China: Xiangyu Dredging Posts 2012 Interim Results

Xiangyu Dredging Posts 2012 Interim Results

Affected by the international and domestic economic environment and the financial positions of local governments of China, the industry generally faced challenges during the first half of the year.

However, the prospect of the market is still promising and the medium-to-long term demand will be robust. In the long run, the “Twelfth Five-Year Plan” and the investments in water conservancy projects are all good news to the industry. During the reporting period, the company recorded revenue of approximately RMB482.4 million, representing a year-on-year increase of 4.5%. The gross profit of the company was RMB 179.9 million, near equivalent as compared with 2011. Net profit was RMB 119.7 million during the period. The Board of the company resolved to pay an interim dividend of HK 2 cents per share.

During the first half of the year, the global financial market was slump. Nevertheless, Xiangyu was capable to maintain a high level of both profit and profit margin. As denoted from the financial report, the slight decline in net income was correlated to the increased cost after IPO, amortization cost of share options issued, and expanded cost during the earlier stage of acquisition. These costs were not categorized as prime business operating factor. Xiangyu has been effectively maintaining the original business competitiveness while widening the income channel and diversifying the risk. All these guaranteed the core competitiveness of the company.

TheGroup has four main operating and reportable segments, namely Capital and ReclamationDredging Business; Environmental Protection Dredging and Water Management Business; Dredging RelatedConstruction Business; and Other Marine Business.

Capital and Reclamation Dredging

Due to the entering into sizable projects and the minimized usage of chartered dredgers after the successful acquisition of 2 additional dredgers in 2011 second half, the profit margin of the company was significantly enhanced.

Environmental Protection Dredging and Water Management

Xiangyu has devoted sustainably into the EPD projects. The Company has completed its environment protection demonstration project in Wuhan. It recently won the bid and entered into a new contract for environmentalprotection dredging services with an aggregatecontract sum of RMB 100 million for Nanhu environment protection project in Wuhan. The contract reflected the market recognition to the technological level and quality of the environmentalprotection dredging projects of Xiangyu Dredging. In addition, the Company also actively carried out research and development and technological upgrading on relevant types of equipment forenvironmentalprotection dredging services, committing to manufacture first class sludge treatment equipment for the domestic market.

Dredging Related Construction Business

During the period, the Group has obtained a sizeable contract in the Dredging Related Construction Business with reasonable return. As a result, the Group recorded revenue of about RMB61.6 million in this segment for the six months ended 30 June 2012.

Other Marine Business

Subsequent to the completion of the acquisition of Jiangsu Jiaolong Salvage Harbour Engineering Co. Lt, the Group has expanded into Other Marine Business that has contributed about RMB63.5 million to the Group for the six months ended 30 June 2012. Meanwhile, with the participation of Hong Kong-Zhuhai-Macau Bridge construction and the maiden voyage of the large lift-on-lift-off ship“Qinhangong No.1”, it is expected that Jiaolong will have prospective contribution to the group in the soon future.

During the period, the Company put more efforts in promotion and business expansion both domestically and in oversea markets. While enhancing its clientele in developed markets, the Group is also actively exploring domestic and oversea markets. During the period, the Company had newly signed orders forvarious types of dredging projects with the value of RMB 600 million, which ensured the future results of the Company. Meanwhile, the Companysecured new clients fromlarge non-state-owned enterprises such as Shandong Nanshan, indicating a more diversified clienteleof the Company. In addition, it is also worth to note thatthe Company’s projects in negotiation and its expansion into overseasmarkets.

Mr. Liu Kaijin, Joint Chairman, Executive Director and Chief Executive Officer of Xiangyu Dredging, commented, “During the sloppy 1st half of 2012, Xiangyu maintained the satisfactory performance and efficiency. An aggregate contracts value of RMB 600 million has been signed. Integration of the acquired institute has been gradually completed. These have guaranteed the competitiveness of the company, and have proven the actual strength of the company. “

Looking forward, Mr. Liu continued, “Notwithstanding the turmoil in the global and mainland market, demand for dredging was only postponed but not diminished. It is foreseen to have huge room for dredging market to develop. Furthermore, as mainland China is keep increasing the focus and devotion in environmental protection, EPD is anticipated to have relatively higher growth in terms of demand in the next 5 years, even though it is at the beginning stage. The trend of EPD’s development is strong. The continuous devotion into the EPD has gradually become the yield for Xiangyu, with an expectation to have upward trend in the next 3-5 years. The company will continue to persevere, devote wholeheartedly, as well as maintain its technology and leading position in the industry”

“The acquisition of Jiaolong, have further diversified business operations and the synergistic effect have also proven to gradually become a great support for the company’s future development. At the same time, the dredging industry in parts of Southeast Asia and China is situated in a similar condition and is expected to further provide opportunities and developments in the near future. Based on medium and long term development, there is still a high demand within the industry and along with the improvement of the macroeconomic condition, the overall trend of the development of the industry is still expected to rise upwards. This will greatly benefit the company and provide immense opportunities to further expand within the market. It is believed that Xiangyu’s true value will be recognized and reflected through its outstanding performances,” concluded Liu.


Press Release, October 22, 2012