Yangzijiang Q3 net profit falls 10% amid fewer orders

YANGZIJIANG Shipbuilding's third-quarter net profit slid 10 per cent year-on-year to 702.3 million Chinese yuan (S$136.3 million) amid an overall weak market. 

Global new shipbuilding orders have declined by 44 per cent more in deadweight tonnage terms in the first nine months of 2019 compared to the same period in 2018, hit by trade and economic uncertainty and shipowners taking time to firm up their plans to cope with the IMO 2020 rules on emission, Yangzijiang said on Wednesday. 

This year, the group has secured 15 new vessel contracts so far, versus the 36 secured in 2018. In addition, the value of new contracts secured year-to-date came in at US$0.7 billion, almost half the US$1.46 billion secured in 2018. 

Gross profit margin worsened to 14 per cent from 20 per cent year-on-year, due to higher raw material and labour costs. Lower interest income and dividend income, and a surge in losses from associated companies and joint ventures, also weighed on the topline. 

Revenue in the three months ended Sept 30 was 5.42 billion yuan, up just 1 per cent, as Yangzijiang delivered 13 vessels in Q3, versus six vessels for the same period a year ago. 

Third-quarter earnings per share was 17.84 RMB cents, down from 19.73 RMB cents a year ago. 

In its outlook, Yangzijiang wrote: "The market conditions will continue to be determined by multiple factors. Shipowners will need to consider the cost of low-sulphur fuel, time taken to install scrubbers, age of old vessels, cost of new vessels, among other factors, before making a decision on order placement. Although the group has noticed an increase in enquiries from shipowners recently, the IMO2020 rule will continue to weigh on the pace of order placement for some time."