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CIMC buys stake in drilling platform designer

By Wang Xiaotian (China Daily)
Updated: 2010-02-03 08:04

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Analysts question company's move into 'unfamiliar' territory

China International Marine Containers (Group) Co (CIMC), the biggest container provider in China, will purchase a 75 percent stake in Friede Goldman United (F&G) from Russia's MNP Group for $75 million to strengthen its marine engineering sector, the company said yesterday.

"The purchase is good for the implementation of our marine engineering development strategy," a statement to the Shenzhen stock exchange said.

Founded in 1946, US firm F&G served as the marine engineering design department for Friede Goldman Halter, before the latter went bankrupt in 2002. F&G is a global designer of mobile marine drilling platforms and also designs and produces auxiliary equipments of platforms.

From January to June 2009, F&G realized $33.7 million in revenue and a $15.2 million net profit.

CIMC also expects F&G's brand name and share of the platform design market to help improve its marketing capability and attract more new orders.

"CIMC has always been seeking opportunities to shift its focus from container manufacturing to industries with higher added value since the shipbuilding industry has languished due to the economic crisis," said Guo Yaling, an analyst at CITIC Securities.

Last November, CIMC announced plans to spend $1.7 billion to buy a controlling stake in Shandong-based Yantai Raffles Shipyard Ltd, China's biggest production base for offshore crude oil and natural gas drilling platforms.

"Actually we believe the purchase of F&G will solve Raffles' design bottleneck and accelerate the delivery of orders," the company said.

But CITIC Securities' Guo doubts whether it is a good idea to quickly enter a field Chinese companies are unfamiliar with. "These purchases have raised concerns over the company's cross-industry management. Few operational attempts by Chinese companies in marine engineering have proven successful. These speedy and aggressive moves are likely to put its ambitions at risk," he said.

CIMC has extended its key business from containers to the manufacturing of trailers, tanks and airport equipment. From January to September 2009, it reported revenue of 13.9 billion yuan ($2.04 billion), a 67.8 percent decline year-on-year. Meanwhile, its net profit hit 775.8 million yuan, a decrease of 54.4 percent compared with the same period a year earlier, due to a market decline in container sales.

CIMC's share price hiked 4.93 percent yesterday to close at at 14.05 yuan.