SINGAPORE (Nov 14): Mainboard-listed shipbuilder Yangzijiang Shipbuilding saw its earnings shrink 10% to RMB702.3 million ($136.3 million) in 3Q19 ended in September, from RMB778.6 million in 3Q18.
On a fully diluted basis, this translates to earnings per share (EPS) of 17.84 RMB cents, down from EPS of 19.73 RMB cents in 3Q18.
The decline was led by other losses of RMB44 million due to foreign exchange loss and fair value loss on derivative financial instruments in 3Q19, compared with a RMB284 million gain in 3Q18.
In addition, share of loss of associated companies and joint ventures widened to RMB23.2 million in 3Q19, from RMB1.9 million a year ago.
Revenue for the quarter inched up 1% to RMB5.4 billion, on the back of higher income generated from its shipbuilding-related segments.
Its core shipbuilding business generated revenue RMB3.2 billion, following the delivery of 13 vessels. The 7 additional vessels delivered in 3Q19, compared to 3Q18, translates to a 15.6% increase in the revenue generated by the segment.
A simultaneous increase was observed in its shipbuilding related segment that grew to RMB186 million in 3Q19, from RMB149 million in 3Q18. The segment which comprises shipping logistics & chartering as well as ship design services, benefitted from an expanded fleet size and higher charter rate, this quarter.
However, revenue growth was constrained by a contraction in its trading business to RMB1.5 billion due to a lower volume in trades.
In line with this, its debt investment at amortised costs dropped to RMB63.5 million, from the RMB333 million in 3Q18.
Meanwhile, the shipbuilder had operating costs of RMB26 million on the back of higher cost of sales from its core shipbuilding.
As at end September, its cash and cash equivalents stood at RMB9.22 billion, higher than the RMB7.68 billion for 3Q18.
The quarter was particularly challenging for Yangzijiang Shipbuilding as it faced rumours that its executive chairman Ren Yuanlin was “missing”.
See: As Yangzijiang's Ren 'assists' with graft probe, son Letian holds the fort
Specifically, he is assisting in the investigations of a corruption case involving Liu Jianguo, a “veteran political patron of the shipbuilding industry” who is also Yangzijiang’s largest investor.
Liu is under probe by the Central Commission for Discipline Inspection in Beijing, the anti-graft body of China’s Communist Party.
In spite of this hiccup, Ren Letian, CEO of Yangzijiang has won 11 new contracts amounting to USD487 million ($663.8 million) in 2H19, which boosted the performance of the company’s core shipbuilding segment.
Going forward, the company foresees that the ongoing US-China trade tensions and resultant weak global economic outlook will have adverse implications shipping demand.
In line with this, it notes there was a 44% decline in new shipping orders globally in the first nine months of the year, compared to the same period in 2018. This is as shipbuilders were adjusting to the economic environment and the International Maritime Organisation’s (IMO) 2020 rule of reducing sulfur emissions by 80% by 2020.
Even so, it expects new order momentum to pick up as shipowners decide to scrap old vessels and replace them with environmentally-friendly ones, in line with the ongoing global sustainability movement.
And while Ren Letian, CEO of Yangzijiang, notes that the move towards sustainability has “affected the pace of new order inflow” he believes it “will eventually lead to long-term benefits for people and the environment”.
And the company is set to contribute to this movement through a joint venture it signed with Mitsui Shipbuilding, to construct green vessels.
“Mitsui’s expertise and design and construction of green vessels and its relentless pursuit of high-quality standards will add tremendous value to Yangzijiang’s next phase of growth, as we continue to create value for our customers and shareholders,” the group says.
Shares of Yangzijiang shipbuilding closed 2.55 cents lower at 96 cents on Wednesday before its results announcement.
