The year 2019 was the first year for CMIC’s business upgrade. In the context of the slowdown in global macroeconomic growth and the fact that the offshore engineering market has not fully picked up, CMIC, firmly adhering to the general principle of “striving for progress while maintaining stability”, cooperated with potential strategic partners in a more proactive way and promoted its transformation and development through the structural reform at the supply side.

In 2019, the Company’s accumulated revenue, gross profit, net profit for the year and total assets amounted to US$70.2 million, US$24.0 million, US$9.3 million, US$356.2 million, respectively, representing a year-on-year increase of 19.4%, 139.2%, 122.3% and 26.9%, respectively. The Company’s total liabilities decreased by 6.6% year-on-year to US$235.8 million and its net assets increased by 324.0% year-on-year to US$120.4 million. The gearing ratio and interest-bearing debt ratio of the Company was 66.2% and 2.6% (excluding lease liabilities), respectively. As of the end of December 2019, the balance of cash and cash equivalents and pledged bank deposits amounted to US$36.1 million, representing an increase of 75.0% over the same period of last year. Throughout 2019, the new orders of the Company amounted to US$68.9 million.

In the past year, the Company mainly implemented its strategic transformation centering on “business integration, structural optimization, cost reduction and efficiency improvement, and strict risk control”. To get more benefits, the Company proactively integrated the offshore manufacturing elements of its shareholders of China Merchants Group and CIMC Group, realised global leasing and sales of multiple offshore rigs through “boosting production with finance”, and improved the offshore asset management business despite the “adverse situation”.

In the first half of the year, the Company successfully integrated six jack-up rigs, of which two units of CJ46 rigs served the Abu Dhabi National Oil Company and started offshore drilling services; the Company signed agreements with SHELF with respect to sales of two units of CJ46 rigs and together with the Fund, a substantial shareholder of the Company, jointly increased their capital investment into SHELF and thus jointly hold 19.4% shares of SHELF, becoming SHELF’s largest shareholder. This signifies a substantial breakthrough in CMIC’s offshore asset management business. The Company conducted in-depth cooperation with the international top rig operation management company by way of exchange of shares with assets, which is an important step in the Company’s strategic transformation and beneficial to the expansion of the Company’s offshore rig asset management business and the of the industrial chain and also generates synergistic pulling effects for the offshore equipment manufacturing, spare parts supply and rig maintenance businesses.

Mexico is the current hotspot area of global offshore engineering. Leveraging on the resource advantages gained in the development of the international market for many years, the Company and its partner CP Latina jointly won the contract for drilling services of PEMEX, the national oil company of Mexico, and to provide them with two units of JU2000E jack-up rigs. The CMIC team’s successful access to the Mexican market indicates that the Company’s offshore asset management business has been recognized by the international mainstream market again and is also conducive to the simultaneous expansion of the Company’s offshore equipment manufacturing and service business.

In terms of equipment manufacturing and oil service related businesses, sales orders still face severe challenges as affected by the industry cycle. Upholding the principle of “development of offshore and onshore businesses in an innovative model”, the Company proactively develops land rig projects. It got equipment orders from CNPC through the innovative package solution model integrating “lease instead of sales + supporting service”; and drilling equipment orders from Tarim oildom in Xinjiang by way of lease and sales. Thus, the Company has been fully recognised by the market.

In early 2020, the new coronavirus epidemic swept the world and cast a shadow on the global economy. Russia and Saudi Arabia released information on increasing oil production, which caused a cliff-like drop in the Brent crude index in March, and crude oil prices would be under great pressure in the short term. With the epidemic under control, economic recovery and introduction of market rescue measures by the governments of all countries, it is believed that the price of crude oil will gradually recover. At the same time, the transformation of the energy structure is the current “main theme” and also the trend. There is a large demand in the clean energy market dominated by LNG, hydrogen energy, photovoltaic and offshore wind power. The development potential and investment direction of such clean energy will remain the focus of our future business transformation. At present, as the offshore engineering market has not fully recovered, it poses a good opportunity which occurs once in 30 years to integrate the offshore assets. Due to this opportunity, China’s shipyards have built an inventory of more than 50 units of offshore assets, most of which are jack-up rigs, accounting for 70% of China’s inventory of offshore assets, which is extremely beneficial to the integration of jack-up rigs.

In the context with both challenges and opportunities, in 2020, the Company must firmly adhere to the balanced development concept of “quality first, benefit priority, scale moderate”, continue to improve the equity structure, and increase attempts for potential cooperation opportunities with strategic partners including exchange of shares with assets and equity swaps, and proactively introduce strategic investment partners suitable for the Company’s medium and long-term development, to create good value returns for investors; While revitalizing redundant assets and promoting the recovery of long-standing debts, the Company will strengthen business integration, optimize asset structure, and moderately expand the scale of asset management. It will further explore profits through sustainable development with risk under control in the future potential development in terms of offshore engineering, technology and energy and achieve synergy with equipment manufacturing industry. Focusing on its core values, it will look for opportunities to extend the transformation to new areas and markets. The traditional sales model will gradually evolve to the method in combination of “financial leasing + supply chain management”, to promote the proactive integration of technological changes represented by “technicalization, intellectualization and networking” and promote the technological innovation and efficiency improvement in the field of marine energy by use of technological breakthroughs in the fields of AI, big data, robotics, Internet of Things and others.

In the future, the Company will keep on innovation and development with an eye on opportunities for integration of the energy market and the domestic offshore engineering, and focus on marine resources, with a view to comprehensive development of high-end equipment manufacturing, asset management, engineering operation and maintenance, and supply chain services and enhancement of the core competitiveness of its businesses. Besides, it will gradually expand to and develop the value chain of the marine energy technologyrelated industries in due course through industrial layout, value investment, and asset integration.

CMIC is still in the “growth stage” and its future development requires maintenance of strategic focus as well as the support, care and trust of all shareholders and investors. I hope that investors will continue to pay attention to the development of CMIC and witness the growth of CMIC. The CMIC team will continue to make persistent efforts to achieve great results to generate return to shareholders and give back to the society!