drdiaoweicheng10.14bDr Diao Weicheng, executive chairman of AVIC Maritime. He obtained a MBA and PhD in Management Science and Engineering from Tongji University. Photo by Leong Chan TeikTHE GLOBAL SHIPPING industry was in the doldrums in the past three years but China's shipyards -- especially the leading ones -- are emerging as the choice of ship owners all over the world.

"We are confident of the future of our company, as more shipbuilding orders will come to China. The government has policies to encourage and develop the shipbuilding industry," said Dr Diao Weicheng, Executive Chairman of AVIC International Maritime, in a recent meeting with analysts and the media. 

AVIC listed on the Singapore Exchange in 2011 with a business that has evolved over the last 20 years to being one of a kind: AVIC offers ship design services and management and consultancy services for ship owners and ship builders. 

And it also arranges marine financing. 

The star of the group is its ship design arm, Deltamarin, a Finnish-based naval architecture and engineering group which AVIC acquired 79.57% of in January 2013.

"Deltamarin is one of the best and largest ship design companies in the world," said Dr Diao. "It is strong in innovation and in concept design. That's why Deltamarin is strategically important to our future development."

Deltamarin, which can design eco-friendly and fuel-efficient ships, clinched RMB100 m worth of jobs in the first half of this year. As of end-Sept this year, its order book stood at RMB120 m.

TITANIC_11.14Among its current projects is the design of Titanic II, the modern-day full-scale version of the famous ship.

Titanic II, which is owned by Blue Star Line led by an Australian tycoon, is scheduled to be completed in China in 2018.

With contributions from such projects, ship design revenue in 9M2014 amounted to RMB188 million at AVIC, accounting for 64% of its total revenue.

Dr Diao said AVIC has strengths in four other key areas for which its services garner fees:

Marketing and sales: AVIC is supported in this area by more than 100 subsidiaries and associate companies of its parent, AVIC Group, one 
of the largest industrial groups authorised and managed by the People's Republic of China Central Government.

Ship construction: AVIC has ties with its parent's three shipyards and thus is advantageously placed to manage shipbuilding projects for clients who are ship owners.

Supply Chain management: Cost-savings and efficiency can be derived by AVIC.

Financing: AVIC has connections with the major banks in China and is able to help customers secure financing from the banks.

By way of example, consider:

» In June this year, AVIC and a third party shipbuilder, TaizouKouan Shipbuilding, clinched a shipbuilding deal from Veritas Ship Management for eight ultramax bulkers with a total contract value of more than US$200 million.
AVIC will provide management and consultancy services to facilitate ship design, construction, procurement, newbuilding management and marine finance arrangement, while TaizouKouan will take charge of the shipbuilding project.

» Next: In July this year, AVIC won an order from Chemical Transportation Group, Inc. to build 5 units of 25,000 DWT stainless steel chemical tankers with another 5 options outstanding. The total contract value of the 5 vessels is approximately US$200 million.

The shipbuilding will be undertaken by AVIC Dingheng shipbuilding Co., Ltd., a shipyard related to AVIC while AVIC will provide management and consultancy services for this project. 

Combining the strengths of AVIC and Deltamarin, Delta-AVIC was set up in February 2014 to and has gone on to secure its first scrubber EPC order, marking the company's entry into the business of being a provider of exhaust gas cleaning systems for ships.

3Q revenue & profit up

sunyan10.14Sun Yan, CEO of AVIC Maritime.
Photo by Leong Chan Teik.
AVIC International Maritime has just reported 
net profit attributable to shareholders of RMB3.0 million for the 3Q ended 30 Sept this year, compared to a loss of RMB4.3 million in the same period last year.

Revenue soared 41% y-o-y to RMB145.7 million
 due to higher contributions from its management service, shipbuilding and other income segments.

Revenue from management service fee increased 88.9% to RMB5.5 
million as the Group expanded this business.

Shipbuilding revenue increased 25.8% to 
RMB41.6 million mainly due to the marine EPC projects secured during 3Q2014.

from ship-related steel trading business under other income was RMB46.3 million for 3Q2014 (and this business did not have revenue in 3Q2013).

The revenue growth from 
these segments was partially offset by revenue declines in the ship-design fee and M&C business segments.

Ship-design fee fell by 22.0% to RMB49.0 million 
mainly due to variations in project progress achieved in the quarter.

For more information, see AVIC's press release. 

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