Published February 25, 2009

Yangzijiang Q4 earnings rise 25%

By VINCENT WEE

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YET another Chinese shipbuilder has posted better-than-expected results. Yangzijiang Shipbuilding yesterday reported a 25 per cent rise in fourth-quarter net profit to 395.1 million yuan (S$88.2 million) and a 20 per cent increase in revenue to 1.87 billion yuan - thanks to a big jump in other income, and effective cost control measures.

Full-year net profit nearly doubled to 1.58 billion yuan while revenue rose 91 per cent to 7.36 billion yuan. Gross profit increased 54 per cent to 1.4 billion yuan but gross profit margin declined to 18.5 per cent from 23 per cent previously.

This was mainly due to a provision for potential cost variation to 8 per cent of shipbuilding contract price from 0.5 per cent previously on vessels that were under construction and partly due to increased material costs and a weakening of the dollar/yuan exchange rate over the period.

Other income and gains - comprising interest income, foreign exchange-related gains and gains from disposal of financial assets - more than doubled to 506.6 million yuan for FY08, highlighting the group's efforts in better managing its currency risk and improved effectiveness of the treasury functions.

Expenses have been kept in check with effective control measures and good economies of scale. Tax-exemption at Yangzijiang's new yard also helped bring its effective tax rate down to 4.5 per cent for FY08 compared to 13.2 per cent previously.

The group also has robust net operating cash flow of 2.6 billion yuan for FY08. Yangzijiang added that it has cash and cash equivalents of 3.1 billion yuan and a strong balance sheet, and is confident of weathering a pronounced downturn and even taking advantage of M&A opportunities that were not available previously.

'The group is progressing well over the years and this year's record performance is very encouraging for us,' said executive chairman Ren Yuanlin.

A one-tier tax-exempt final dividend of 1.8 cents per ordinary share has been proposed.

In 2008, the group was ranked 26th in the world and sixth in China in terms of capacity, delivering 27 vessels on schedule that totalled up to 850,000 deadweight tonnes. Yangzijiang's total order book stands at 155 vessels with a total value of US$6.9 billion as at Dec 31, 2008, made up of 7.53 million dwt.