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China Rongsheng Heavy Industries announces 2011 annual results revenue surges 25.6%
China Rongsheng Heavy Industries Group Holdings Limited, a leading heavy industries group in China, yesterday announced its audited annual results for the twelve months ended 31 December 2011.
During 2011, the Group’s revenue was approximately RMB 15.9 billion, a surge of 25.6% from RMB 12.7 billion during the same period last year. Earnings attributable to equity holders of the Company slightly increased by 0.1% to RMB 1.7 billion compared with 2010.
Mr. Chen Qiang, Chief Executive Officer and Executive Director, said, “The Group continued to present outstanding results in 2011 and demonstrated immense growth potential under adverse market conditions. Affected by sluggish economic growth caused by volatile world markets, new shipbuilding orders globally declined about 54.6% and China’s new orders declined 58.3% compared with 2010. However, amidst these challenges, China Rongsheng Heavy Industries demonstrated strong marketing capability. The Group ranked first in China and third in the world in terms of new shipbuilding orders measured by DWT as at the end of 2011, demonstrating our strong capabilities and shipowners’ recognition of the Group.”
“The two flagship products of the Group have also achieved remarkable progress. The first very large ore carrier (“VLOC”) has been delivered in November 2011. The 3,000-meter deepwater pipe-laying crane vessel (“DPV”) has also been completed within the year. Besides, the steadily emerging contribution from the marine engine building and the engineering machinery business segments helped to increase the proportion of RMB revenue from 20% in 2010 to 35% in 2011, which has enabled the Group to deliver promising returns to our shareholders.”
Shipbuilding
Shipbuilding, our major business segment, remained as our major revenue source. During the year, revenue from our shipbuilding segment was RMB 15.4 billion, an increase of 29.8% compared with 2010. During the year, the Group received orders for a total of 39 new vessels of approximately 4.6 million DWT with a total contract value of USD 1.8 billion.
According to Clarkson Research, the Group represented 15.6% of China’s and 7.2% of the world’s new shipbuilding orders in terms of DWT in 2011, increases of 7.5 percentage points and 3.1 percentage points respectively. As at the end of 2011, the Group ranked first in China and third in the world in terms of new shipbuilding orders measured by DWT.
In 2011, the EURO zone appeared gloomy with an escalated debt crisis which spread across global markets. The US economic recovery comeback appeared fragile. Emerging markets, troubled by inflation, tightened their monetary policies and slowed down investment growth. The current downturn has brought about a major challenge to the global shipping market and the highly correlated shipbuilding industry.
New orders received by Chinese shipbuilders decreased significantly to 29.3 million DWT, representing a 58.3% year-on-year decline. The new orders were mostly shifted towards high-tech high-value vessels. The lack of advanced technology prevented over one-third of the Chinese shipyards from receiving any new order this year.
The Group endeavored to move upwards along the industry value chain, expanding its customer base of domestic shipowners and enriching our product variety to include more high-value vessels in its order book. In 2011, vigorous efforts were made to develop the containership market, which accounted for 14.6% of the total new orders secured during the year. The Group also continued to develop advanced vessel types with eco-friendly features, in full appreciation of current market requirements regarding fuel efficiency and low emission standards.
As at 31 December 2011, our order book included 111 vessels, representing a total of approximately 16.8 million DWT and a total contract value of approximately USD 6.6 billion.
Offshore Engineering
During the year, revenue from the offshore engineering segment, which arose from the construction of the 3,000-meter DPV, was approximately RMB 31.3 million. The DPV has contributed revenue since 2008 and was completed in June 2011. With China’s growing demand for offshore oil and gas, offshore engineering is positioned as a strategic emerging industry supported by the Government. The Group is enhancing its R&D capability in complex vessel types such as drilling rigs and liquefied natural gas (“LNG”) carriers, and preparing for LNG carrier containment systems and mock-up installation.
Marine Engine Building
The Group’s revenue from the marine engine building segment during 2011 was RMB 1.1 billion, an increase of 257.6% from the previous year. After excluding the inter-segmental sales, the marine engine building segment contributed RMB 93 million, an increase of 201.6% from the comparable period last year. The Group secured new orders for 37 low-speed marine diesel engines during the year, a total capacity of 683,663 horsepower with a total contract value of RMB 1.2 billion, of which 14 were external orders. The Group’s total orders on hand as at 31 December 2011 were 56 engines, with a total capacity of 1,145,868 horsepower and a total contract value of RMB 1.9 billion, of which 26 were external orders.
