Yanzijiang unlikely to rescue cash-strapped shipbuilder

It plans to exit the offshore market.

Yanzijiang is unlikely to rescue cash-strapped shipbuilder Jiangsu Rongsheng in spite of recent media reports that it is mulling the acquisition of a 20% stake in the company’s assets.

The report, which was published in oil and gas publication Upstream, claimed that Yangzijiang is in advanced talks to take a stake in Rongsheng.

In a release to the SGX, Yangzijiang clarified that while it has been approached by relevant government agencies and company regarding the potential acquisition, the group’s management has not made any decision regarding the deal.

CIMB analyst Lim Siew Khee believes that Yanzijiang is unlikely to spare cash to help Rongsheng as Yangzijiang plans to exit from offshore, expand into LNG and continue with containerships and larger bulk carriers. 

“Rongsheng, which is undergoing restructuring, has suffered losses since 2012. In June 2014, the yard posted a loss of Rmb3bn. We think YZJ is unlikely to take on an additional burden as it is also trying to keep its yard utilised. Its order book of US$4.6bn will largely be depleted by 2016. YZJ secured US$1.8bn of orders in 2014, with six options being extended to 2015, suggesting a sluggish outlook in the shipbuilding industry,” she wrote.