Daewoo Shipbuilding Posts Worse-Than-Expected Loss on Delays

  • Company’s second-quarter sales drop to 3.39 trillion won
  • Slump in oil prices damps orders at South Korean shipyards

Daewoo Shipbuilding & Marine Engineering Co., the world’s second-largest shipbuilder, posted a bigger-than-estimated loss for the second quarter as the global shipbuilding industry struggles to come out of a prolonged downturn.

The net loss, excluding minority interest, widened to 1.19 trillion won ($1.1 billion) in the three months ended June, from a restated loss of 436.2 billion won a year earlier, the company said in a filing Tuesday. Analysts expected a loss of 14.2 billion won, based on the average of seven estimates compiled by Bloomberg. Sales fell to 3.39 trillion won from 3.96 trillion won.

Daewoo Shipbuilding recorded clients’ requested construction delays as losses and didn’t recognize some tax assets under its external auditor’s “conservative” assessment of its books, contributing to the wider losses, the shipbuilder said. The company joins Samsung Heavy Industries Co., the world’s third-biggest shipyard, in posting losses as projects get delayed and orders dry up amid a protracted slump in oil prices that’s hurt its clients’ spending power.

Daewoo Shipbuilding said it expects improved results from the third quarter, and intends to sell a site for apartments on South Korea’s Geoje island to bolster its balance sheet.

Asset Sales

Samsung Heavy, Daewoo Shipbuilding and shipbuilding market leader Hyundai Heavy Industries Co., all based in South Korea, plan to raise a combined 8.41 trillion won through asset and share sales after setting aside provisions for losses in offshore projects.

Korea Development Bank and Export-Import Bank of Korea, two key creditor banks of Daewoo Shipbuilding, pledged in October last year to provide 4.2 trillion won in loans and equity. Korea Development Bank is also the shipbuilder’s biggest shareholder.

Daewoo Shipbuilding posted a second-quarter operating loss of 423.6 billion won, compared with a loss of 582.1 billion won a year earlier.

Shares of Daewoo Shipbuilding have been suspended from trading since July 15 while investigations are under way on falsification of earnings.

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