Yangzijiang Shipbuilding posts 89% year-on-year jump in Q1 net profit

YANGZIJIANG Shipbuilding (YZJ) on Thursday posted an 89 per cent increase in its net profit for the first quarter ended March 31, from 403.83 million yuan (S$82.76 million) in the corresponding period the preceding year to 761.73 million yuan.

This came amid a decline in its topline, as the group's revenue fell 25 per cent year on year from 3.50 billion yuan in Q1 FY20 to 2.62 billion yuan in Q1 FY21.

In the shipbuilding-related segment, YZJ's core shipbuilding revenue fell from 2.3 billion yuan in Q1 FY20 to 1.8 billion yuan in Q1 FY21, as a result of lower shipbuilding activities. This is even as the group delivered 12 vessels in those two quarters.

In the same period, trading revenue also declined from 538 million yuan to 115.9 million yuan due to lower trading volume, said the group in a bourse filing.

Meanwhile, revenue from other shipbuilding businesses, consisting of shipping logistics and chartering, as well as ship-design services, was higher at 186.5 million yuan in Q1 FY21, compared with Q1 FY20's 145.1 million yuan, on the back of an expanded fleet size and improved charter rates.

However, YZJ's gross profits increased 12 per cent year on year to 802.29 million yuan, from 714.14 million yuan in the corresponding period last year. This was as the group's cost of sales fell by a larger margin than the fall in its revenue for the quarter, which declined 35 per cent year on year.

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Correspondingly, the group's gross profit margin improved by 11 percentage points to 31 per cent in Q1 FY21 - underpinned by the construction of more container ships and larger-size vessels for the quarter, along with improved charter rates.

What gave the biggest boost to the group's bottom line for the quarter was its share of profit of associated companies and joint ventures. This jumped 825 per cent year on year, from 6.38 million yuan in Q1 FY20 to 59.02 million yuan in Q1 FY21.

This figure mainly relates to the share of profits from Yangzi-Mitsui Shipbuilding Co, the group's joint venture with Mitsui E&S Shipbuilding Co and Mitsui & Co, said YZJ in its financial results.

In the year to date, YZJ has secured new orders for 75 vessels, with a total contract value of US$4.01 billion, marking its largest order win since 2008.

As at Thursday, the group's outstanding order book stood at US$6.6 billion for 146 vessels, its highest level since 2009. This will "provide the group with a stable revenue stream for at least the next two years", said YZJ in a statement.

Ren Letian, executive chairman and chief executive of YZJ, said: "Yangzijiang was the key beneficiary to the strong demand for orders placed for container ships since the fourth quarter of 2020, backed by its strong capabilities in this market."

He added: "Our current outstanding order book is at its highest level since 2009 and to increase capacity, the group will resume operations at its Changbo yard in the second quarter of 2021. The Changbo yard will allow the group to deliver six to seven mid-sized vessels every year… We will continue to stay ahead of environmental regulations and we aim to play a part in the decarbonisation of the shipbuilding industry and increase our capabilities in building eco-friendly vessels." (see amendment note)

Shares of YZJ closed flat at S$1.46 on Thursday, prior to the results announcement.

Amendment note: An earlier version of the article stated that the Changbo yard will open in Q2 2020, when it should be Q2 2021. The article has been amended to reflect this change.