YZJ Shipbuilding shares fall after it cancels $232m worth of contracts
Sign up now: Get ST's newsletters delivered to your inbox
Yangzijiang Shipbuilding terminated the contracts after it found the customer's sole shareholder was allegedly involved in a scheme to circumvent US sanctions.
PHOTO: YANGZIJIANG SHIPBUILDING
Follow topic:
SINGAPORE - Shares of Yangzijiang Shipbuilding fell after the company announced that three of its subsidiaries had cancelled contracts valued at US$180 million (S$232 million) with an unknown party.
This was executed by the shipbuilder’s three units – Jiangsu Yangzijiang Shipbuilding Group, Jiangsu New Yangzi Shipbuilding and Jiangsu Yangzi Xinfu Shipbuilding. The deal concerned four 50,000 deadweight tonnage medium-range oil tankers scheduled for delivery from 2026 to 2027.
In a statement on Sept 27, the group explained that the termination of the contracts was due to “certain critical information” concerning allegations that the buyer’s sole shareholder was involved in a scheme to circumvent US sanctions laws and regulations.
This had just been disclosed by the buyer, hence the subsidiaries were not aware of it, despite earlier extensive due diligence on the buyer and its shareholder.
The units have since determined that the unknown buyer is in anticipatory repudiatory breach of the contracts, in the light of these developments and following the legal advice received.
Shares of Yangzijiang Shipbuilding closed down 1.5 per cent at $3.23, after falling as much as 6.7 per cent to $3.08 on Sept 29. The stock was the third-most heavily traded by value, with 52.8 million shares changing hands.
Mr Ren Letian, executive chairman and chief executive officer of Yangzijiang Shipbuilding, said in the statement: “Alternatively, the contracts have been frustrated as a result of the supervening illegality associated with the buyer’s payment obligations.”
The three subsidiaries have reserved all of their legal rights against the buyer.
No revenue or profit relating to the contracts was recognised up to June 30. A 10 per cent deposit of the contract value, or US$18 million, was received at the time the contracts were signed.
The company noted that construction had commenced for just one vessel, for which an additional 10 per cent instalment of about US$4.5 million was collected.
The group, at the same time, secured additional shipbuilding contracts for eight vessels with an aggregate contract value of US$440 million.
These new contracts comprise four 20-foot equivalent unit (TEU) container ships, and four 71,000 deadweight tonnage vessels.
Specifically, two units of 11,800 TEU container ships were placed by Seaspan, a longstanding partner of the group.
The contracts are scheduled for deliveries between 2027 and 2029, and are not expected to have any significant impact on the earnings of the group for the financial year ending Dec 31, 2025.
Year to date, Yangzijiang Shipbuilding has secured a total of 44 effective shipbuilding contracts with an aggregate value of US$1.9 billion, the group said in a separate statement.
The company’s shares had fallen 2.1 per cent, or seven cents, to $3.21 as at 10.20am on Sept 29, after the announcement. THE BUSINESS TIMES
