STX tries to turn the boat around

STX Group, Korea’s fourth-largest shipbuilder and heavy industrial conglomerate, is hard at work to make a turnaround by winning two consecutive plant orders from Saudi Arabia.

In announcing the news last week, the struggling STX Group showed promise that it could end the year on a positive note.

STX said yesterday it won a $2 billion plant order from Saudi Arabia. It signed a Pepcom contract to construct three plants for producing steel materials. The company inked the deal with National Mining, a joint venture between a U.K. resource developer National Mining and Saudi’s Al Sharif Group, a leading company in the field of power system networks. Under the Pepcom deal, STX will take responsibility for planning, engineering, procurement, construction, operation and management of the plant complex. The contract is bigger than a typical plant deal that covers engineering, procurement and construction only.

“STX will develop 5 million tons of iron ore every year in Wadi Sawawin in the city of Tabuk in the northwestern part of Saudi Arabia,” the company said. “And the company will build a large plant complex, including a pelletizing plant, a power generation plant and a desalination plant.” A pelletizing plant refers to a facility that processes ore into pellets to be used as raw material.

“Currently running an iron ore mine in Kintap, Indonesia, STX is recognized for its capability to build, operate and manage steel material plants,” the company said.

The latest order helped the company gain confidence amid its continued sluggish performance this year. Earlier, the company announced it was awarded an order from Saudi’s South Steel Company to build an additional 0.5 million-ton rolling plant in Jizan, Saudi Arabia, last Thursday. It was the first order since it first made inroads into the Middle East country in 2009. The group’s shipbuilding unit said that it received an order to make six super-size (16,000 TEU-class) container carriers for a European shipper.

“So far, STX’s shipbuilding business has been around $6 billion in orders as of now,” Koh Sung-geun of the company said.

The figure is far less than the company’s initial goal of achieving $12.8 billion in orders.

“The group’s heavy industrial business has nearly reached its annual goal,” Koh said, but he declined to reveal exact numbers.

The No. 4 player in the Korean heavy industry, whose business portfolio is centered on the shipbuilding area, has been awash in rumors that the company was short of money in October. Lee Hee-bum, chairman of STX Heavy Industries, denied the rumors that were circulating in the financial sector and sued those who were alleged to have had spread the rumors.

Due to the rumors that the group suffered a lack of liquidity triggered by the European financial crisis, stock prices of listed STX subsidiaries plummeted by 10 percent on Oct. 21.

By Song Su-hyun [ssh@joongang.co.kr]