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China Rongsheng flags full-year profit loss as prolonged shipping slump takes toll

Yimou Lee
Wednesday, 4 Dec 2013 | 5:23 AM ET

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HONG KONG, Dec 4 (Reuters) - China Rongsheng Heavy Industries Group, the country's largest private shipbuilder, said on Wednesday it expects to report a substantial full-year loss just months after it appealed to the government for financial help.

The struggling shipbuilder said this year an unspecified number of workers had been made redundant and it reported a net loss of 1.3 billion yuan ($213 million) for the first half of the year amid a prolonged industry slump.

"The company believes that the net loss is primarily attributable to the decrease in revenue as a result of the company's conservative sales strategy under the current trough stage of the shipbuilding market," China Rongsheng said in a statement to the Hong Kong stock exchange.

Analysts have said the company could be the biggest casualty of a local shipbuilding industry suffering from overcapacity and shrinking orders amid a global shipping downturn.

Greek ship owner Dryships Inc has already questioned whether some of the ships on order at China Rongsheng will be delivered, which could hit its revenue and profitability next year.

Dryships has four dry bulk carriers on order at the company's shipbuilding subsidiary, Jiangsu Rongsheng Heavy Industries, that are due for delivery in 2014.

"The deliveries of these vessels are severely delayed," said Ziad Nakhleh, Dryships chief financial officer, during a third quarter results presentation last month.

China Rongsheng, which sought financial help from the government in July, has said it won only two shipbuilding orders worth $55.6 million last year when its target was $1.8 billion worth of contracts.

The company told Reuters on Wednesday it had delivered 7 vessels (1.5 million DWT) in the first half of 2013, and had delivered at least two 380,000-DWT class very large ore carriers in the second half of the year.

The company declined to say how many new orders it has received so far this year.

Rongsheng's profit warning was made after the close of trading in Hong Kong.

Its shares had fallen 1.7 percent in trading on Wednesday, lagging a 0.8 percent loss in the benchmark Hang Seng Index . They have fallen 7.3 percent so far this year.

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