to 15.35 billion yuan.

Shipbuilding-related businesses accounted for about 89 per cent of its total revenue. A total of 33 vessels were delivered in FY2014 according to schedule, compared to 34 vessels delivered in FY2013. But those delivered in FY2014 had relatively lower contract price and resulted in lower margin. Gross profit margin for shipbuilding related segment fell to 19 per cent from 27 per cent in FY2013.

The lower shipbuilding margin weighed down the overall gross profit for the group, which declined 13 per cent from a year ago to about four billion yuan.

This was cushioned by a significantly lower effective tax rate of 12 per cent for FY2014, compared to 33 per cent a year ago. This was due to the one-off credit balance of 349 million yuan to Jiangsu New Yangzi Shipbuilding Co, Ltd, given its "High/New Technology Enterprise" status. The yard is now enjoying a preferential enterprise income tax rate of 15 per cent for three years starting from FY2013. The tax credit cushioned the decline in gross profit.

Yangzijiang's outstanding shipbuilding order book stood at 118 vessels with a total value of US$4.75 billion.

It has proposed a higher dividend of 5.5 Singapore cents per share, compared to five Singapore cents a year ago.