26-04-2016

South Korean Shipbuilders Confronting Merger Issue amid a Narrow Escape

shipbuilding

It has been found that Hyundai Heavy Industries and Samsung Heavy Industries managed to post some profits in the first quarter of this year while Daewoo Shipbuilding & Marine Engineering succeeded in reducing its loss.

According to industry sources, Hyundai Heavy Industries’ profit for the quarter is estimated at between 100 billion won and 200 billion won. The shipbuilder remained in the red for nine quarters in a row until the end of last year, recording a cumulative loss of four trillion won or so. The loss amounted to 279.1 billion won in Q4, 2015.

Samsung Heavy Industries’ Q1, 2016 profit is estimated at approximately 40 billion won. Its cumulative loss reached 1.5 trillion won in Q3 last year before it posted an operating profit of 29.9 billion won in the following quarter. Daewoo Shipbuilding & Marine Engineering’s quarterly loss is estimated to have been reduced from 973.3 billion won to somewhere between 19 billion won and 40 billion won, too.

This is because the three South Korean shipbuilders have removed their insolvency factors in quantity. “Losses related to the delay of the delivery of offshore plants and design modifications were reflected in last year’s business data and, therefore, substantial improvements are likely to be witnessed in this year’s data,” said an industry insider.

Under the circumstances, a call for business combination for restructuring purposes in the industry is subsiding at least to some extent although those in the industry agree to the necessity of drastic restructuring itself. They are wary of a significant reduction in manpower and facilities in particular. “Restructuring based on a reduction in infrastructure will cause the South Korean shipbuilding industry to lag behind those of Japan and China when the global economy recovers to result in an increase in the number of shipbuilding and offshore plant contracts,” said professor Baek Jeom-ki at Pusan National University.

Source: BusinessKorea

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