SINGAPORE (Apr 30): Mainboard-listed shipbuilder Yangzijiang Shipbuilding booked earnings of RMB403.8 million ($80.6 million) for 1QFY2020 ended March, some 51% lower than earnings of RMB824.1 million a year ago.
This denotes earnings per share (EPS) of 10.31 RMB cents, a steep decline from EPS of 20.88 RMB cents in 1QFY2019.
The plunge in the group’s bottom line figures for the quarter under review comes amid government-mandated lockdowns in China due to the Covid-19 outbreak, which had in turn adversely impacted the group’s productions for a few weeks.
This had led to a 44% fall in Yangzijiang’s revenue figures to RMB3.5 billion from RMB6.3 billion last year.
Segmentally, revenue contributions from core shipbuilding activities fell 33% year-on-year to RMB2.3 billion. This was a result of some 12 vessels being delivered in 1QFY2020, compared to 15 vessels last year. In addition, revenue from trading business fell 77% to RMB0.5 billion due to the lower volume of trading activities.
However, these declines were partially mitigated by an 18.7% increase in the group’s other shipbuilding activities to RMB145 million as its fleet size expanded.
Cost of sales for the quarter fell 46% to RMB2.8 billion from RMB5.1 billion. However, the group noted that although overall shipbuilding activities for the quarter had eased compared to previous quarters, its fixed depreciation costs had translated to the disproportionate decrease in cost of sales for the quarter.
Correspondingly, gross profit tumbled 39% to RMB7.1 million from RMB1.2 billion a year ago.
As at end-March, cash and cash equivalents stood at RMB9.6 billion.
In 1QFY2020, Yangzijiang had secured new orders for seven vessels, with a total contract value of US$360 million. Not including proceeds from the termination of one shipbuilding order for one unit of an oil tanker, the group had an outstanding order book of US$2.9 billion for 69 vessels as at end-March.
The group adds that these orders will keep its yard facilities at a healthy utilization rate up to late
2021, and provide a stable revenue stream for at least the next 1.5 years.
Looking ahead, Yangzijiang CEO Ren Letian says the group has taken “several proactive measures” to resume production after the extended lockdown period imposed by the Chinese government. These efforts include longer shifts for employees and the recruitment of additional workers.
Despite the improvement in China, Ren notes that challenges such as a weak global sentiment, as well as a lack of near-term visibility, remain.
“However, once the situation is contained and the economy starts to stabilise, global trade will recover. Shipowners will still need to upgrade and replenish their fleets, with a focus on energy efficiency and environmental protection,” says Ren.
“Yangzijiang has the financial strength and core capability to stand strong against major headwinds, and our long-term strategy for sustainable growth will remain intact,” he adds.
Shares in Yangzijiang Shipbuilding closed 0.5 cent higher, or 0.5% up, at 97.5 cents on Wednesday prior to the results announcement.
