CSBC cuts capitalization in attempt to offset losses

CSBC Corp, Taiwan shareholders at a extraordinary general meeting on Thursday approved the company’s plans to reduce its capitalization, aiming to offset accumulated losses.

The Kaohsiung-based shipbuilder is to cut its paid-in capital by 57.91 percent from NT$7.44 billion to NT$3.13 billion (US$248.3 million to US$104.4 million).

At the end of the last quarter of this year, the company had accumulated net losses of NT$4.81 billion, translating to a loss per share of NT$6.45.

Apart from a persisting downturn in the global cargo shipping sector that has driven down demand for new vessels, the company’s earnings this year have been affected by a strengthening New Taiwan dollar against the US dollar and rising material costs, CSBC said, adding that the company’s margins have also been narrowing as existing projects lag behind schedule.

To pave the way for the company’s diversification, shareholders also voted to remove a rule that has limited investments in non-shipbuilding and maintenance to less than 10 percent of its paid-in capital, the company said.

CSBC has said it is preparing to tap into the offshore wind farm market to reduce its reliance on shipbuilding.

Shareholders also approved plans to issue no more than 200 million new shares through a private placement to raise fresh funds.

The new shares would likely be purchased by government affiliates, such as Yao Hua Glass Co and Taiwania Investment and Management Co Ltd, the company said.

In the July-to-September period, CSBC reported a net loss of NT$2.14 billion, marking its sixth consecutive quarter in the red.

Meanwhile, the number of shipbuilders across the globe has tumbled from 934 in 2009 to 358 at the end of July this year, of which an estimated 163 have no further orders, CSBC has said.

Looking ahead, the company said that earnings are expected to improve along with a recovery in the global cargo shipping sector.

CSBC said that the Baltic Dry Index — a gauge of freight rates for transported cargo such as coal, grain and iron ore — has recently risen above the 1,500-point benchmark to reach a new high for the past four years, although the index dropped this week as the market fell into consolidation mode.

In particular, the Asia Pacific region would see rapid growth as fleets in the region speed up their adoption of new vessels, the company said.

CSBC is also anticipating up to NT$500 billion in sales opportunities from upcoming procurements by the navy and coast guard that are expected to materialize next year, the company said.
Source: Taipei Times