Yangzijiang's Q2 net profit falls 17% on lower trading volume

YANGZIJIANG Shipbuilding posted a 17-per-cent drop in net profit to 773.9 million yuan (S$154.5 million) for Q2 FY2020 ended June, as its top line took a hit from lower contributions from the trading business.

The mainboard-listed firm saw Q2 revenue fall 32 per cent to 4.8 billion yuan. Amid lower trading volumes, income from its trading business more than halved to a billion yuan, from 3.2 billion yuan a year ago. This segment carried a low gross profit margin of around 1 per cent.

However, revenue from the shipbuilding segment remained robust at 3 billion yuan, down by 3.2 per cent from a year ago. The drop was because Yangzijiang delivered 16 vessels in Q2, two fewer than the same period last year.

Despite the dip, the shipbuilding business expanded its gross profit margin to 22 per cent, up from 18 per cent a year ago. This was mainly due to the resale of the 157,000 dead-weight tonnage (DWT) oil tanker at a higher gross profit margin this year.

Yangzijiang's Q2 income from other shipbuilding businesses, comprising shipping logistics, chartering and ship-design services, inched up 0.6 per cent to 180 million yuan. However, with lower charter rates, the gross profit margin for this segment shrank to 20 per cent, down from 28 per cent last year.

For H1, Yangzijiang posted a steeper 34 per cent fall in net profit to 1.2 billion yuan, on the back of a 38 per cent fall in revenue to 8.3 billion yuan. (see amendment note)

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Despite a temporary shutdown from February to early March, Yangzijiang resumed full-capacity operations in April and said that it has "made up for the lost time". Its recent vessel deliveries included several New Panamax dry bulkers. In July, it delivered a 12,600 20-foot equivalent (TEU) containership, the largest it has ever built.

Covid-19 continues to weigh on the price of new vessels and charter rates, and has dampened shipowners' sentiment, Yangzijiang said. However, its new order wins for of US$517 million for H1 was more than double that from a year ago, it noted.

The firm's chief executive and chairman, Ren Letian, said: "Our customer base has grown to include more Chinese ship-owners, and our shipbuilding portfolio has become more diversified with an increased focus on dual-fuel vessels and LNG-related vessels. We remain financially strong with a net-cash position, providing a vital condition for survival in an economic downturn."

Shares of Yangzijiang closed at S$0.935 on Wednesday, up 2.75 per cent, before the results announcement.

Amendment note: The original version of this article wrongly stated the H1 net profit as 1.2 million yuan. This has been corrected to 1.2 billion yuan.