Yangzijiang’s net profit drops 29% to $535m in FY15

Blame it on lower margins.

Chinese shipbuilder Yangzijiang reported a 29% slump in its full-year net profit to $535m (RMB 2.5 billion), despite a 4% increase in its total revenue.

The group raked in $3.4 billion (RMB 16 billion) in revenues last year, but gross profit margin dropped to 23% from 27% in the previous year. Asa result, gross profit dropped 10% to $792m (RMB 3.7b).

The decline in margins was due to lower contract value for the vessels built and delivered in FY2015 as compare to FY2014. Trading business, which carries a much lower margin of 1%, contributed about 14% of the revenue to the Shipbuilding Related Segment.

Meanwhile, administrative expenses increased by 51% yoy to $140.7m (RMB657m). This was primarily due to the impairment provision of $79m (RMB369m) made for payment due from customer on the jack up drilling rig under construction, the group’s only jack up rig order.

“The low shipping demand, low shipping rates and overcapacity issue continued to take a toll on the shipbuilding industry in 2015,” said Yangzijiang Executive Chairman Ren Yuanlin.

“In China, as the consolidation and restructuring continue, excess capacity will gradually be removed, in favor of yards of decent size and capabilities. However, recognizing the headwinds on the market, especially pertaining to offshore rigs and dry bulkers, we are also prepared for the worst case scenario.” he added.