Guangzhou Shipyard Profit Falls 50% on Plate Prices

Guangzhou Shipyard International Co. (317), a unit of China’s biggest shipbuilder, said first-quarter profit fell 50 percent because of higher prices of steel plates.

Net income for the three months ended March 31 declined to 129.3 million yuan ($18.9 million), or 0.26 yuan a share, from 258 million yuan, or 0.52 yuan, the company said in a statement to the Shanghai stock exchange.

“They may still be using some of the high-priced inventory acquired in the middle of 2008 when steel prices were high,” Jack Xu, a Shanghai-based analyst at Sinopac Securities Asia Ltd., said before the announcement. “The company had a very good first quarter in 2008, which makes the comparison tough.”

Guangzhou Shipyard also incurred higher financing costs during the period as it received fewer orders, according to an April 9 exchange filing. Orders placed with Chinese shipbuilders plunged 94 percent in the first three months, according to government estimates, as a global recession erased demand for ships to carry raw materials and consumer goods.

Guangzhou Shipyard fell 0.7 percent in Hong Kong trading to close at HK$11.22 today before the earnings announcement. The shares have surged 58 percent this year, compared with a 5.8 percent gain in the key Hang Seng Index.

The Guangzhou, southern China-based company completed and delivered four vessels, the statement said. It secured orders for building 60 vessels, with a total tonnage of 2.66 million deadweight tons, it said.

Chinese shipyards may have cash shortages of about $30 billion in the next three to four years, the China Daily reported on April 8, citing Li Li, a deputy general manager of Export-Import Bank of China’s ship finance department.

The biggest decline in global shipping rates in two decades led to a worldwide 95 percent decline in new vessel orders in March, according to Clarkson Plc, the world’s largest shipbroker.

To contact the reporter on this story: Lee Spears in Beijing at lspears2@bloomberg.net.

To contact the editor responsible for this story: Teo Chian Wei at cwteo@bloomberg.net.

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.