The claims are not expected to have a material adverse impact on the group’s financial position for the financial year ending December 2024, Yangzijiang said.
YANGZIJIANG Shipbuilding announced that arbitration proceedings had been filed in London two years ago against three of its units over the orders of 10 vessels worth US$900 million for alleged breach of contract.
The China-based shipbuilder said in a regulatory filing on Saturday (Oct 12) that the customers had in 2022 terminated the contracts for the 10 vessels shortly after placing orders for them in late 2021.
These unidentified customers commenced the arbitration proceedings, alleging a breach of the contracts by three wholly owned subsidiaries of Yangzijiang. They are claiming US$835 million for compensation including loss of profits as well as refund of the payments made, which total US$3.3 million.
The first tranche of arbitration hearings are scheduled for November 2024.
It is unclear whether the shipbuilder had earlier made the announcement with regard to the abolition of orders when these customers wanted out of their contracts.
The total outstanding order book at the shipbuilder was a “record US$20.2 billion for 224 vessels” as at Jun 30, according to Yangzijiang’s financial results released in August.
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Yangzijiang said on Oct 12 that it had earlier been legally advised there were “no merits” in the claims and they were “highly improbable to succeed”. Its units were instructed to defend against the claims in the arbitration proceedings.
It also noted that there was substantive progress in the arbitrations only during the course of this year, and its expert witness said that quantum of the claims is “incorrectly measured and highly inflated”.
The claims are not expected to have a material adverse impact on the group’s financial position for the financial year ending December 2024, Yangzijiang said.
“Nevertheless, to promote transparency and uphold the orderly functioning of the capital markets, the company considers it appropriate to provide this update to its shareholders,” Ren Letian, chief executive of Yangzijiang Shipbuilding said in the statement.
The counter closed S$0.02 or 0.8 per cent higher at S$2.50 last Friday, before this announcement.
