Companies

Zhenhua Heavy may report loss

By Wang Ying (China Daily)
Updated: 2011-02-01 13:38

SHANGHAI - Shanghai Zhenhua Heavy Industry Co Ltd (ZPMC), the world's leading manufacturer of large steel cranes designed to unload shipping containers, is expected to report a financial loss in 2010, the first-ever loss in company's 18-year history.

The heavy-duty equipment manufacturer told China Daily on Sunday that it estimated the loss in 2010 could be between 650 million yuan ($98.6 million) and 750 million yuan.

Four new quayside container gantry cranes, manufactured by Shanghai Zhenhua Heavy Industry Co, sit on a ship waiting to be delivered to the Port of Los Angeles, California, in January. The company is likely to report its first-ever loss in 18 years due to weak demand in the aftermath of the global financial crisis. [Photo/Bloomberg]

The company's net profit was 840 million yuan in 2009, which means ZPMC's net profit might have slumped up to 189.3 percent year-on-year last year.

The company attributed the slump in business to weak demand globally in the aftermath of the financial crisis.

The global financial meltdown in late 2008 has led to a sharp cut in orders in 2009. "ZPMC only received $1.7 billion worth of orders in 2009, compared with $4 billion in 2008," said Kang Xuezeng, president of ZPMC.

On average, it takes between eight months and 18 months to complete an order, hence the worst performance in 2010.

In addition, ZPMC's high level of steel inventory, purchased at higher prices, together with the appreciation of the yuan, has led to the only loss since the Shanghai-based State-owned company was founded in 1992, according to Kang.

"We have tried every means to reduce losses, such as cutting the budget, restructuring product lines and strengthening internal management," said Kang. "The company is ready to operate more diversified product lines," he added.

Kang, however, remained upbeat this year. "The worst year for port equipment manufacturers has passed, and in the following year, global demand will recover for marine engineering products. As a result, ZPMC's performance will see major improvements in 2011 and 2012," he said.

"It is worth noting that even during the slowdown ZPMC maintained a 76 percent global port machinery market share," added Kang.

ZPMC set the goal of acquiring $4 billion in orders and 20 billion yuan in sales in 2011.

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Global demand for port cranes revived in 2010. ZPMC received new orders worth $3.05 billion, up 78 percent over 2009.

The increase of new orders in 2010 showed ZPMC has come through its worst time, said Zhou Sili, an analyst from Northeast Securities. However, due to the long industrial cycle of port machinery manufacture, it should take a bit more time for ZPMC to regain its pre-crisis performance.

In addition, the company is striving to expand its marine engineering production line. ZPMC plans to generate up to 50 percent of revenue from marine engineering and steel structures in the future.

The company will also develop its own 91-meter jack-up drilling unit in 2011, according to Kang.

The optimization of its product line will play a significant role in its future development, said Zhou.

Despite the expected loss in 2010, shares of ZPMC edged up 1.67 percent to close at 7.29 yuan a share on the Shanghai Stock Exchange on Monday.