China's Nanjing Tanker Poised to Delist, Underscoring Corporate Woes
CSC Nanjing Tanker Corp is poised to become the first company backed by China's central government to delist from a domestic stock market after it breaches exchange rules and reports its fourth consecutive year of losses.
The expected delisting of Nanjing Tanker, the oil and bulk chemicals marine freight subsidiary of state-owned Sinotrans & CSC Holdings Co Ltd, is a rare event that underscores the difficulties facing Chinese companies facing record high debt and slowing economic growth.
These problems are worse for sectors struggling with overcapacity. China's State Council has said the government would block new approvals in five industries affected by chronic oversupply, including shipbuilding.
"We'll be delisted according to securities markets rules if the audited annual results show a loss," Ding Wenjin, a Nanjing Tanker board member, told Reuters. The company, listed on the Shanghai stock exchange, is due to report 2013 earnings in April.
Nanjing Tanker said last month it expected to report a net loss of 1.27 billion yuan ($209.34 million) for 2013, after the Jiangsu-based company said net losses reached 1.24 billion yuan a year earlier. It shares have not traded since May.
Nanjing Tanker reported 12.45 billion yuan ($2.05 billion) in total debt at the end of September, with debt outpacing equity more than four times, according to exchange filings.
Analysts said most government-controlled enterprises were willing to help their subsidiaries stay afloat, but cautioned that most of these units were in better financial shape than Nanjing.
In the past month, state-backed firms Angang Steel and China Cosco Holdings have said they expect to see a profit in 2013 for the first time in three years, largely due to one-time cash injections from asset sales.
"The big state-owned enterprises can take measures to turn red into black, and the government also will try to help them" said Cao Xuefeng, head of research at Huaxia Securities Co. in Chengdu. "There's a lot of room."
Nanjing's parent firm Sinotrans & CSC Holdings is one of the key state-owned enterprises operating under the direct administration of the State Council's State-owned Assets Supervision and Administration Commission.
It reported group turnover of 106.7 billion yuan ($17.60 billion) and assets of 122.9 billion yuan in 2012. The group holds five listed companies, including Sinotrans Ltd, a shipping, warehouse, and railways company as well as Sinotrans Shipping Ltd.
Another subsidiary, Changjiang Shipping Group Phoenix Co , has also reported three consecutive years of losses but may be spared delisting as it is holding bankruptcy restructuring talks with creditors, Sinotrans spokesman Xu Jiandong told Reuters.
The dry bulk goods shipper has been sued for loan repayment by five banks, including China Merchants Bank Co. and China Minsheng Banking Corp. It also faces lawsuits by the leasing arm of the Industrial and Commercial Bank of China and China Petroleum and Chemical Corp for unpaid bills.
($1 = 6.0641 Chinese yuan)
By Matthew Miller and Fang Yan (C) Reuters 2014.