China Rongsheng upbeat despite cash concerns

The severe cash position at China Rongsheng Heavy Industries has raised doubts about whether the mainland's largest private shipyard can continue to operate despite the raising of 1.4 billion yuan (HK$1.76 billion) in convertible bonds earlier this month.

The money raised was just a fraction of its total borrowings of 25 billion yuan as at June 30 - of which 15 billion yuan will be due for repayment next June, according to the company's latest filing to the Hong Kong stock exchange.

The shipbuilder posted an underlying loss of 1.3 billion yuan in the first six months of the year, excluding a revaluation gain on its assets. This compares to a profit of 243 million yuan a year ago. It had net cash and cash equivalent of 870 million yuan as of June 30.

The gloomy situation facing the entire shipping trade this year is not helping as the company has secured orders for only two new dry bulk carriers totalling 360,000 deadweight tonnes and another order for a marine engine over the period.

While chief financial officer Sean Wang said the company is confident of meeting its financial obligations through loan refinancing and other means, a number of uncertainties may cast into doubt the group's ability to continue as a going concern.

These include requests by ship buyers to postpone delivery of new vessels amid slowing trade and oversupply, which in turn led to slower collection of debt for Rongsheng.