China Rongsheng Heavy Industries Group Holdings Ltd -- the country's largest private shipbuilder -- reported an 82-percent drop in first-half profit due to tumbling demand for new vessels.

Rongsheng said on Tuesday it expects to deliver all of the 16 very large ore carriers (VLOCs) that have been ordered by the end of 2013 and has delivered four so far.

Chief Financial Officer Sean Wang, speaking at the company's earnings briefing, said it had delivered a VLOC to Oman on Monday, marking the fourth delivered so far.

Net income slumped to 215.8 million yuan ($34 million) from 1.2 billion yuan a year earlier, the Shanghai-based shipbuilder said in a Hong Kong stock exchange filing on Tuesday. Sales fell 37 percent to 5.5 billion yuan.

The company received orders for two vessels in the period, compared with 24 a year earlier, as global overcapacity and slumping charter rates deter shipowners from adding ships. Rongsheng has also shelved the 2.15 billion yuan acquisition of an engine-maker.

"New orders for many yards in the bulk and container space have really dried up," said Vincent Fernando, a Singapore-based analyst at Religare Capital Markets, who rates Rongsheng "sell". That's "a big problem," he said.

Operating profit, or sales minus the cost of goods sold and administrative expenses, dropped 43 percent to 859 million yuan.

Rongsheng, which also makes engines and excavators, delivered 11 ships in the first half, including two of the world's largest commodity vessels. The company said in March it will deliver as many as 10 mega-ships this year. The shipbuilder has handed over a total of three VLOCs out of the 16 ordered by Vale SA and Oman Shipping Co.

The shipbuilder had outstanding orders for 101 ships as of June 30, compared with 111 at the end of last year and 91 a year earlier. Nationwide ship orders fell 50 percent in the first-half, according to the China Association of the National Shipbuilding Industry.

Rongsheng is not proposing an interim dividend for this period, compared with 0.052 yuan a year earlier.

Rongsheng warned on Tuesday that economic uncertainties, such as the euro zone debt crisis, would continue to weigh on the global shipping market.

"The shipbuilding industry is expected to continue its consolidation and experience further restructuring with the elimination of low-end surplus capacities," it said in its results statement.

China Daily - Agencies

(HK Edition 08/22/2012 page2)