Yangzijiang Shipbuilding H2 profit down 30% after financial unit spin-off

YANGZIJIANG Shipbuilding on Thursday (Feb 23) reported a 30 per cent fall in net profit to 1.4 billion yuan (S$272.3 million) for the second half ended Dec 31, 2022, from 2.1 billion yuan the previous year. 

This came after the spin-off and listing of Yangzijiang Financial Holding in April last year, resulting in the absence of some 973.1 million yuan in profit from discontinued operations.

On a continuing-operations basis, profit for H2 rose 33 per cent from the base of 1.1 billion yuan in H2 FY2021.

Earnings per share for the second half stood at 36.51 fen, up from 27.9 fen previously. 

The company’s revenue for H2 increased 17 per cent year on year to 11 billion yuan, from 9.4 billion yuan.

The higher topline was driven mainly by higher contributions from the shipbuilding and shipping business, which helped to offset a fall in revenue in other segments such as terminal services, trading, ship-design services and investments. 

Shipbuilding revenue increased 17.9 per cent to 9.9 billion yuan, from 8.4 billion yuan.

The segment’s gross profit margin improved by two percentage points amid the depreciation of the yuan against the US dollar, as well as the normalisation of steel prices during the half-year period.

While revenue from the shipping business rose 49 per cent to 822 million yuan due to a bigger charter fleet and improved charter rates, gross profit margin fell by one percentage point. This was on the back of significantly higher operating costs, driven by higher oil prices.

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Revenue from other businesses decreased to 291 million yuan, which the company mainly attributed to the lower volume of trading business activities. Considering how the reduced trading activities had lower margins, gross profit margin for other business segments came in higher at 38 per cent, as opposed to 18 per cent in H2 of FY2021.

Other income, excluding interest, increased by 169 per cent to 92.3 million yuan from 34.4 million yuan, which the company said was driven by higher income from sales of materials.

Administrative expenses fell 143 per cent to 169.6 million yuan from 397.3 million yuan.  

The share of results of associated companies and joint ventures fell 77 per cent to 7.6 million yuan, from 32.3 million yuan. This mainly consisted of profits from Yangzi-Mitsui Shipbuilding, the company said. 

For the full year ended Dec 31, Yangzijiang posted a 24 per cent fall in net profit to 2.8 billion yuan, from 3.7 billion yuan for FY2021. 

Revenue for FY2022 increased 37 per cent to 20.7 billion yuan from 15.1 billion yuan, driven mainly by higher shipbuilding and shipping business revenues. 

The group proposed a final dividend of S$0.05 per ordinary share for FY2022.

Following China’s reopening, the shipping industry is expected to witness a turnaround, with demand expected to improve in 2023, the company said, although it noted that recovery in the shipping business is expected to remain uneven. 

The company is focused on long-term goals such as sustainable profitability and growth, which has been supported by its increased operational efficiency and research and development efforts over the past year, executive chairman and chief executive Ren Letian said. 

“Yangzijiang Shipbuilding is well-positioned to progressively convert a sizeable amount of its record high order book of US$11 billion,” Ren noted. “We expect to generate healthy cash flow in the coming years, allowing us to generate sustainable returns to our shareholders.”

Separately, the company announced it was acquiring Jiangsu Jiasheng Gas for 430.1 million yuan – a deal which will diversify Yangzijiang’s revenue stream and expand its maritime value chain, said the group.

Jiangsu Jiasheng Gas holds a 45 per cent equity interest in Jiangsu Yangzi Jiasheng Terminal, in which Yangzijiang acquired a 55 per cent equity interest in 2019.

Following the acquisition, the group will hold a 100 per cent interest in Jiangsu Yangzi Jiasheng Terminal. It intends to convert the Chinese company’s petrochemical terminal site and adjacent land in the upstream Yangtze River region into a liquefied natural gas terminal facility, after obtaining relevant government approvals.

Shares of Yangzijiang were down 0.7 per cent or S$0.01 at S$1.34 as at 11.12 am on Thursday, after both announcements.