UPDATE 2-China Rongsheng shares suspended after job loss reports
(Adds analyst comment, details throughout)
HONG KONG, July 4 (Reuters) - Trading in shares of China Rongsheng Heavy Industries Group Holdings Ltd, China's largest private shipbuilder, was suspended on Thursday in the wake of media reports that said it had laid off 8,000 workers in recent months.
The company, suffering from a downturn in the global shipping industry as well as China's own economic slowdown, said it had sought the suspension pending clarification of news articles, according to a filing to the Hong Kong stock exchange.
No further details were available and China Rongsheng declined to comment, but analysts said the company's balance sheet was under pressure. On Wednesday, its shares closed down 10 percent at HK$1.06.
The Wall Street Journal said the job cuts represented some 40 percent of the firm's workforce. The cuts sparked protests by workers earlier this week, according to media reports.
A company executive told The Wall Street Journal the layoffs were not a sign of financial distress but the result of a restructuring aimed at making more specialised vessels used in the offshore oil-and-gas industry.
China Rongsheng is a major supplier of bulk carriers that ship iron ore from producer nations such as Brazil to China. Brazil's Vale is one of its customers.
"We expect a continuing deterioration in the balance sheet given weak overall demand growth for bulk vessels, Rongsheng's core product," Barclays analyst Jon Windham said in a report.
China's economic downturn is shaping up to be the worst in at least 14 years, with growth possibly missing Beijing's 7.5 percent target this year.
And an unprecedented cash crunch in China's financial markets last month, which saw interest rates briefly spike to record highs, may further drag on the economy.
According to its December 2012 annual report, issued on March 26, China Rongsheng's cash and cash equivalents fell to 2.1 billion yuan ($342.53 million) from 6.3 billion yuan a year ago. It had borrowings of 16.26 billion yuan that were due in less than a year, said the report, the latest financial statistics available on the company's website.
In the annual report, the company said it had "significant" cash outflows since some customers had sought to delay the delivery of new vessels.
Indeed, receivables pending for more than six months rose to 83 percent from 21 percent a year ago, the annual report said.
The industry slowdown was also taking its toll on sales, with inventory turnover up to 136 days from 73 days.
"Short term debt is seven times cash resources. That to me is a liquidity red flag. Industry conditions are terrible, freight rates have been low for the past 2-3 years and ship owners are behind on payments," said a Hong Kong based analyst who declined to be identified as he is not authorised to speak to media.
China Rongsheng is the country's largest private shipbuilder by accumulated order books. It is based in eastern Jiangsu province, near Shanghai, and went public in Hong Kong in 2010.
It posted a net loss of 572.6 million yuan ($92 million) in 2012, its worst-ever.
WILL GOVERNMENT HELP SHIPBUILDERS?
The Chinese government has been trying to support the domestic shipping industry since the 2008 financial crisis, and local media reports said this week Beijing was considering policies to revive the shipbuilding business.
The shipping industry downturn cut new ship orders for Chinese builders by about half last year.
Underscoring China's employment challenge, growth in the country's vast factory sector slowed to multi-month lows in June on faltering new orders.
The official purchasing managers' index (PMI) showed a sub-index measuring employment dropped slightly to 48.7 in June from 48.8 in May. A HSBC survey showed factories shed jobs last month at the quickest pace since August.
Some economists said those figures reinforced concerns China's economic slowdown could deepen in the second quarter, especially with Beijing looking increasingly reluctant to take action to stimulate growth.
($1 = 6.1308 Chinese yuan)
(Additional reporting by Twinnie Siu; Writing by James Pomfret. Editing by Dean Yates)