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UPDATE - Yangzijiang Shipbuilding Q3 profit falls 59 per cent

YANGZIJIANG Shipbuilding (YZJ) posted a 59 per cent decrease in third quarter net profit to 281.2 million yuan.

Earnings per share was 7.34 fen compared to 17.76 fen.

Revenue was down by 6 per cent to 3.88 billion yuan mainly on a decline in the turnover for its core shipbuilding business.

Shipbuilding turnover fell by 19 per cent to 2.7 billion yuan on delivery of eight vessels in Q3 2016 compared with nine vessels a year ago.

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This was partly offset by an increase in turnover for two other shipbuilding related businesses. Revenue from YZJ's trading business more than doubled to 874.3 million yuan. Turnover from other shipbuilding-related activities rose to 81 million yuan from 55 million yuan last year, on higher revenue recognition from the ship demolition business. Interest income from YZJ's investment business decreased to 214.2 million yuan from 335.6 million yuan on lower interest rate from increasing diversion to government-related projects.

Other income for Q3 was higher at 501 million yuan, up from 40 million yuan last year mainly on recognition of 434 million yuan in advances from previous ship owners that terminated shipbuilding contracts. Six shipbuilding orders were terminated in Q3, including three vessels on which construction had not started. An average of about 20 per cent down payment has been collected for these six terminated contracts.

But YZJ also booked 510 million yuan in other losses, a reversal from 242 million yuan gain a year ago, on impairment provisions for vessels owned and operated by its shipping arm and its held-to-maturity investments.

The shipbuilding group took on board a share of 95.8 million yuan loss from its associated companies and joint venture. In Q3, its 45 per cent owned joint venture PPL Holdings Pte Ltd sold its 15 per cent equity in rig builder PPL Shipyard to Sembcorp Marine for US$115.06 million.

YZJ secured orders for seven boxships during the quarter including three 1,900 TEU (20 foot equivalent) and four 1,800 TEU units. Its outstanding order book stood at 4.4 billion yuan comprising 85 vessels as at Sept 30.

YZJ posted net cash outflow of 487.4 million yuan from its operating activities for Q3 compared to a net inflow of 1.4 billion yuan last year.

The group has 5.8 billion yuan of cash and cash equivalents as at Sept 30.

In a separate announcement after Tuesday trading hours, YZJ said that it has subscribed, through a wholly owned subsidiary, an additional 40 million yuan equity interest in Jiangsu New Material Industrial Venture Capital Enterprise (Limited Partnership), JNMIV. With the additional stake purchase, JNMIV will be a 38 per cent owned associate of YZJ.

JNMIV is a venture capital fund aiming to generate capital gains from investment in new materials in terms of its technologies, products, equipment and services, YZJ said.

The increased stake in JNMIV is in line with YZJ's move to diversify its income sources beyond its core shipbuilding business, the shipbuilding group had indicated in its Q2 2016 results briefing.