Yangzijiang Shipbuilding addresses order cancellations

Three vessels have been re-sold while potential buyers are being sourced for the remaining units.

OCBC Investment Research noted:

Yangzijiang Shipbuilding reported a 13% YoY rise in revenue to RMB3.9b but saw a 9% fall in net profit to RMB878.2m in 2Q12, such that 1H12 net profit accounted for 50.2% and 51.8% of ours and the street’s full year estimates.

Excluding income from its financing business, the shipbuilding segment saw an increase in gross profit margin from 22.1% in 2Q11 to 24.2% in 2Q12, though slightly lower compared to 26.4% in 1Q12.

15 vessels were delivered according to schedule in 2Q12, and the group also entered into new deals to build eight vessels worth US$159m in the quarter. Out of the six 1,100 TEU containerships, four are buyer options which are valid till 2013.

Recall that YZJ was earlier looking at a new order target of US$2b- US$2.5b for this year. However, the group has clinched only 11 effective contracts YTD worth US$295.1m, and it looks increasingly probable that the Seaspan orders may take a longer time to materialize.

After the order cancellations of two 34,000 DWT bulk carriers (highlighted in our 21 Jun 2012 report), YZJ also ceased contracts for another six 82,000 DWT bulk carriers. Out of the eight vessels, three have been re-sold while potential buyers are being sourced for the remaining units.