Shares of China Rongsheng Heavy Industries Group Holdings Ltd. 1101.HK -16.04% fell to a record low Friday after a profit warning, as things go from bad to worse for the shipbuilder.
The shares closed down 16% at 89 Hong Kong cents, the lowest price since the company’s 2010 listing in Hong Kong. They had been down as much as 18% during the day.
The company Friday forecast a first-half net loss, as the shipbuilding industry in China suffers from overcapacity and high debt levels. China Rongsheng, which isn’t state-owned, said that it is trying to renew its credit facilities with banks and is seeking government aid. Shareholder Zhang Zhirong is extending an interest-free loan of 200 million yuan ($32 million).
“The implication, in our view, is that it was unable to fund the money through normal banking channels,” said Barclays PLC in a note, adding that the company has 15 billion yuan in outstanding short-term bank borrowings.
The Wall Street Journal reported that China Rongsheng laid off about 8,000 employees, or 40% of its workforce, in recent months, sparking worker protests.
Barclays notes that China Rongsheng’s net debt-to-equity level was 119% at the end of 2012, up from 17% at the end of 2010.