DSME 2Q Hit By Discounts

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August 29, 2012

SEOUL–Daewoo Shipbuilding & Marine Engineering Co. (042660.SE) on Wednesday posted a 33% decline in its second-quarter net profit, due to earlier discounts the shipbuilder offered to boost sales.

Consolidated net profit for the three months ended June 30 fell to 96.4 billion Korean won ($85 million) from KRW142.78 billion a year earlier, the world’s third-biggest shipbuilder by sales said.

Operating profit plunged 63% to KRW114.1 billion from KRW308 billion while sales rose 9.3% to KRW3.951 trillion from KRW3.615 trillion.

As of Wednesday, the company achieved 71%, or $7.83 billion, of its order target of $11 billion for the year.

Earlier this month, Hyundai Heavy Industries Co. (009540.SE) and Samsung Heavy Industries Co. (010140.SE), Daewoo’s two bigger rivals, reported sharp declines in their second-quarter earnings due to the same reason.

In 2009, DaewooShipbuilding gave discounts to attract customers reeling from the 2008-2009 global financial crisis as orders fell sharply .

Shipbuilders typically book a large part of payments for vessels right before delivery, and the outlook continues to be bleak through early 2013 as they deliver low-priced ships for which the orders were booked a few years earlier, analysts say.

By Kyong-Ae Choi. (c) 2012 Dow Jones & Company, Inc.

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