ONE DAY after Cosco announced a net profit plunge of 64% year-on-year, Yangzijiang announced its FY09 net profit was up 45%.
Yangzijiang’s net earnings rose to Rmb 2.3 billion (S$473 million) while Cosco’s contracted to S$110 million.
Investors at its results briefing yesterday were keen to find out what accounted for the starkly different set of results of China's 2 major shipyards.
Yangzijiang has specialized in building vessels for over half a century, explained its executive chairman, Mr Ren Yuanlin.
In contrast, Cosco Singapore is predominantly a repair and conversion yard, with numerous smaller contracts compared to the tens of millions that a single newbuilding job goes for. Its maiden revenues from shipbuilding started appearing only 3 years ago in 2007.
Another reason: Yangzijiang was successful in preventing order cancellations, thanks to its policy of securing huge deposits of 40% of a newbuilding contract value before work commences.
On the other hand, a slump in shipyard repair work hit Cosco Singapore.
Going forward, Mr Ren said he is commited to steering Yangzijiang to become one of China’s top 3 players in ship demolition within the next 2 to 3 years.
He wants to transform the builder of bulk carriers and container vessels into an integrated marine and offshore player with diversified income streams.
Mr Ren did not hide the fact that he expects shipbuilding margins to slide over the long term.
FY09 net margins of 21.6% reflected orders clinched during the shipbuilding boom in 2007, but margins in a normal market should be closer to 15%, he said.
Elaborating on previously announced plans for his Group to foray into ship demolition, he revealed that Yangzijiang is eyeing 2 ship demolition yards, each with a coastal line of one kilometer.
Other highlights of Yangzijiang’s FY09 results:
(1) Revenues rose 44% year-on-year to Rmb 10.6 billion (S$2.2 billion)
(2) A final cash dividend of 3.5 cents per share (tax-exempt) will be paid, amounting to dividend yield of 3.125% based on last close price of S$1.12.
(3) Order books as at 31 Dec were US$5.6 billion.
(4) Gross margin expansion of 2.5 percentage points to 21%
Related story: YANGZIJIANG: Why (still) no order cancellation
