China Rongsheng Heavy Industries Group (HKG:1101) said that it noted the decrease in price and increase in trading volume of its shares yesterday and that save for the news reports relating to the cancellation of an order, its board of directors was not aware of any reasons for such movements.

The board noted that there were recent reports published by some newspapers relating to the cancellation of an order by an original buyer of one capesize vessel. The board would like to clarify that Jiangsu Rongsheng Heavy Industries Co., Ltd. (an indirect subsidiary of China Rongsheng) entered into the relevant shipbuilding contract in respect of the vessel with the original buyer in November 2006. In November 2011, the original buyer repudiated the contract, which repudiation was subsequently accepted by Jiangsu Rongsheng. As a result, the instalments prepaid by the original buyer on the vessel, representing 45% of the original purchase price, were forfeited. Jiangsu Rongsheng is now in the process of recovering its loss against the original buyer. In an effort to mitigate its loss, Jiangsu Rongsheng has entered into a contract with a new buyer to resell the vessel at a price which is about 47% of the original purchase price under the contract. For these reasons, the board believes that the loss (if any) which may be suffered by China Rongsheng as a result of the repudiation of the shipbuilding contract would not be material.

China Rongsheng's board believes that similar incidents of order-cancellations by buyers of ships occur from time to time in the ordinary course of business in the shipbuilding industry. Such buyers are generally liable for damages to the shipyard where such cancellations are wrongful. Therefore, the board does not consider the above incident to be information of a price-sensitive nature requiring disclosure.
 

Source:chinesestock.org