Losing Money
Daewoo Shipbuilding & Marine Engineering is predicted to have recorded operating losses for the second consecutive quarter. The losses for the second quarter are estimated to be up to 3 trillion won (US$2.6 billion), and a restructuring program is looming large.
According to the financial authorities and the Korea Development Bank, the largest shareholder of Daewoo Shipbuilding & Marine Engineering, the losses that the company has not reflected in its records are estimated to reach approximately 2 trillion won (US$1.7 billion).
The shipbuilder had to spend a lot of money as of late due to a delay in its schedule caused by a change in offshore plant design. It won a contract for four submersible drilling ships, each around 600 billion won (US$522 million), four years ago, but each schedule was delayed by an average of 10 months to a year, leading to huge losses. The performance of Daewoo Mangalia Shipyard in Rumania, one of its subsidiaries with impaired capital, is likely to be reflected in the shipbuilder’s business records soon. Besides, Daewoo Shipbuilding & Marine Engineering’s long-term trade receivables amount to about 9 trillion won (US$7.8 billion), and the irrecoverable part is predicted to be added as losses.
Some people are pointing out that the company was trying to hide the losses after its recognition. This could lead to the government and creditor intervention in the management of the company for large-scale restructuring.
In the meantime, Hyundai Heavy Industries suffered operating losses of 3.2495 trillion won (US$2.8303 billion) last year, due mainly to its poor performance in the offshore plant sector, while Samsung Heavy Industries’ operating profits for the same period stood at 183 billion won (US$159 million) with losses of 500 billion won (US$436 million) estimated in two offshore plant construction projects.