CSSC forecasts 11-fold earnings jump

PUBLISHED : Friday, 01 February, 2008, 12:00am
UPDATED : Friday, 01 February, 2008, 12:00am

China State Shipbuilding Co, the largest mainland shipyard, said yesterday that its net profit surged more than 11-fold last year due to an increase in vessel orders and the acquisition of shipyards from its parent company.

The Shanghai-based shipyard predicted its net profit for last year would increase up to 11.5 times compared with 297.5 million yuan in 2006, in a filing with the Shanghai Stock Exchange yesterday.

Previously a heavy-duty engine maker, the company acquired two Shanghai-based shipyards from its parent, China State Shipbuilding Corp last July, making it an integrated shipbuilding conglomerate. The boost in profit was mainly due to its takeover of Shanghai Waigaoqiao Shipbuilding Company and a 65 per cent interest in Jiangnan Changxing Shipbuilding last year.

Shares in the company rose 1 per cent to 216.83 yuan yesterday.

The increase in dry bulk freight rates [early last year] has driven up demand for dry bulk vessels and filled the shipyards' order books until 2012, a transport analyst said. 'The outlook for 2008 is good, but since dry bulk vessels will be in oversupply in 2009, shipowners may trim down orders next year.'

Shipyard stocks have plunged for more than a month over uncertainty about the growth of order books for next year. Shares in China State Shipbuilding dropped 13 per cent last month. Shares in Korea's Hyundai Heavy Industries fell 29 per cent last month to 312,000 won.

The parent of China State Shipbuilding said early last month that its net profit for last year would increase 269 per cent to 14 billion yuan from 5.2 billion yuan in 2006. Last year, the whole group built 7.5 per cent of the world's new vessels. About 10 per cent of new ship orders and outstanding orders are held by the shipbuilding conglomerate.

Guangzhou Shipyard International, a Hong Kong-listed shipyard controlled by China State Shipbuilding Corporation, said on Wednesday that its profit last year rose more than 200 per cent.

Meanwhile, shares in dry bulk shipping companies surged yesterday because of a substantial rebound in the Baltic Dry Index, a measure of freight rates.

The BDI rose 4.8 per cent to 5,900 points yesterday, a two-year record in terms of percentage growth.

Shares in Pacific Basin, a bulk ship operator, rose 12.99 per cent to HK$10.96 yesterday, while China Shipping Development closed at HK$19.82, up 2.9 per cent.