Published April 30, 2009

Yangzijiang Q1 profit rises 30% to 483m yuan

By VINCENT WEE

	Email this article
	Print article
	Feedback

CHINA-BASED shipbuilder Yangzijiang turned in a 30 per cent rise in first-quarter net profit to 483.3 million yuan (S$106.3 million) on a 23 per cent rise in revenue to 2.09 billion yuan, despite the tough times in the shipbuilding industry.

Yangzijiang kept its gross profit margin above 20 per cent, despite taking an 8 per cent provision, compared with a provision of just 0.5 per cent in the previous corresponding quarter.

The higher provision was taken to cover potential variations to contract prices for vessels under construction, higher raw material costs and a weakening US dollar/yuan rate.

The increased provision was offset by the higher profit margins from construction of larger vessels at the group's new yard, Yangzijiang said.

Operating costs were kept under control, though the cost of sales rose to 1.67 billion yuan from 1.34 billion yuan previously due to an increase in turnover and construction activity.

The effective tax rate fell from 7.2 per cent in Q1 2008 to 5.7 per cent in Q1 2009, as more contributions came from the new yard, which is tax-exempt.

There was a 10 per cent rise in other gains to 97.3 million yuan, mainly due to foreign exchange-related gains from realised forward contracts.

'The progress of our new yard is very encouraging,' said executive chairman Ren Yuanlin. 'We delivered our first two 92,500 deadweight tonne vessels and the first 4,250 TEU container vessel in this quarter. This was not only a key operational milestone, but also a proud achievement.'

Yangzijiang's order book totalled US$6.7 billion on March 31, comprising 149 vessels. The group has not suffered any cancellations to date. Six vessels were delivered in Q1, followed by another two in April. Yangzijiang expects to deliver a total of 40 vessels this year.

It said it is in constant contact with ship owners to help explore options to get through the current tough economic conditions.

Yangzijiang shares closed two cents higher at 45 cents yesterday.