S. Korea: Major shipyards’ earnings on the mend


South Korea’s major shipyards saw their earnings improve in the first quarter as their efforts to cut costs and realign their business portfolios paid off, analysts said Saturday.

Market watchers said that improvements made can bolster their bottom line that is expected to mend going forward on the back of a mild recovery in the shipbuilding sector.

Hyundai Heavy Industries Co., a major shipyard here, announced late this week that its first-quarter earnings almost doubled from a year earlier on cost-cutting efforts and the delivery of high-priced ships. Net profit reached 462 billion won (US$409 million) in the January-March period, up from a profit of 245 billion won a year earlier, and operating income also surged 90 percent on-year to reach 619 billion won.

Daewoo Shipbuilding & Marine Engineering Co., a troubled shipbuilder here, also swung to the black in the first quarter of the year from a year earlier, largely thanks to cost-cutting measures. Net profit reached 261 billion won in the first quarter, swinging back from a loss of 3.4 billion won in the same quarter of last year. The shipbuilder logged an operating income of 292 billion won in the first quarter, also returning from an operating loss of 38 billion won a year earlier.

Samsung Heavy Industries Co. also joined the pack by reporting a net profit for the first quarter with 58.7 billion won, sharply up 15.9 percent from a year earlier.

Local shipyards have suffered losses for the past few years amid a plunge in demand for new vessels and a delay in the construction of offshore facilities.

The top three players conducted massive self-rescue plans to tide over their worst-ever slump. Last year, they trimmed at least 20,000 jobs.

The creditors, led by Korea Development Bank (KDB), announced a fresh rescue package worth 6.7 trillion won for Daewoo Shipbuilding. Next month it is set to receive a fresh cash injection of 2.9 trillion won from the creditors, the second of its kind.

New orders were improving and clients are poised to place orders down the road, according to industry sources.

“Local shipyards are positioned to benefit from higher oil prices and demand for fuel-efficient ships, and their earnings will improve,” said an industry source.

Hyundai Heavy said earlier it has so far clinched new orders worth $1.4 billion to build 15 ships this year, including 13 oil tankers.

In April alone, the shipyard bagged orders worth $420 million to build five ships.

Daewoo Shipbuilding and Samsung Heavy have clinched more than expected deals so far this year.

“Global shipbuilding orders seem to have bottomed out,” said Hong Sung-in, “Rising demand for LNG carriers and oil tankers are also positive for local shipyards.”

Source: Yonhap

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