Daewoo Shipbuilding Has Record Loss as Oil Slump Leads to Delaysby
Company wrote down more charges from offshore projects
Daewoo Shipbuilding expects earnings to turn around this year
Daewoo Shipbuilding & Marine Engineering Co., the world’s second-biggest shipbuilder, posted a record loss last year as it wrote down more charges from offshore projects under construction.
The net loss including minority interests totaled 5.13 trillion won ($4.3 billion) in 2015, compared with profit of 33 billion won a year earlier, the Seoul-based company said in a regulatory filing Monday. Sales fell 23 percent to 13 trillion won.
Daewoo Shipbuilding is among global shipyards that were driven to losses in 2015 after a foray into construction of floating drilling and production units coincided with a plunge in oil prices to the lowest levels in more than a decade. The company, the worst performer in 2015 among stocks on the Kospi 200 Index, has said it aims to post a profit this year given that most offshore projects in which it has incurred losses are expected to be delivered in 2016.
“Earnings are expected to turn around this year as more high-valued gas carriers are built,” Daewoo Shipbuilding said in an e-mailed statement. “The company has sufficiently set aside provisions that will eliminate any uncertainties.”
Shares of Daewoo Shipbuilding rose 14 percent to close at 6,040 won Monday before the results. The stock has fallen about 70 percent in the past year, compared with a 2.7 percent decline in the benchmark Kospi index.
Daewoo Shipbuilding posted a full-year operating loss of 5.51 trillion won, compared with profit of 471.1 billion won in 2014.
The fourth-quarter net loss including minority interests narrowed to 979.8 billion won from a loss of 1.69 trillion won in the third quarter, the company said. Daewoo Shipbuilding posted an operating loss of 973.3 billion won in the three months, narrowing from 1.45 trillion won in the third quarter.
Oil prices have dropped more than 30 percent over the past year amid volatility in global markets, brimming U.S. crude supplies and an expectation of increased supply from Iran. That prompted oil companies, such as Statoil ASA and Royal Dutch Shell Plc, to cut spending and led rig owners to cancel orders or ask for delivery delays.
Brent traded at $39.35 a barrel as of 2:48 p.m. in Singapore Monday.
The South Korean government said in December it plans to work with banks to set up a $1.2 billion fund to help local shipping companies pay for new vessels they’ve ordered, according to the Ministry of Oceans and Fisheries. The government also will push shipyards to downsize and focus on their core businesses, and will seek to close or sell yards that can’t survive on their own.
Major creditors Korea Development Bank and Export-Import Bank of Korea pledged in October to provide 4.2 trillion won to Daewoo Shipbuilding in loans and equity. The company also plans to raise 750 billion won by selling non-core assets such as its headquarters building and a golf course.
The creditors’ due diligence found that Daewoo Shipbuilding could face a severe cash shortage in the first half of this year, but that could ease as the shipyard receives payments on drill ships it will deliver, Korea Development Bank said in October.