Yangzijiang

Yangzijiang: In its latest annual report, grp note that YZJ was the most profitable shipyard in China last yr, and the 7th most profitable in the world. This was FORTIFIED BY MULTIPLE INCOME STREAMS, and to mitigate the cyclical nature of core shipbuilding business, grp’s long-term strategy to generate about 60% of revenue from construction of marine vessels and the remaining 40% from related activities such as the offshore sector, ship demolition and other nonshipbuilding activities. Beyond shipbuilding and its related activities, grp has developed supplementary income streams from conservatively managed businesses such as low-risk financial investments. Also leveraged on strong balance sheet to assist ship owners in ship finance and lease vessels for income. Grp currently manage more than Rmb 11b of financial assets that are over and above its Rmb 2b cash reserve, which is held for working capital, expansion and dividend payment needs. Having supplementary income streams puts grp in the favorable position of being able to be selective on shipbuilding contracts during downturns. That means need not enter contracts on compromised terms and conditions. For 2013, grp expect the shipbuilding environment to remain difficult and intend to deliver 42 vessels in 2013, which is lower than the 51 vessels we had in 2012. 2013 product mix will comprise more of large containerships of higher value. The poor shipbuilding market has proven to be an opportunity for grp to become more client-oriented and competitive and will focus on developing vessels that meet ship-owners’ needs and focus on large vessels, for which there is greater demand. Also believe PRC yards will eventually capture a larger share of targeted offshore market because of the nation’s competitive cost structure compared to yards in Korea, Japan or Europe.