Financial News Agency, November 23 (Reporter Hu Haoqiong) Against the backdrop of a positive shipbuilding cycle, China Heavy Industries (601989.SH) is still losing money in Q3, triggering many investors to question management at the performance briefing held today.

In response, Guan Hong, director of China Heavy Industries, explained that the company's performance was affected by various aspects such as the industry environment, comprehensive costs, upfront order prices, and exchange rate fluctuations. Losses in the third quarter were mainly related to factors such as product construction sites, types of products delivered, and quantity during the reporting period.

In addition, investors are also very concerned about issues such as the delivery order situation in the company's civil shipping sector in the fourth quarter and the outlook for the current industry cycle.

The company's management said that in recent years, the proportion of batch ship orders, middle and high-end ship orders, and green ship orders has continued to increase among the new orders received by the company. Orders received since 2021 will be gradually delivered in 2023, and batch delivery is expected to be achieved in 2024. In terms of ship prices, the company's new ship order price is consistent with the price of a new ship in the shipbuilding market.

“Currently, Clarkson's new shipbuilding price index has risen nearly 9% from the beginning of the year. The prices of the four major ship types of tankers, bulk carriers, liquefied gas carriers, and container ships have all been on an upward path for the past six months. In the short term, there is room for new shipbuilding prices to rise. Currently, the new shipbuilding market will maintain a high level of activity with the support of renewal demand, and the world's major shipbuilders are full of orders. At the same time, factors such as rising prices of supporting equipment, rising labor costs, and green technology adopted to meet new environmental protection regulations all support the price of new shipbuilding.” Wang Yongliang, chairman of China Heavy Industries, said.

As for “How to prevent and control shipowners' risk of abandonment of orders and risk of default?” raised by investors As for the problem, Guan Hong said that the company's current orders are mostly made by mainstream shipowners, and the shipowners are well-funded, have good bank performance guarantees, and the risk of abandoning ships is manageable. Furthermore, the company will do a good job of managing contracts as soon as possible. At the same time, it will do a good job in contract management, check the acceptance and delivery terms, liability clauses for breach of contract, dispute resolution clauses, etc., and do a good job of risk prediction.

In terms of raw material prices, Guan Hong further stated that the cost of marine steel is related to factors such as raw material price trends and centralized procurement agreement prices, making costs manageable within a certain range when raw material prices fluctuate. It generally takes 12 to 18 months from ship construction to delivery. Raw material procurement will be arranged according to delivery time, production plans and supplier prices.

At the same time, the fact that China Heavy Industries was previously investigated by the Securities Regulatory Commission is also a major concern for investors. Guan Hong responded that up to now, the investigation work by the China Securities Regulatory Commission is still ongoing. At present, the company's various production and operation activities are being carried out in a normal and orderly manner.

According to financial reports, in the first three quarters of 2023, the company achieved operating income of 30.302 billion yuan, an increase of 16.72% over the previous year; realized net profit attributable to shareholders of listed companies - 111 million yuan, compared to -1.25 billion yuan in the same period last year.