Writing New Answer Sheet for High Quality Development

Peng Huiqing

In 2018, in the face of severe market situation and difficult test of reform and development, COSCO Shipping Heavy Industry Co., Ltd. united to fight hard,strove hard, promoted all kinds of work to achieve positive results. Focusing on the market to grasp orders, the company made new breakthroughs in its business operation; “Learn from Kawasaki”’s lean management, key project delivery achieved good performance; adhered to innovation-driven development, intelligent manufacturing maintained the industry leading position; they unswervingly deepened reform and steadily advanced the reorganization and integration of the enterprise.

Outstanding Operating Results Further Expansion of Industry Influence

Operation work is the leader of all the work of the enterprise, and is the foundation of COSCO Shipping Heavy Industry in the fierce market competition.In 2018, the company actively responded to the changes in the market, clung to hot projects at hand and rammed up its internal management, fully completed the annual task, marketing performance achieve a substantial growth year-onyear, and achieved the year's target.

In 2018, COSCO Shipping Heavy Industry increased customer visits,tracked customers' demand for new ships,strengthened service awareness, and provided quality services. At the same time, it strengthened internal coordination and actively served the internal repair and construction business of COSCO Shipping Group Co., Ltd. On the basis of the order of 21 wood-pulp carriers in 2017, 5+4 other wood-pulp carriers of the same type were signed in 2018, and the shipbuilding orders developed in the direction of serialization. In marine engineering, they inclined to FPSO construction, modification and module construction and other high-end areas,seized the opportunity of rebound in oil prices, strove for low risk and high efficiency orders, and entered a new phase of cooperation with international first-class oil companies, world-class contractors, further enhancing their influence in the field of high-end marine engineering equipment manufacturing.In the field of repair and refit, the output value and profit of single ship were further increased while the increment was developed. They achieved additional installation of desulphurization units and large repair and refitting. To date, they have secured more than 400-ship orders for installation of desulphurization units. They continued to maintain the leading position of FPSO refit in China, and undertook the membrane LNG cargo cabin repair project for the first time in China, further tamping the competitive advantage in the high-end repair field. In supporting business, they took denitrification, desulphurization,luxury cruise internal decoration and other new business in an effort to promote the upgrading of supporting enterprises and technical reserves.The company’s affiliated Nantong Ocean Ship Equipment Co., Ltd’s desulphurization plant project started production smoothly, in October 2018 it began production of German Zach's first washing tower, and entered the high-end ro-ro ship interior decoration field.

Successful Delivery of Key Projects Cost Control Effective

In 2018, COSCO Shipping Heavy Industry, based on the progress of the project and the design information, following the principle of balanced production, scientifically planned and strictly followed the line table to promote the implementation of the project, and achieved a steady increase in the project delivery rate and achieved good results. Delivery of ships and marine engineering equipment manufacturing projects hit 51 units. NACKS has successfully delivered China's first 20000TEU container ship with full independent intellectual property rights; Dalian COSCO Shipping Kawasaki Shipbuilding Engineering Co., Ltd.successfully delivered the first 20000TEU container ship; Yangzhou COSCO Shipping Heavy Industry Co.,Ltd successfully delivered its first VLCC, 13500TEU container ship realized completion for delivery and the manufacturing level was up to a new level; Zhoushan COSCO Shipping Heavy Industry Co., Ltd. delivered 5x3600TEU ice class container ships,and the first ship was cited as “Danish Ship Star of the Year”; construction quality and progress of the 62000 DWT wood-pulp carrier Dalian COSCO Shipping Heavy Industry Co.,Ltd. built for COSCO Shipping Special Transportation Co., Ltd. were beyond the expectations of the shipowner,improving the construction strength.

By improving the design capability, strengthening supply chain management, reducing the cost of comprehensive procurement, as well as ensuring delivery, decapacity,reducing leverage and other measures,COSCO Shipping Heavy Industry has been guided by “cost control throughout the whole process of production” as the guiding concept.They rigidly restrained the enterprise direct cost expenditure, established the ship repair single ship project gross profit accounting and the appraisal mechanism, controlled the project direct cost expense, enhanced marginal contribution of single ship and single project. They adhered to the principle of “no budget, no expenditure”, and exercised the rigid budget management over fixed cost. They strengthened inventory management, reduced more than two years of inventory backlog totaling 175 million yuan. They conducted effective cost control over idle equipment in each enterprise after capacity compression, regulated use after overall classification in the system, avoided repetitive investment,and saved costs.

