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Rongsheng's H1 profit falls 82% on fewer deals
Source: Bloomberg News |
August 22, 2012, Wednesday
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China Rongsheng Heavy Industries Group Holdings Ltd, the country's largest shipbuilder outside state control, posted its sharpest fall of 82 percent in half-year profit on falling demand for new vessels.
First-half net income fell to 215.8 million yuan (US$34 million) from 1.2 billion yuan a year ago, the Shanghai-based shipbuilder said in a Hong Kong stock exchange filing yesterday. Sales fell 37 percent to 5.5 billion yuan.
The company received orders for two vessels in the period, compared with 24 a year earlier, as global overcapacity and slumping charter rates deter shipowners from adding ships. Rongsheng has also canceled the 2.15 billion yuan acquisition of an engine-maker, while a company owned by its chairman is separately being investigated by the US Securities & Exchange Commission for insider-trading.
"New orders for many yards in the bulk and container space have really dried up," said Vincent Fernando, a Singapore-based analyst at Religare Capital Markets, who rates Rongsheng a sell. That's "a big problem," he said.
The company's inventories rose 28 percent from the end of last year to 3.3 billion yuan on June 30. Its inventory turnover days more than doubled in the period to 169. Short- and long- term borrowings also rose 13 percent to 28.7 billion yuan.
"We admit that cash flow is indeed an issue that needs to be urgently addressed," Chief Financial Officer Sean Wang said in Hong Kong.
Operating profit, or sales minus the cost of goods sold and administrative expenses, fell 43 percent to 859 million yuan.
First-half net income fell to 215.8 million yuan (US$34 million) from 1.2 billion yuan a year ago, the Shanghai-based shipbuilder said in a Hong Kong stock exchange filing yesterday. Sales fell 37 percent to 5.5 billion yuan.
The company received orders for two vessels in the period, compared with 24 a year earlier, as global overcapacity and slumping charter rates deter shipowners from adding ships. Rongsheng has also canceled the 2.15 billion yuan acquisition of an engine-maker, while a company owned by its chairman is separately being investigated by the US Securities & Exchange Commission for insider-trading.
"New orders for many yards in the bulk and container space have really dried up," said Vincent Fernando, a Singapore-based analyst at Religare Capital Markets, who rates Rongsheng a sell. That's "a big problem," he said.
The company's inventories rose 28 percent from the end of last year to 3.3 billion yuan on June 30. Its inventory turnover days more than doubled in the period to 169. Short- and long- term borrowings also rose 13 percent to 28.7 billion yuan.
"We admit that cash flow is indeed an issue that needs to be urgently addressed," Chief Financial Officer Sean Wang said in Hong Kong.
Operating profit, or sales minus the cost of goods sold and administrative expenses, fell 43 percent to 859 million yuan.
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