Thu, Apr 02, 2009 - Page 12 News List

CSBC announces losses from scratched orders

STILL QUITE AFLOAT Despite a last-minute decision by an Israeli client to cancel an order for six vessels, the shipmaker said work would be non-stop through 2012

By Elizabeth Tchii  /  STAFF REPORTER

CSBC Corp, Taiwan (CSBC, 台灣國際造船), the nation’s largest ship manufacturer, said yesterday that the preliminary income losses from canceled orders by Israeli client Zim Integrated Shipping Services Ltd were estimated to reach NT$1 billion (U$29.5 million) this year.

The Kaohsiung-based company said it expected to book more than NT$1 billion in losses next year as a result of the cancelation, while adding that the turn of events would not affect its business next year through 2012.

“We are in the midst of soliciting new contract orders from international customers, as well as participating in government projects to even out our revenue stream,” Lee Shu-ling (李叔麟), chief secretary of the board of directors at CSBC, told the Taipei Times by telephone yesterday.

Furthermore, CSBC is working on the Taiwanese navy’s coastal defense ships, Lee said.

As part of the penalty clause included in the contract with Zim, the Israeli company will be forfeiting the 10 percent deposit it made on six 1,700-TEU (20-foot equivalent unit) container vessels as well as any associated raw material costs CSBC has incurred so far in the production of the vessels.

Lee said the company had yet to begin work on the vessels. Work had been expected to begin at its Keelung production site in November.

In a statement to the Taiwan Stock Exchange on Tuesday, CSBC informed investors of the canceled order totaling US$220.4 million. As a result of the cancelation, CSBC now has 52 orders on its books.

Last year, CSBC’s revenues reached NT$35.65 billion, a year-on-year increase of 22.4 percent. Earnings last year reached 1.07 billion, an earnings per share estimated at NT$1.61.

At the company’s pre-IPO road show in December, CSBC chairman Cheng Wen-lon (鄭文隆) said revenue this year would be between NT$35 billion and NT$38 billion, with profit estimated at between NT$2.2 billion and NT$2.4 billion, taking into account declining steel prices and favorable exchange rates.

At the time, Cheng said the shipbuilder was fully booked until 2012.

Lee refused to confirm those figures yesterday.

Despite early downward trading in the morning, CSBC shares closed up NT$0.55, or 1.77 percent, to NT$28.80 on the Taiwan Stock Exchange.

CSBC mainly builds container vessels, oil tankers, bulk carriers, naval ships and oil drilling rigs. Its other business lines include commercial and naval ship repairs, machinery production engineering and smoke stacks for power plants.

The company has enjoyed the most successful turnaround among all of Taiwan’s state-owned companies, with pre-tax income of NT$2.5 billion in 2007, surpassing its budget target by NT$31 million.

In December, CSBC unveiled a plan to expand its ship repair services to meet a possible rise in repair demand following the opening of direct shipping links with China on Dec. 15.

ADDITIONAL REPORTING BY CNA

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