Deepening Reform and restructuring Decapacity PaysOff

In 2018, COSCO Shipping Heavy Industry made a new breakthrough in deepening reform and restructuring. Shanghai COSCO Shipyard Engineering Co., Ltd.and Changxing Shipyard made important progress in reorganization and integration, and the overall efficiency greatly improved,laying the foundation for longterm profit keeping, and the corporate development entered a new stage. Shanghai area stopped ship repair business in Sanlin plant area and Donggou plant area,the diversion and resettlement work involving more than 480 people was progressing smoothly.COSCO Industry Service Co., Ltd.and Nantong COSCO Shipping Automation Co., Ltd. reorganization and integration achieved obvious results with sustainable development of business. Shanghai No.1 Motor Co., Ltd. and Shanghai Wanduli Mechanical Engineering Co., Ltd. Smoothly completed reorganization and integration, turning loss to profit that year. Nantong Dishi Co., Ltd. and Dalian Dishi Co.,Ltd. made good integration.The task of cancellation of Wanduli Company and Nanjing Aircraft Repair Parts Factory and legal entity reduction was successfully completed.The decapacity work was advanced, cumulative reduction of shipbuilding capacity hit 4.07 million deadweight tons,marine engineering equipment production capacities were reduced by 12, completing the target task.

COSCO Shipping Heavy Industry continued to promote enterprise integration, and eight marine equipment enterprises including COSCO Shipyard Engineering Service and Nantong COSCO Automation were integrated into four enterprises,and operation and production achieved a smooth and orderly transition during the period. In the four enterprises that completed the integration in 2018 and the two enterprises that implemented restructuring integration and management integration in 2017,not a few achieved a year-onyear increase in profits. At the same time, the company made steady headway in promoting the corporate governance of 5 zombie desperate enterprises and achieved the annual interim governance goals. Through hard work, four special hardship enterprises achieved the phased governance objectives and completed the hard task issued by SASAC and COSCO Shipping Group. Digang Shipyard overcame difficulties, “three supply, one industry” completed the transfer to the local government, got rid of years of trouble, and obtained the approval of SASAC and COSCO Shipping Group.

Leading Intelligent Manufacturing Industry Further Upgrading of Core Competitiveness

Intelligent manufacturing represents advanced productivity.In 2018, COSCO Shipping Heavy Industry responded positively to COSCO Shipping Group's call for “Double Intelligent Development” to promote intelligent manufacturing and technology R&D in an orderly manner, formulate a framework for the development of intelligent manufacturing,and continue to advance to it by classification, stratification and step by step.

NACKS promoted MITT’s Intelligent Manufacturing Project,maintained industry leadership and demonstration status. Dalian COSCO Shipping Kawasaki ship intelligent manufacturing pilot demonstration project was incorporated into MITT’s Intelligent Manufacturing Pilot Demonstration Project for 2018, this is the second shipbuilding company nationwide among the list on the wake of NACKS. Guangdong COSCO Shipping Heavy Industry and Nanjing International Marine Equipment became MITT’s standard implementation pilot enterprises for “IT and Industrialization Integration Management System”.

COSCO Shipping Heavy Industry completed the establishment scheme of the design and research institute to further deepen its strategic cooperation with the Shanghai Ship and Shipping Research Institute and continuously enhance its technical R&D capability.As the chairman of the China Ocean Engineering Equipment Technology Industry Association, COSCO Shipping Heavy Industry set up the Shanghai Ocean Engineering Equipment Manufacturing Innovation Center,and signed a series of cooperation agreements with relevant parties.By jointly carrying out R&D of key common technologies in the field of marine engineering, it promoted the transformation of technological achievements. In terms of key technologies, NACKS’ “A Method of Semi-Series Construction of Large Vessels” won the Gold Award for Patent in China's Shipbuilding and Marine Engineering Industry and relevant key projects were approved by MIIT, and many scientific research achievements won the First Prize of the Science and Technology Award of the Chinese Navigation Society and the CSNAME. The company applied for 61 patents and won acceptance, obtained 55 patent authorizations, held 591 valid patents and 43 computer software copyright registrations.