China Shipbuilder Yangzijiang’s Profit Falls on Tax, Forex Loss

Yangzijiang Shipbuilding Holdings Ltd. (YZJSGD), China’s second-biggest private shipyard, posted a 7.6 percent decline in second-quarter profit because of higher tax and foreign exchange loss on contracts done in euros.

Net income in the three months ended June dropped to 812 million yuan ($133 million) from 878 million yuan a year ago, the company said in a statement to the Singapore stock exchange today. Sales rose 12 percent to 4.42 billion yuan.

Yangzijiang is among companies diversifying into offshore drilling and production as demand for new bulk vessels decline. The government has urged financial support, capacity control and a move into high-end products as part of a three-year plan to help the troubled shipbuilding industry after China Rongsheng Heavy Industries Group Holdings Ltd. (1101), the country’s biggest private yard, sought financial assistance.

“The current shipbuilding down cycle has been harsh on all Chinese shipbuilders and has claimed many victims along the way,” Yangzijiang Chairman Ren Yuanlin said in the statement. “In times of difficulty, customers turn to those who have an established and untarnished track record and a strong balance sheet.”

Second-quarter foreign exchange-related loss was 66.6 million yuan, compared with a gain of 6.21 million yuan a year earlier, the Jiangyin, China-based company said in the statement. Tax rate in the second quarter was 27 percent, compared with 19 percent a year ago.

The company won $1 billion of orders in the first half and $2.54 billion of options that could become firm contracts. Its orderbook stood at $3.24 billion at the end of June.

Yangzijiang shares gained 0.5 percent to 92.5 Singapore cents yesterday. The stock has fallen 3.7 percent this year, compared with 1.8 percent gain in the Straits Times Index.

China’s State Council urged local governments to support innovation, promote high-end products and stabilize the industry’s international market share with greater funding support, according to a statement earlier this week.

Thirty-eight percent of yards in China didn’t get contracts for new vessels last year, and 10 percent had no deliveries scheduled beyond the end of that year, the London-based ship-broking unit of ICAP Plc said in a report.

To contact the reporter on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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