China Rongsheng to Announce Restructuring Amid Exponential Losses

A view of the Rongsheng Heavy Industries shipyard is seen in Nantong, Jiangsu province December 4, 2013. (c) REUTERS/Aly Song

SHANGHAI, Aug 29 (Reuters) – China Rongsheng Heavy Industries Group, the country’s largest private shipbuilder, said its first-half net loss widened more than ten times as shipowners continued to postpone vessel deliveries amid a prolonged industry slump.

The shipbuilder, which faced possible insolvency last year before agreeing in March with banks to extend its loans, also said it would make an announcement related to the group’s restructuring. Its shares were put on a trading halt pending the announcement.

Rongsheng reported a net loss of 3.1 billion yuan ($505 million) for the first half, compared to a loss of 285 million yuan in the same period last year.

Revenue plunged 79 percent to 311.3 million yuan on postponements. The company had flagged a large increase in its net loss earlier this month.

“The imbalance between demand and supply in the shipping market will continue into the second half of 2014,” Rongsheng said in a statement.

The company said that as of end-June, current liabilities exceeded its assets by 12.3 billion yuan. Its total borrowings rose to 23.2 billion yuan, an increase of 795 million yuan from December 2013. Some 17 billion yuan is due over the next 12 months.

It also flagged that it had failed to comply with certain financial covenants related to a current bank loan of 609 million yuan. It said it had asked for a waiver and had obtained the relevant bank’s preliminary consent.

Rongsheng said it entered new shipbuilding contracts for six vessels worth a combined $167.4 million over the first half. As of June 30, it had an order book of 90 vessels, representing a total contract value of $4.2 billion.

(1 US dollar = 6.1466 Chinese yuan) (Reporting by Brenda Goh; Editing by Edwina Gibbs)

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