ZPMC mulling German deal

A facility owned by Shanghai Zhenhua Heavy Industries Co Ltd in Nantong, Jiangsu province. The company is in talks to acquire a German shipyard. Xu Congjun / For China Daily

Firm aims to buy Hamburg-based shipyard in move to diversify business

Shanghai Zhenhua Heavy Industries Co Ltd, the world's largest maker of cranes and large steel structures and known as ZPMC, is negotiating the acquisition of a German shipyard - part of its drive to diversify and expand its maritime engineering business.

ZPMC aims to buy JJ Sietas Schiffswerft, a Hamburg-based shipyard with a history of more than 300 years, Huang Qingfeng, vice-president of ZPMC, told China Daily. He visited the shipyard and talked with local politicians and business executives in October.

The Chinese company made an offer for the bankrupt European facility because it wants to boost its research and development capability for vessel engineering, Huang said.

ZPMC's parent company, China Communication Construction Co, already owns a US-based maritime engineering center - Friede Goldman United, which provides design services and equipment for offshore drilling rigs.

"It would be best if we could have another vessel engineering center in Europe," Huang said.

A Russian shipyard in St. Petersburg has also submitted a bid for Sietas, German media have reported.

Huang didn't say how far the talks have advanced or how much his company is offering. But the bid for the German shipyard underlines ZPMC's ambition to seek growth opportunities beyond its traditional strengths of building container cranes and the heavy load ships that carry them, analysts said.

The company lost money from 2010 to 2012 as a result of rising steel prices and yuan appreciation. Since its new chairman, Song Hailiang, arrived in 2012, the company has been trying to diversify its portfolio.

According to its 2013 first-half statement, ZPMC returned to profit. Its contract value in maritime engineering and large steel structures surged 71.3 percent to $997 million, representing 33.3 percent of its total revenue.

But contracts for port equipment fell 32 percent to $1 billion, representing 34.6 percent of the revenue.

The company has also purchased domestic shipyard Daoda Maritime Heavy Industry Co Ltd.

Song previously vowed to boost the company's revenue from maritime engineering to $2 billion over the next three years.

Zhang Zhongjie, an industry researcher at Essence Securities Co Ltd, said ZPMC's recent comeback was the result of its non-core business. Maritime engineering is the company's bright spot, and there's considerable growth potential in the sector, especially overseas.

ZPMC is also seeking to boost its overseas infrastructure investment. Huang said his company is holding negotiations to buy stakes in US and Italian ports, without giving details.

"Previously, we were focused on perfecting our products domestically and didn't pay enough attention to overseas investment. But by buying ports, we could enhance our negotiating position and boost the sale of a range of our products," he said.

Already, the company is deploying its resources strategically in developing countries. For example, it is training workers in Sri Lanka in preparation for dramatic wage rise for Chinese workers.