Dramatic Improvement Expected
Daewoo Shipbuilding & Marine Engineering Co. (DSME), a leading South Korean shipbuilder working on a debt-restructuring plan, succeeded in shifting to an operating profit for the first time in six years. The turnaround is attributed to the massive restructuring plan that the shipbuilder has undertaken since 2015 to cut costs and put in place an efficient production system.
DSME announced on March 12 that it recorded an operating profit of 733 billion won (US$686.65 million) for 2017 based on consolidated financial statements, marking the first time it has posted a profit since 2011. The company’s sales dropped by 13.5 percent to 11.1 trillion won (US$10.4 billion) compared to the previous year but its net profit swung back into the black at 669.9 billion (US$627.54 million) won. Its debt ratio improved significantly from 2,185 percent at the end of 2016 to 281 percent at the end of 2017.
However, its annual performance improved but it posted 351 billion won (US$328.81 million) in operating loss in the fourth quarter last year, recording a loss for the first time in a year. This is largely due to the decrease in sales from large-scale drop in exchange rates, the rise in costs from the increase in steel prices and minimum wages and reflection of provision for construction losses based on conservative market prospects.
DSME said on the same day it aims to achieve 10 trillion won (US$9.37 billion) in sales based on separate financial statements and receive orders worth US$7.3 billion (7.79 trillion won) considering improving market conditions this year. An official from DSME said, “The loss in the fourth quarter last year was caused by temporary factors that reflected future uncertainty in advance. This year, the shipbuilding market shows a sign of recovery and the company expects that its financial conditions will dramatically improve as it will deliver 20 LNG carriers that are most lucrative.”