Yangzijiang's Q3 net profit sinks 55% to $64.1m

Blame it on impairment losses.

Shipbuilder Yangzijiang Shipbuilding Ltd. reported a 59% decline in net profit to $64.1m (RMB 313.4m) in 3Q16 mainly due to impairment losses.

The group revealede that its total revenue declined 6% to RMB3.9b as revenue from shipbuilding business slumped 19% to RMB 2.7b. The decrease in shipbuilding earnings was due to completing only eight vessels compared to nine vessels delivered during the same period last year.

Revenues from trading business and other shipbuilding related segments posted growth. This was offset by lower gains under investment segment due to the lower interest rate received by the group.

Meanwhile, the group recorded other losses of RMB510m in 3Q2016 as compared to a gain of RMB242m in 3Q2015. These losses have badgered the group's overall bottomline.

"The loss was primarily due to the impairment provision of RMB531m made for vessels owned and operated by its shipping arm and additional impairment provision of RMB219m made for HTM investments accordingly to group policy," the shipbuilder said in a statement.

These impairment items were then partially offset by a subsidy income of RMB 107m and foreign exchange related gain of RMB 84m.

Yangzijiang Executive Chairperson Ren Yuanlin said the group has worked hard to build up the order book and the delivery track record, manage cancellation risk, explore opportunities in specialized essels and high value added vessels where demand is stronger, and optimize profit through further cost rationalization.

"Despite that the global outstanding order book declined to the lowest level since 2004 in the severe, prolonged market downturn, Yangzijiang remained in smooth operation and profitable, backed by a strong financial position" Yuanlin said.

He added, "Our financial strength provides reliable financing for the shipbuilding activities, gives customer the confidence in order placement, and helps in procurement and cost management."