Daily Management Review

Daewoo's Shipyards : The Worst is Over for the Company


South Korean shipbuilding company Daewoo Shipbuilding & Marine Engineering Co. (DSME) has declared that the worst is behind the company. The company expects to reach the profit for the current quarter after a record loss in 2015.

Wei-Te Wong
Wei-Te Wong
The second largest producer of ships in the world is going to receive this year's orders for a total of $ 10.8 billion compared with $ 4.5 billion last year. In 2015, due to the fall in oil prices to the lowest in more than a decade, DSME customers cancelled or postponed orders for offshore rigs. As a result, Daewoo Shipbuilding program significantly reduced, and the operating loss of the company amounted to 5.51 trillion won ($ 4.6 billion) last year. The company's revenue fell by 23% to 13 trillion won.

At the end of October 2015, the company reported about earnings awaited in 2016, as construction of a large number of LNG carriers is expected to be completed in the current year.

Daewoo expects that sales in 2016 will amount to 10-12 trillion won. Proceeds from the shipbuilding industry will amount to 55% of this year’s revenue, offshore projects - 33% of total revenue.

At the time, Daewoo Shipbuilding plans to lay off about 30 thousand contractors' workers. Now, the number of employees is 45 thousand. Layoffs will be gradual, the company's management has not named the exact timing.

The aggregate operating loss of the largest shipbuilding companies in the world - Korean Hyundai Heavy Industries Co., Daewoo Shipbuilding and Samsung Heavy Industries Co. - amounted to 8.55 trillion won last year. According to head of Daewoo Shipbuilding Sung-Leep Jung, shipbuilding industry in South Korea will recover in the second half of 2017.

source: yonhapnews.co.kr