Chairman Speech

Dear Shareholders,

With the moderate growth of the global economy and international trade in 2017, we witnessed some improvement in the shipbuilding market conditions. Backed by the strong support of our parent company AVIC Group, we penetrated the niche market, enhanced our R&D capabilities, grew the high value-added clean energy vessel business, and improved production efficiency through the optimization of management, operation and cost structures. In 2017, the Group achieved earnings of RMB26.5 million, a reversal from the loss in 2016. The achievement only became possible with the persistent efforts by all at our Group.

Review

In 2017, we worked closely with our associated shipyards, AVIC Dingheng and AVIC Weihai, and both shipyards made notable breakthroughs. AVIC Dingheng strengthened its world-leading position in the small chemical tanker (30,000 DWT and below) category. AVIC Weihai successfully delivered the 6,000-ton Subsea Rock Installation vessels and launching Ro-Ro vessels, establishing its reputation in the market.

In 2017, we stepped up the efforts in exploring the overseas market, especially in Europe, the Belt-and-Road countries and other developing countries, providing integrated services throughout the shipbuilding value chain. AVIC Dingheng and AVIC Weihai received new orders worth a combined total of USD311 million, of which, USD213 million were for small chemical tankers. As of March 2018, AVIC Dingheng had an outstanding orderbook comprising 25 chemical tankers (308,598 DWT in total), which made its ranking No.1 in the world in the category.

In 2017, the Group enhanced management in several key processes, such as strategic planning, supply chain, design and coordination, production safety and quality management. These processes created a strong foundation for the smooth execution of our projects. At the same time, through cost optimization, the Group’s distribution and marketing costs were reduced by 17%, while total revenue increased by 51% from FY2016 level to RMB646 million.

In 2017, we continued to promote technological advancement, including the 3D design systems. We built up the expertise in the authentic 3D smart manufacturing, and the research in “Internet + collaborative manufacturing” enhances our design capabilities. Our design unit Deltamarin has solidified its leading position in the design of high-tech green vessels in the world. The world’s first LNG-powered handysize bulker that Deltamarin designed was ranked No. 5 in the Great Ships 2017 List by Maritime Reporter & Engineering News. Deltamarin’s excellent design capability has not only made direct contribution to the Group’s financial performance, but also brought about important synergies for the development of the Group’s other businesses.

Outlook

Looking ahead, as the global economy and international trade continue to recover, the outlook for the shipping and shipbuilding market remains promising. The ongoing consolidation of China’s shipbuilding industry will help companies with strong competitive advantages strengthen its market position. In 2018, we will focus on restructuring, achieving breakthroughs and growing the value of our business. We will penetrate and expand our markets in the Belt-and-Road countries and other developing countries, as well as in China. Product wise, we will further develop our capabilities in high-end Ro-Pax vessels and small-medium sized chemical tankers. Through global-based marketing, R&D, design and procurement, we will actively build up our orderbook. We will ensure on-time delivery, and provide customers with high-quality products at reasonable price.

At the same time, we will strive to enhance our business value and create additional income through supply chain services and sharing our technological and management expertise. Through providing comprehensive support to Deltamarin, and creating synergies and good coordination, we will aim to grow Deltamarin’s business and financial performance to the next level. In terms of internal management, we will speed up the transformation and upgrading in our product offering, ensure safe production, strengthen financial management, use innovative financing methods, so as to improve capital efficiency and reduce financing costs.

In 2018, we will, as always, commit ourselves to developing our core capabilities in shipbuilding management services and ship design, constantly exploring new technologies and new ideas to cope with new challenges. With a global horizon, we will seek to be a market leader and a transformed state-owned enterprise. Our parent company, AVIC International and AVIC, provide strong support for us with their financial resources, brand value, the network, as well as technology, talents and the management structure. The Group is making solid steps in moving forward to become a strong, integrated supply chain provider of offshore and marine services, as we improve our financial performance and return to our shareholders.

In Appreciation

On behalf of the Board, I would like to express my sincere appreciation to the management team and employees for their dedication and commitment to the Group. To our business partners and customers, thank you for your unwavering support and I look forward to a closer collaboration and partnership with you in the years to come. To our valued shareholders, we are thankful for your unrelenting support and confidence in us, and we strive to optimize the financial performance and sustained growth of the Group in return.

Dr Diao Weicheng
Executive Chairman