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At CIMC Raffles, Paid Leave Instead of Layoffs

Raffles
Images courtesy Raffles

By MarEx 2016-06-03 19:53:14

Yantai CIMC Raffles Offshore has not received any new orders since last summer, and its rig production has slowed as its backlog slims. The situation is similar to that experienced by other yards – but unlike competitors, Yantai is not planning to lay off employees, reports Caixin. Instead, fearing protests and unrest, it has required idled workers to take mandatory paid leave until further notice. Its parent company is partly state-owned, and many government-associated enterprises in China have moved carefully to avoid cutting payrolls even as business slows – at least for now.

Raffles' employees will receive 70 percent of the minimum wage while on leave. Executive salaries will also be slashed in half and employees due to retire within three years will stay home at a percentage of pay until they reach retirement. "This is mainly because there is no work to do," the paper’s source said. Workers on ongoing projects will be retained.

Raffles lost nearly $2 million last year as ordering slowed; revenue fell by a third year-on-year. "During [2015], there was no new order on the Semi-submersible Drilling Platforms around the world; and there were only three orders on the Jack-up Drilling Platforms, representing a year-on-year decrease of approximately 90%. Overall, new orders for offshore engineering equipment also fell by over 70%," Raffles' parent company CIMC said in its annual report. In addition, cancelations and delivery delays have made it difficult to collect on final payments for completed rigs.

There have been positive notes: Raffles delivered the JU2000E jackup Kan Tan Qi Hao for Sinopec Shanghai Offshore in April; it marked an important milestone for its second ultra-deepwater rig Frigstad Kristiansand in March, and it began construction on the newly ordered jackup HYSY16 for CNOOC earlier that month. Looking forward, it expects business and financial support from the Chinese government's "One Belt, One Road" policy, especially as it was one of the first on the state "white list" of leading yards. And Raffles has a strong lead over other Chinese yards in the construction of ultra-deepwater semi-submersibles, technically complex offshore plants that have traditionally been the province of Korean and Singaporean competitors. “We have seen considerable improvements to infrastructure and execution skills at the [CIMC Raffles] yard,” said Simen Skaare Eriksen, CEO of Frigstad Offshore at the time of the firm's semi-sub order.