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Yangzijiang confirms first order for VLGC pair, sees Q3 profit dip

Yangzijiang confirms first order for VLGC pair, sees Q3 profit dip
Privately-owned Yangzijiang Shipbuilding has confirmed 12 new shipbuilding orders worth a total of $730m, including its first VLGC order for two units of 84,000 cu m gas carriers.

Between September to October, the Chinese shipyard entered into shipbuilding contracts for four 11,800 teu containerships for Pacific International Lines (PIL), four 3,800 teu containerships for Hamburg Sud, two 1,900 teu containerships for Rickmers Group and the two VLGCs for Shanghai Zhenrong Energy.

The four 11,800 teu containerships were converted from 9,700 teu capacity from an order inked in August, accompanied by increments in contract value.

The contracts are slated for deliveries in 2017 and 2018.

Yangzijiang had been in talks to secure the two VLGCs since early this year, and the latest order confirmation has reinforced the company’s progress into building higher specification and higher value ships.

“While the demand growth for traditional vessels has slowed down, demand for high-technology, more sophisticated and green vessels has become more promising. We have included LNG carriers and VLGC in the product line, and these high value-added vessel types are expected to provide crucial support for our sustained growth,” said Ren Yuanlin, executive chairman of Yangzijiang.

As at 30 September 2015, the group sat on an outstanding orderbook of $4.8bn comprising of 107 vessels. The delivery of the orderbook is scheduled to optimise the use of yards’ facilities up to 2018.

Meanwhile, Singapore-listed Yangzijiang has recorded a dip in earnings for the third quarter ended 30 September 2015.

Profit during the quarter was recorded at RMB680.67m ($107.36m), down 16% compared to the gain of RMB811.19m in the same period of last year.

Third quarter revenue, however, rose by 10% year-on-year to RMB4.14bn due mainly to the growth of the group’s shipping logistics and chartering business.

“The Chinese shipbuilding industry is going through one of the most challenging years in recent history, as the industry order flow, outstanding orderbook and vessel delivery numbers showed. The oversupply situation for containerships and dry bulkers is expected to continue, and the competition on the market has intensified,” Ren commented.

“Facing the tough environment, we have become more flexible in profit margin requirement and payment terms. We believe this is the optimal strategy given the situation, and it has proved effective in stimulating order flow since we adopted it,” he said.

In terms of M&A opportunities, Ren said the group will only evaluate those that are accretive to its core shipbuilding business, offer favourable return, and enhance shareholder value and the competitiveness of the company in the long run.