Yangzijiang's Q1 net profit slips 12% on weaker shipbuilding market

YANGZIJIANG Shipbuilding reported on Thursday that its net profit for the first quarter ended March 31, 2015 fell 12 per cent from a year ago to 706.88 million yuan.

Revenue was 14 per cent lower at 3 billion yuan. Shipbuilding-related segment remained its core revenue driver, contributing about 2.75 billion yuan, or about 90 per cent to the group's revenue in the first quarter, compared to about 82 per cent a year ago.

The Chinese shipbuilder delivered 10 vessels in the first quarter according to schedule, compared to 7 delivered a year ago. As a result, revenue derived from shipbuilding business increased by 26 per cent to 2.3 billion yuan. Revenue from trading business fell by 64 per cent to 0.36 billion yuan.

Other income increased by 38 per cent to 127 million yuan due the recognition of 88 million yuan advances during the quarter. The advances were from the down payments from the previous ship owners who terminated shipbuilding contracts earlier.

Cash and cash equivalents decreased to 2.5 billion yuan by end March 2015 from 2.7 billion yuan as at the end of 2014.

Yangzijiang said China's shipbuilding industry still faces an overcapacity issue, with utilization rate falling to 60 per cent in 2015 from 75 per cent in 2010.

"Chinese shipyards took total new orders of 5.99 million DWT, a decline of 77 per cent year on year. Supported by the strong demand for oil tankers and ultra large containerships, Korean yards received the most orders in this quarter.''

It added that its order book will keep its yards utilized till at least the end of 2016.

Looking ahead, Ren Yuanlin, executive chairman of Yangzijiang expects the Chinese government will continue to promote industry consolidation amid the overcapacity issue in the China's shipbuilding industry.

"We will continue monitoring the market and study the M&A opportunities that are presented to the group from time to time, however, our prime goal is to enhance shareholder value and the competiveness of the group in the long run; and the group will only consider M&A opportunities that offer favorable return and are accretive to our core shipbuilding business.''