Yangzijiang Shipbuilding was the most profitable shipyard in China last year, and the 7th most profitable in the world. We reproduce excerpts of executive chairman Ren Yuanlin's message in its just-published 2012 annual report. The excerpts focus on its evolving business strategy, and its take on the near-term prospects. For the full-blown annual report, click here.
Ren Yuanlin (second from left) with L-R: Sun Jianmin (Bank of China), Wang Lei (Bank of China) and Liu Hua (Yangzijiang CFO) at last year's dinner to celebrate YZJ's 5th anniversary of listing on the SGX. Photo: Company
To mitigate the cyclical nature of our core shipbuilding business, it
THE YEAR AHEAD
We expect the shipbuilding environment to remain difficult in 2013. We intend to deliver 42 vessels in 2013, which is lower than the 51 vessels we had in 2012.
Our 2013 product mix will comprise more of large containerships of higher value. In 1H2013, we shall deliver our maiden 4,800-TEU containership, which shall be yet another flagship product.
Ren Yuanlin (second from left) with L-R: Sun Jianmin (Bank of China), Wang Lei (Bank of China) and Liu Hua (Yangzijiang CFO) at last year's dinner to celebrate YZJ's 5th anniversary of listing on the SGX. Photo: Company
FORTIFIED BY MULTIPLE INCOME STREAMS
To mitigate the cyclical nature of our core shipbuilding business, it
is our long-term strategy to generate about 60% of revenue from
construction of marine vessels and the remaining 40% from related
activities such as the offshore sector, ship demolition and other nonshipbuilding
activities.In order to achieve our long-term strategy, on 1 January 2012, we very purposefully set up YZJ Offshore Engineering Pte Ltd (“YOEPL”), a 45%-owned joint venture providing marketing, procurement, front end engineering and design, and management consultancy services for the construction, fabrication and repair of oil & gas marine vessels and platforms.
Following the setting up of YOEPL, together with one of our wholly owned subsidiaries, Jiangsu Yangzijiang Shipbuilding Co. Ltd (“Jiangsu Yangzijiang”), another new subsidiary named Jiangsu Yangzijiang Offshore Engineering Co., Ltd (“JYOEC”) was set up in Taicang.
On 3 December 2012, JYOEC secured its maiden offshore contract – a Jackup Drilling Rig worth US$170 million.
Some of our other recent ventures that extend on our shipbuilding capabilities include steel fabrication for building facades of petrochemical plants, energy equipment manufacturing
Following the setting up of YOEPL, together with one of our wholly owned subsidiaries, Jiangsu Yangzijiang Shipbuilding Co. Ltd (“Jiangsu Yangzijiang”), another new subsidiary named Jiangsu Yangzijiang Offshore Engineering Co., Ltd (“JYOEC”) was set up in Taicang.
On 3 December 2012, JYOEC secured its maiden offshore contract – a Jackup Drilling Rig worth US$170 million.
Some of our other recent ventures that extend on our shipbuilding capabilities include steel fabrication for building facades of petrochemical plants, energy equipment manufacturing
as well as other non-shipbuilding activities.
Beyond shipbuilding and its related activities, we have developed supplementary income streams from conservatively managed businesses such as low-risk financial investments. We also leveraged on our strong balance sheet to assist ship owners in ship finance and lease vessels for income.
We currently manage more than Rmb 11 billion of financial assets that are over and above our Rmb 2 billion cash reserve, which is held for working capital, expansion and dividend payment needs.
Having supplementary income streams puts us in the favorable position of being able to
Having supplementary income streams puts us in the favorable position of being able to
be selective on shipbuilding contracts during downturns. That means we need not enter contracts on compromised terms and conditions.
THE YEAR AHEAD
We expect the shipbuilding environment to remain difficult in 2013. We intend to deliver 42 vessels in 2013, which is lower than the 51 vessels we had in 2012.
Our 2013 product mix will comprise more of large containerships of higher value. In 1H2013, we shall deliver our maiden 4,800-TEU containership, which shall be yet another flagship product.
The poor shipbuilding market has proven to be an opportunity for us to become more client-oriented and competitive. We will focus on developing vessels that meet ship-owners’ needs and focus on large vessels, for which there is greater demand.
For example, the 82,000-DWT vessel is another new addition to our high loading capacity, enhanced fuel efficiency and eco-friendly production range.
We also believe PRC yards will eventually capture a larger share of our targeted offshore market because of the nation’s competitive cost structure compared to yards in Korea, Japan or Europe. As such, the Group plans to be an offshore player for the long term.
Even though we face stiff competition as many other shipyards are likewise trying to enter this sector to mitigate the shipbuilding downturn, we will not easily take orders with unfavorable
Even though we face stiff competition as many other shipyards are likewise trying to enter this sector to mitigate the shipbuilding downturn, we will not easily take orders with unfavorable
terms just to secure contracts.
Rather, we intend to secure offshore orders selectively, and work towards a good track record of timely and successful deliveries. During the downturn, we will seize opportunities to generate additional income streams through joint ventures with established players in low-risk business sectors that are synergistic with the Group’s development.
For example, we are participating in the redevelopment of the coastal land where our Jiangsu Yangzijiang Yard used to occupy in joint venture with the China listed Jiangsu Huaxicun.
Rather, we intend to secure offshore orders selectively, and work towards a good track record of timely and successful deliveries. During the downturn, we will seize opportunities to generate additional income streams through joint ventures with established players in low-risk business sectors that are synergistic with the Group’s development.
For example, we are participating in the redevelopment of the coastal land where our Jiangsu Yangzijiang Yard used to occupy in joint venture with the China listed Jiangsu Huaxicun.
We are now in the second shipbuilding downturn since our 2007 IPO and it has been a period when many shipyards struggled to stay afloat. I am glad to report that the Group distinguished itself in our management for profitability.
Proactive management of held-to-maturity financial assets, plus other income streams from our diversification efforts have enabled us to pay dividends every year since our IPO.
This feat led Lloyd’s List to vote me as one of the top 100 most influential shipping personalities in 2012. It is a public affirmation of our extension of the Group’s various strengths to diversify into synergistic businesses.
Proactive management of held-to-maturity financial assets, plus other income streams from our diversification efforts have enabled us to pay dividends every year since our IPO.
This feat led Lloyd’s List to vote me as one of the top 100 most influential shipping personalities in 2012. It is a public affirmation of our extension of the Group’s various strengths to diversify into synergistic businesses.
Last but not least, we thank shareholders for staying vested in the Group through the up and down cycles of the shipbuilding industry. We believe that we shall emerge stronger than ever after the industry consolidation.
To share the fruits of our success, the Board is pleased to declare a 5 Singapore cent cash dividend for FY2012. We strive to be a hallmark of trustworthiness, dedication, fine workmanship and efficiency to all our customers, partners, business associates and shareholders.
Our corporate culture will steer Yangzijiang into becoming the most outstanding shipbuilding enterprise. Let us join hands to sail the seas!
Recent story: YANGZIJIANG: 5-ct dividend despite profit decline
To share the fruits of our success, the Board is pleased to declare a 5 Singapore cent cash dividend for FY2012. We strive to be a hallmark of trustworthiness, dedication, fine workmanship and efficiency to all our customers, partners, business associates and shareholders.
Our corporate culture will steer Yangzijiang into becoming the most outstanding shipbuilding enterprise. Let us join hands to sail the seas!
Recent story: YANGZIJIANG: 5-ct dividend despite profit decline
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