Engineering Machinery
During 2011, the Group’s revenue from the engineering machinery segment was RMB 681 million, an increase of 108.1% compared with 2010. After excluding inter-segmental sales, this segment contributed revenue of approximately RMB 410 million, an increase of 24.2% compared with 2010. Following the official commissioning of Phase One of our new plant, which is to focus on the production of 16 types of hydraulic excavators and two types of crawler cranes, on 28 June 2011, our production capacity of engineering machinery has been further enhanced. This project has been included in the “861 Action Plan” of Anhui Province and designated as a key implementation project under the “Twelfth Five-Year Plan” of the Hefei Municipal Government.
Prospects
Due to economic uncertainty and seasonal pressures, the recovery of the shipping market in 2012 may encounter a possible delay. The Group expects the global shipbuilding industry will remain weak for the year of 2012 with the imbalance between supply and demand unlikely to be resolved shortly. It will be difficult to secure new orders of traditional vessel types. However, orders for high-value vessels such as very large containerships are expected to remain steady. The current market situation will guide the shipbuilding industry into a period of restructuring and polarization. This tendency will inevitably further broaden the gap between leading shipyards and Greenfield shipyards. In the long-run, adjustment and restructuring will relieve oversupply and help restore market equilibrium.
In the time of uncertainty, China Rongsheng Heavy Industries will enhance strategic cooperation with shipowners and rely on the strong three-year order backlog to push through the current downturn. Meanwhile, the Group will actively seek upgrading and restructuring of our product offerings, with a focus on high-value vessels and cost-efficient eco-friendly vessels. To take advantage of falling steel price, the Group will reinforce cost management while enhancing production efficiency and profitability.
Driven by the ever-increasing global demand for offshore energy resources, offshore equipment manufacturing is entering into a boom period. During the “Twelfth Five-Year Plan” period, China plans to develop an offshore production capacity of 50 million tonnes and total investment in this sector will reach RMB 250 to 300 billion.
Mr. Chen Qiang concluded, “Looking ahead into 2012, the Group will reinforce execution of our measures to address risks after cautious evaluation of the market situation and closely tracking market trends. The Group will enhance our strategic cooperation with financial institutions and optimise cash flow management. To mitigate risks, the Group will regulate capital expenditure by controlling both the extent and speed of implementing new projects. Moreover, our primary target is to boost overall corporate competitiveness by enhancing management with a focus on cost efficiency and production efficiency. The current downturn offers us an opportunity to promote transformation, restructuring and upgrading. Setting 2012 as a new start, the Group will strive to ensure that it steadily progresses along the road to become a world-class competitive heavy industries conglomerate, and to generate promising returns for our shareholders.”
During 2011, the Group’s revenue was approximately RMB 15.9 billion, a surge of 25.6% from RMB 12.7 billion during the same period last year. Earnings attributable to equity holders of the Company slightly increased by 0.1% to RMB 1.7 billion compared with 2010.
Mr. Chen Qiang, Chief Executive Officer and Executive Director, said, “The Group continued to present outstanding results in 2011 and demonstrated immense growth potential under adverse market conditions. Affected by sluggish economic growth caused by volatile world markets, new shipbuilding orders globally declined about 54.6% and China’s new orders declined 58.3% compared with 2010. However, amidst these challenges, China Rongsheng Heavy Industries demonstrated strong marketing capability. The Group ranked first in China and third in the world in terms of new shipbuilding orders measured by DWT as at the end of 2011, demonstrating our strong capabilities and shipowners’ recognition of the Group.”
“The two flagship products of the Group have also achieved remarkable progress. The first very large ore carrier (“VLOC”) has been delivered in November 2011. The 3,000-meter deepwater pipe-laying crane vessel (“DPV”) has also been completed within the year. Besides, the steadily emerging contribution from the marine engine building and the engineering machinery business segments helped to increase the proportion of RMB revenue from 20% in 2010 to 35% in 2011, which has enabled the Group to deliver promising returns to our shareholders.”
Shipbuilding
Shipbuilding, our major business segment, remained as our major revenue source. During the year, revenue from our shipbuilding segment was RMB 15.4 billion, an increase of 29.8% compared with 2010. During the year, the Group received orders for a total of 39 new vessels of approximately 4.6 million DWT with a total contract value of USD 1.8 billion.
According to Clarkson Research, the Group represented 15.6% of China’s and 7.2% of the world’s new shipbuilding orders in terms of DWT in 2011, increases of 7.5 percentage points and 3.1 percentage points respectively. As at the end of 2011, the Group ranked first in China and third in the world in terms of new shipbuilding orders measured by DWT.
In 2011, the EURO zone appeared gloomy with an escalated debt crisis which spread across global markets. The US economic recovery comeback appeared fragile. Emerging markets, troubled by inflation, tightened their monetary policies and slowed down investment growth. The current downturn has brought about a major challenge to the global shipping market and the highly correlated shipbuilding industry.
