Bloomberg News

Rongsheng Slumps After Forecasting Annual Loss: Hong Kong Mover

December 27, 2012

Rongsheng Slumps After Forecasting Annual Loss

“The stubbornly low freight rate has deterred shipping companies from placing new orders because they expect vessel prices to keep dropping,” Amos Zhang, a Shanghai-based analyst at Shenyin & Wanguo Securities Co., said in a phone interview today. Photographer: Qilai Shen/Bloomberg

China Rongsheng Heavy Industries Group Holdings Ltd. (1101), the country’s largest shipbuilder outside state control, slumped the most in a month in Hong Kong trading after forecasting its first annual loss in four years.

China Rongsheng fell 7.4 percent to close at HK$1.25, the most since Nov. 30. The city’s benchmark Hang Seng Index rose 0.4 percent. The markets were closed for holidays in the previous two days.

The shipbuilder said Dec. 24 that it may post a net loss this year as vessel prices and orders slumped amid global overcapacity. The company’s first-half profit had plunged 82 percent. The Baltic Dry Index, a measure of commodity shipping rates, has fallen 57 percent this year.

“The stubbornly low freight rate has deterred shipping companies from placing new orders because they expect vessel prices to keep dropping,” Amos Zhang, a Shanghai-based analyst at Shenyin & Wanguo Securities Co., said in a phone interview today. “This is terrible for shipyards.”

The Baltic Dry Index slid 0.14 percent to 699 points on Dec. 24, according to the Baltic Exchange in London. Shipping companies break even at rates between 1,500 and 2,000 points, Zhang said.

The shipbuilder previously posted an annual loss in 2008, according to data compiled by Bloomberg. The company is setting up a new offshore-energy equipment unit as it seeks contracts for oil rigs and tender barges to offset slowing ship demand.

To contact the reporters on this story: Jasmine Wang in Hong Kong at Jwang513@bloomberg.net

To contact the editor responsible for this story: Vipin V. Nair at vnair12@bloomberg.net


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