By Kyunghee Park (Bloomberg) — The world’s two biggest shipbuilders reported profit and issued an improved outlook, indicating South Korea’s shipyards may finally be emerging from two years of restructuring.
Daewoo Shipbuilding & Marine Engineering Co., which averted a payment crisis this month after bondholders agreed to a debt revamp, said Thursday it is set to deliver more than 30 liquefied natural gas carriers through next year, helping improve earnings. Hyundai Heavy Industries Co. got $1.42 billion of orders in the first four months of this year and expects more in the coming months, the company said in a statement Thursday.
Earnings are on the mend for the nation’s shipbuilders after they undertook aggressive reorganization to counter losses and plunging orders for new vessels and shipping platforms used for drilling oil in deep sea. Yards in South Korea — home to the world’s top three builders — eliminated at least 20,000 jobs last year, while Daewoo Shipbuilding was bailed out by creditors twice in the past two years.
“We are getting double the number of inquiries for orders this year,” Hyundai Heavy said. “We have also been able to get higher ship prices.” Its affiliate Hyundai Mipo Dockyard Co. said it won $910 million in contracts.
Hyundai Heavy reported first-quarter operating profit jumped 90 percent on year to 618.7 billion won ($545 million), beating analyst estimates for 353.2 billion won. Daewoo Shipbuilding’s operating profit was 291.8 billion won, the first in 17 quarters, versus a loss of 38.1 billion won a year ago.
After getting court approval for the latest revamp, Daewoo Shipbuilding will qualify for an additional 2.9 trillion won in new loans from Korea Development Bank and Export-Import Bank Korea. This will give the world’s largest shipbuilder more time to repay debt amid a cash shortage and regain confidence of customers.
“We have reflected almost all uncertainties related to offshore projects in our earnings last year,” Daewoo Shipbuilding said in its statement. “We are also set to deliver higher-margin vessels such as LNG carriers and mega-big container ships, which will help to sustain our profitability. Our restructuring efforts helped cut costs and improved productivity.”
Shares of Daewoo Ship were halted from trading mid-July last year. Hyundai Heavy shares, which were suspended March 30 pending the restructuring, will resume trading May 10.
Hyundai Heavy has been split into four firms — Hyundai Robotics Co., Hyundai Heavy Industries Co., Hyundai Electric & Energy Systems Co. and Hyundai Construction Equipment Co. Hyundai Robotics will also serve as the group’s holding company.
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