CSIC remains buoyant with diversification, controls on risk

The China Shipbuilding Industry Corporation (CSIC), the country's largest shipbuilder, achieved impressive double-digit growth in output, revenue and profit last year despite the global recession. Last year was tough for China's export-oriented shipbuilding industry with new orders at the national shipyards dropping by 55 percent to 26 million deadweight tons, according to figures from Ministry of Industry and Information Technology.
Yet the Beijing-based company eventually completed 33 percent more ships last year than in 2008. Its revenue increased 17 percent to 120.9 billion yuan, with profit up 18.5 percent to reach 7.4 billion yuan.
Addressing their effort to counter the decline of new orders, Liu Zhengguo, general office director and spokesman for CSIC said that the company invested hugely in communicating with clients and maintaining existing orders as a priority, as a precaution against buyers canceling orders due to financial imperatives.
The company also became more selective in its choice of clients, with shipping lines that have a long trading history with CSIC being given a preference, said Liu.
As part of a strategy to reduce risk, the CSIC has focused increasingly on the domestic market over the past two years, which resulted in nearly half of its current orders now being sourced from within China.
The company also implemented a number of other measures aimed at controlling risk and ensuring continued development during this lean time. These measures included centralized procurement and improved internal management, as well as the development of new ships with a higher added value.
Last year the company signed a number of contracts for the construction of vessels designed to undertake scientific surveys or lay undersea cables as well as ocean engineering equipments, such as drilling platforms, intended to explore the offshore oil and gas resources. This divergence in its traditional manufacturing base has made up for some of the shortfall in orders for oil tankers, container ships and bulk cargo carriers.
Yang Huanzhi, vice director of the general office of CSIC, said that the challenge of seeking new orders will continue this year, but the situation will be better than over the last 12 months, as the amount of new orders had hit rock bottom in 2009.
According to Yang, CSIC's output in its shipbuilding businesses is expected to double this year, reaching 10 million deadweight tons.
Non-ship businesses
As a business with nearly 50 subsidiaries and 28 research institutes across the country, CSIC also has distinct technological advantage in terms of equipment manufacturing across a broader range of sectors than just shipbuilding. Over the next few years, it intends to expand its operations in the non-marine sphere.
Offshore wind power generation is now an important part of CSIC's non-ship businesses. Its subsidiary in the Chongqing municipality now produces a series of eight different wind generators. The company aims to generate sales revenue of more than 20 billion yuan from this sector over the next three years.
Last year, the company's subsidiaries in Kunming, the capital of Yunnan province, secured a contract to provide the baggage-sorting system for the new airport in the city, breaking the longstanding monopoly of foreign manufacturers in the airport logistics equipments sector.
CSIC has also extended its operations into nuclear power and the petrochemical industry, based on its substantial experience and strong capability in developing large-scale equipments.
CSIC's non-ship businesses now account for about 40 percent of its total output. The company aims to increase this proportion to 45 percent in coming years in order to stave off the continuing problems facing the global shipbuilding industry.
Its dominant position in the shipbuilding industry, coupled with its strong performance in non-ship businesses, gives CSIC renewed confidence in its ability to maintain double-digit growth this year.
14 billion yuan IPO
The company aims to achieve a 15 percent increase in operating revenue, taking it to 140 billion yuan. Its profits are expected to exceed 8 billion yuan in 2010.
The CSIC also took a major step on the capital markets last year. It announced an initial public share offering on the Shanghai Stock Exchange in December and has raised over 14 billion yuan to date. This share offering related solely its marine-related equipment subsidiaries and not its shipbuilding and non-ship businesses.
Lepu Medical Technology (Beijing) Co, of which CSIC is the largest shareholder, was listed on the growth enterprise board at the Shenzhen bourse last year, raising more than 1.1 billion yuan.