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Yangzijiang retains profit in 2015 in weak shipbuilding market

Yangzijiang retains profit in 2015 in weak shipbuilding market
China’s privately-owned Yangzijiang Shipbuilding has remained profitable in 2015 despite the severe downturn in the shipbuilding industry, though earnings fell compared to 2014.

Net profit for the year ended 31 December 2015 at Yangzijiang was recorded at RMB2.46bn ($373.13m), a drop of 29% from RMB3.48bn in 2014.

Full year revenue, however, inched up 4% year-on-year to RMB16.01bn on higher contributions from the group’s shipbuilding and trading segments, while shipbuilding related businesses such as shipping logistics and chartering, ship design and consultation services saw a dip in contributions.

Yangzijiang’s 2015 results were largely dragged down by a huge plunge in profit during the fourth quarter on a gain of RMB41.45m, down 93% from RMB636.56m in the same period of 2014.

The group recorded other losses of RMB615m in the fourth quarter of 2015 from loss of RMB259m in the previous corresponding quarter, due mainly to impairment provision of RMB210m made for vessels and provision of RMB151m made for finance lease receivable for vessels on bareboat hire purchase arrangement. There was also additional impairment provision of RMB95m made for held-to-maturity investments and foreign exchange related losses.

Despite the persistently weakening shipbuilding market with declining number of new orders, Yangzijiang secured a total of 37 contracts with a total value of $2.25bn in 2015, compared to $1.8bn in 2014. As at 31 December 2015, the group had an outstanding orderbook of $5.4bn comprising 116 vessels, with progressive deliveries up until 2018.

Ren Yuanlin, executive chairman of Yangzijiang, said the shipyard added LNG carrier to its product portfolio to faciliate sustained growth, while continued to gain orders for its flagship containerships and other products.

“In China, as the consolidation and restructuring continue, excess capacity will gradually be removed, in favour of yards of decent size and capabilities,” Ren commented.

“However, recognising the headwinds on the market, especially pertaining to offshore rigs and dry bulkers, we are also prepared for the worst case scenario. We are confident that given the limited exposure to the offshore sector, risks are within control and will not hinder the long term growth of our core shipbuilding business,” he said.