Yangzijiang Shipbuilding (Holdings) Ltd. Roadshow Presentation 25 th April 2008
1
Agenda
Operation update
Our Presence & Our Shipyards
Market outlook
Q & A
Strong order book and increasing of production capacity
Sustaining profit margins
Consideration and Strategies
2
Our Presence
♦ Old shipyard is located in Jiangyin City
♦ New shipyard is located in Jiangjiang city with new facility to produce more ships
Our shipyards ♦ 2nd largest non-state-owned shipbuilder in terms of production
capability
Our Core Business ♦ Producing wide range of commercial vessels
Our Products
♦ Containerships
♦ Dry bulk carriers, and
♦ Multi-purpose cargo vessels
Our Customers
♦ Peter Dohle (Germany)
♦ Rickers Reederei (Germany)
♦ Tomas Schulte (Germany)
♦ Hansa Shipping (Germany)
♦ Carisbrooke (UK)
♦ Seaspan (Canada)
♦ Formosa (Taiwan)
♦ Canadry (Italy)
♦ D’amato (Italy)
♦ IMS Shipping (Italy)
♦ Cosco (China)
Our Presence & Our Shipyard
3
New yard
♦ New yard completed in June 2007
♦ 4 vessels launched in the yard in 2007
♦ 2 of the 4 vessels delivered
Capacity ♦ Current built capacity in existing yard 0.2 million CGT and it production
capacity is expected to grow more than 1.0 million with the phrasing in of the new yard
Order in 2007 ♦ USD 5.0 billion, equivalent to 2.1 million CGT = 107 vessels
Backlog ♦ USD 6.8 billion as at 03/31/08, equivalent to 2.9 million CGT=155
vessels
Order book Breakdown
♦ 4250 TEU (48 Vessels)
♦ 2500 TEU (26 Vessels)
♦ 1350 TEU (14 Vessels)
♦ 13000 DWT (1 Vessels)
♦ 92500 DWT (34 Vessels)
♦ 12600 DWT (10 Vessels)
♦ 7600 DWT (16 Vessels)
♦ 8000 DWT (6 Vessels)
Strong order book and increasing of production capacity
4
Strong orderbook and increasing in production capacity
Number
10
30
50
8
8
57
3
0
20
40
60
80
100
120
2005 2006 2007
Container Bulk Others
Amount(million USD)
384
1358
2934
114
109
2041
23
0
1000
2000
3000
4000
5000
2005 2006 2007
Container Bulk Others
250.3 167.8
618.5
1,162.7
40.5
275.2
910.9
70.711.0
0.0
300.0
600.0
900.0
1,200.0
1,500.0
1,800.0
2,100.0
2,400.0
2004 2005 2006 2007
CG
T (
'00
0)
Containerships Multi-purpose/mini-bulkers Others
2004-2007 CAGR = 92.5%
290.8 249.5
893.7
2,073.6
0
200
400
600
800
2004 2005 2006 2007 2008E 2009E
Cap
aci
ty (
CG
T '
00
0)
Existing Yard New Yard
CAGR = 46.3%
96133
167202
321
643
New orderbook growth Production Capacity
5
Strong orderbook and increasing in production capacity
New order highlights
1
2
Secured contract from Cosco container to build 16+4 vessels, equivalent to
USD1.36bn, delivery between August 2011 and June 2012
Have a broad base of regular and new customers; in particular our long-term
relationship with D’amato, further expanding our customer base in Europe
Our new orders increased by 132% from 897.3 thousands CGT of 2006 to
2,073.6 thousands CGT of 2007. The compound growth rate from 2004 to
2007 is 92.5%.
It converts to our order book in hand of 4 years, and our capacity is
expected to have large increase in 1-2 years.
3
4
6
Acquisition of the Remaining Minority Interest of New Yard
Seavi
JNYS
24.8%
JYS Yitian
YZJ Holdings BVI
100%100%
51.1%24.1%
100%
Hengyuan
100%
Acquire 100% of BVI Company by new shares issuance and cash
7
Market outlook
We foreseen that:
1
2
The containerships sector will grow steadily while the bulkers sector
may shrink
Equal opportunities for industry consolidation are emerging
The rise of Chinese shipbuilding industry is unquestionable
China-related factors will lead the direction of the shipping market in the
future
3
4
8
Rising steel prices
Steel Price is expected to increase in 2008, which in turn will increase the raw
material cost;
The enlarged production capacity by steel mills in 2005 may take away some of
the heat from the raising steel price towards the second half of 2008;
Demand for steel will decrease with tight fiscal policy implemented to cool the
economic;
Rapid increase in steel price push CPI further; we believe the Chinese
government will freezing certain prices within the economy in order to help keep
inflation under control;
9
7.14187.07
6.9
6.75
6.61
6.19
5.96
7.14187.11
6.99
6.87
6.72
6.45
6.23
5.8
6.0
6.2
6.4
6.6
6.8
7.0
7.2
7.4
7.6
7.8
8.0
1/31/07 4/30/07 7/31/07 10/31/07 1/31/08 4/30/08 7/31/08 10/31/08 1/31/09 4/30/09 7/31/09 10/31/091/31/10 4/30/10 7/31/1010/31/10
Spot Forward Forecast
RMB appreciation
RMB has appreciated against USD at a pace of 8.25% over the last year, and this trend is expected to continue in the median term.
Source: Bloomberg, 22 Feb 2008
Notes:1 “Forecast” refer to the median of the USD/RMB forecasts provided by 30 banks to Bloomberg
USD/RMB exchange rate forecast
10
About the New Orders:
♦ To a certain extend the boom of shipbuilding industry in 2007 had cause a temporary over tonnage situation.
♦ On average most shipyards have more then 4 years’ of orders in hand. When only 2 years’ order conventionally, their desires to accept orders are not very strong. Any new order, will have to live with a longer then normal delivery time.
♦ In terms of uncertain judgment of cost increase/exchange rate and ship market, ship yards are not willing to accept an order easily.
♦ The decreased of new ship orders are deem to be a blessing in disguise as it can help to sustain the high price of new ships, especially for containerships. The appreciation of price in 2007 are consider to be reasonable.
♦ Our focus on containerships, good track record and our ability to build a wide range of ships will mitigate any serious impact to our profitability while allowing the market to find it own equilibrant.
♦ Our cautions and steady management strategy ensure the least possibility of contracts cancellation.
11
Industry cycle and our competitiveness
We foresee that industry cycle and the introduction of new yards will intensify the competitiveness of the industry.
1
2
Our sustainable operating policies ensure the continuity of new orders
while the industry troughs
Relevant training program for all level of staffs are in place.
Timely & efficient application of capital markets to consolidate the
industry
Rewarding systems to keep talent and to inspire creativity
3
4
12
Sustaining profit margins
We will adopt the following strategies:
1
2
Prepayments of essential material to lock in the quantity of steel and
the price of key components, lower the raw material cost at the
expense of costs of capital;
The new labor law is not going to have any adverse impact to our
overhead on short term as we have already adopted most of it long
before it became law;
Higher labor cost reflects the continuous improvement of our business
result;
Market and focus on producing key products to benefit from economic
of scales;
Capacity growth ensures the growth of the dollar amount of net profit
3
4
5