Yangzijiang wants to foray into VLCCs as there are relatively few players in China that build such large vessels. Photo of Yangzijiang's 10k TEU containership: Company
YANGZIJIANG SHIPBUILDING, with bellwether profit, orderbook and cash reserves among PRC shipyards, is taking a step to further strengthen its financial management.
"We are expanding into building LNG / LPG vessels as there is strong demand for such vessels," said Executive Chairman Ren Yuanlin. NextInsight file photoAt its 1QFY2015 results briefing on Thursday, executive chairman Ren Yuanlin, 61, said that he will focus on the Group’s Investment segment to ensure strong financial support for its core business in shipbuilding.
It plans to decrease the portfolio size of its held-to-maturity financial assets to Rmb 10 billion or less by the end of this year and park the excess cash with professionals instead.
That is, through collaboration with sovereign wealth funds or publicly listed companies in venture capital investments.
“We have partnerships in venture capital investments with municipalities in Shanghai, Zhuhai and Wuxi,” said Mr Ren.
He listed 3 criteria for the Group’s venture capital investments.
1. The Group has a stake of 30% of more when it participates as a limited partner.
2. The Group has a stake of 20% of more when it participates as a general partner.
3. The Group has the right to veto against project implementation.
Successor Ren Letian to helm shipbuilding division
Newly appointed CEO Ren Letian was in charge of the Group’s Xinfu Yard in its production of six 10,000 TEU flagship containerships last year. Photo by Sim Kih
His son and successor, Ren Letian, 33, will focus on the Group's Shipbuilding Related segment.
Ren Letian assumed his new role of Group CEO with effect from 1 May 2015.
The Group’s Shipbuilding and related segment contributed 65% to 1QFY2015 gross profitwhile Investment segment contributed 35%.
On 30 April, the Group posted 1QFY2015 revenue of Rmb 3.0 billion, down 14% year-on-year.
10 vessels were delivered in 1QFY2015, compared to 7 vessels in 1QFY2014, resulting in a 26% increase in shipbuilding revenue.
However, revenue from trading fell by 64%, resulting in the top line contraction.
Net profit attributable to shareholders was Rmb 715.6 million, down 10% year-on-year. Group gross profit margin remained healthy at 26%, with shipbuilding gross margin at 21%.
The Group had an order book for 114 vessels amounting to contract values totalling US$4.6 billion as at 30 April.
In April, the Group received 4 new vessel orders: two 36k DWT vessels from Europe as well as two 10k TEU containerships from Seaspan.
Managing risk as China's economy slows down
“The recent stock market bull-run in China has improved the quality of our micro-financing colllateral,” said CFO Liu Hua.
Photo by Sim KihTo address risks associated with the continued weakness in global shipbuilding and as well as increased credit default risk arising from China’s economic slowdown, the Group has been stepping up on its operational efficiency as well as financial prudence.
During 1QFY2015, it cut administrative expenses by 23% to Rmb 68.8 million and finance costs by 54% to Rmb 50.4 million.
To reduce the exposure of its held-to-maturity financial assets to China’s property slump, the Group also limited the proportion of borrowers from the real estate and construction industry to 30% as at 31 March 2015 (down from 32% as at 31 December 2014).
Held-to-maturity financial assets increased from Rmb 161.1 million as at 31 December 2014 to Rmb 266.3 million as at 30 April 2015 as the Group had participated in a short term investment opportunity with a return that was as high as 24% a year.
Gross gearing improved marginally from 38.2% as at 31 December 2014 to 37.3% as at 31 March 2015 as it further paid down secured debt.
Restricted cash fell from Rmb 3.3 billion to Rmb 1.7 billion during this period.
AGM on 30 April (Thursday) @ Capital Tower, Robinson Road: A lot of happy shareholders and a Chairman (Ren Yuanlin) who is popular with them. Photo by Reyna Mei.