New orders received by Chinese shipbuilders decreased significantly to 29.3 million DWT, representing a 58.3% year-on-year decline. The new orders were mostly shifted towards high-tech high-value vessels. The lack of advanced technology prevented over one-third of the Chinese shipyards from receiving any new order this year.
The Group endeavored to move upwards along the industry value chain, expanding its customer base of domestic shipowners and enriching our product variety to include more high-value vessels in its order book. In 2011, vigorous efforts were made to develop the containership market, which accounted for 14.6% of the total new orders secured during the year. The Group also continued to develop advanced vessel types with eco-friendly features, in full appreciation of current market requirements regarding fuel efficiency and low emission standards.
As at 31 December 2011, our order book included 111 vessels, representing a total of approximately 16.8 million DWT and a total contract value of approximately USD 6.6 billion.
Offshore Engineering
During the year, revenue from the offshore engineering segment, which arose from the construction of the 3,000-meter DPV, was approximately RMB 31.3 million. The DPV has contributed revenue since 2008 and was completed in June 2011. With China’s growing demand for offshore oil and gas, offshore engineering is positioned as a strategic emerging industry supported by the Government. The Group is enhancing its R&D capability in complex vessel types such as drilling rigs and liquefied natural gas (“LNG”) carriers, and preparing for LNG carrier containment systems and mock-up installation.
Marine Engine Building
The Group’s revenue from the marine engine building segment during 2011 was RMB 1.1 billion, an increase of 257.6% from the previous year. After excluding the inter-segmental sales, the marine engine building segment contributed RMB 93 million, an increase of 201.6% from the comparable period last year. The Group secured new orders for 37 low-speed marine diesel engines during the year, a total capacity of 683,663 horsepower with a total contract value of RMB 1.2 billion, of which 14 were external orders. The Group’s total orders on hand as at 31 December 2011 were 56 engines, with a total capacity of 1,145,868 horsepower and a total contract value of RMB 1.9 billion, of which 26 were external orders.
Engineering Machinery
During 2011, the Group’s revenue from the engineering machinery segment was RMB 681 million, an increase of 108.1% compared with 2010. After excluding inter-segmental sales, this segment contributed revenue of approximately RMB 410 million, an increase of 24.2% compared with 2010. Following the official commissioning of Phase One of our new plant, which is to focus on the production of 16 types of hydraulic excavators and two types of crawler cranes, on 28 June 2011, our production capacity of engineering machinery has been further enhanced. This project has been included in the “861 Action Plan” of Anhui Province and designated as a key implementation project under the “Twelfth Five-Year Plan” of the Hefei Municipal Government.
Prospects
Due to economic uncertainty and seasonal pressures, the recovery of the shipping market in 2012 may encounter a possible delay. The Group expects the global shipbuilding industry will remain weak for the year of 2012 with the imbalance between supply and demand unlikely to be resolved shortly. It will be difficult to secure new orders of traditional vessel types. However, orders for high-value vessels such as very large containerships are expected to remain steady. The current market situation will guide the shipbuilding industry into a period of restructuring and polarization. This tendency will inevitably further broaden the gap between leading shipyards and Greenfield shipyards. In the long-run, adjustment and restructuring will relieve oversupply and help restore market equilibrium.
In the time of uncertainty, China Rongsheng Heavy Industries will enhance strategic cooperation with shipowners and rely on the strong three-year order backlog to push through the current downturn. Meanwhile, the Group will actively seek upgrading and restructuring of our product offerings, with a focus on high-value vessels and cost-efficient eco-friendly vessels. To take advantage of falling steel price, the Group will reinforce cost management while enhancing production efficiency and profitability.
Driven by the ever-increasing global demand for offshore energy resources, offshore equipment manufacturing is entering into a boom period. During the “Twelfth Five-Year Plan” period, China plans to develop an offshore production capacity of 50 million tonnes and total investment in this sector will reach RMB 250 to 300 billion.
Mr. Chen Qiang concluded, “Looking ahead into 2012, the Group will reinforce execution of our measures to address risks after cautious evaluation of the market situation and closely tracking market trends. The Group will enhance our strategic cooperation with financial institutions and optimise cash flow management. To mitigate risks, the Group will regulate capital expenditure by controlling both the extent and speed of implementing new projects. Moreover, our primary target is to boost overall corporate competitiveness by enhancing management with a focus on cost efficiency and production efficiency. The current downturn offers us an opportunity to promote transformation, restructuring and upgrading. Setting 2012 as a new start, the Group will strive to ensure that it steadily progresses along the road to become a world-class competitive heavy industries conglomerate, and to generate promising returns for our shareholders.”
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