Yangzijiang gross profit down 20.8% in Q3 despite 25% revenue rise as raw material prices climb

YANGZIJIANG Shipbuilding's BS6 : BS6 0%gross profit fell 20.8 per cent in the third quarter despite a 25 per cent rise in revenue as higher raw material costs squeezed shipbuilding margins, the mainboard-listed shipbuilder said in a Singapore Exchange update on Monday (Nov 1) evening after market close.

The group's gross profit for the third quarter ended Sep 30 was 1 billion yuan (S$210.9 million), down from 1.26 billion yuan in the year-ago period.

This was despite revenue rising to 4.47 billion yuan, from 3.58 billion yuan before.

For the group's core shipbuilding business, gross profit fell to 486.2 million yuan from 694.9 million yuan before.

Revenue had risen to 3.69 billion yuan, up from 2.55 billion yuan, due to higher shipbuilding activity. There were 15 vessels delivered compared to 9 in the year-ago period, and full revenue recognition for 2 medium range oil tankers.

But Q3's gross profit margin narrowed to 13 per cent, down from 27 per cent a year ago, which Yangzijiang said was mainly due to rising raw material costs.

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For its "shipping and others" business segment - including businesses such as shipping logistics, chartering and ship design services - both revenue and gross profit rose, up 32 per cent to 255.2 million yuan and up 73 per cent to 110 million yuan respectively.

But interest income from investment declined by about a fifth to 427.2 million yuan, as portfolio size was reduced.

Yangzijiang noted that the first 9 months of 2021 saw the highest number of new orders for container ships since 1996, according to Clarksons. Yangzijiang had the largest share of these, securing some 16 per cent of orders.

For the fourth quarter so far, Yangzijiang has secured shipbuilding orders with a total contract value of US$200 million.

Although a power crunch amid coal supply shortages in China led to electricity rationing and production halts at numerous factories in September and October, the impact on the group's shipyards was "kept under control", said Yangzijiang.

Electricity usage restrictions have eased since the start of November, and the shipyards are now back to normal operations. Yangzijiang's major shipyards now operating at full utilisation rates, with no changes to the group's scheduled delivery of vessels in the second half of the year.

"The group continues to consider various possibilities and its respective tax implications, as part of its strategic review of its debt investment portfolio to allow the group to focus on its core shipbuilding business," it added.

Yangzijiang shares closed down S$0.02 or 1.41 per cent at S$1.40 on Monday before the news.