Daewoo Shipbuilding shares drop

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Daewoo Shipbuilding shares drop

Daewoo Shipbuilding & Marine Engineering shares tumbled Wednesday amid rumors of massive losses and speculation that its major shareholder, the Korea Development Bank (KDB), may restructure the company.

Shares in the world’s No. 2 shipbuilder fell by the daily maximum limit of 30 percent to 8,750 won, the lowest close in about seven years as investors dumped stocks en masse on rumors the shipbuilder may see a loss of as much as 3 trillion won ($2.7 billion) for the second quarter.

Delays in orders and losses in the marine plant businesses and Romanian shipyard Daewoo Mangalia Heavy Industries are behind the bad second quarter.

“There appear to be losses that have been made, but they have not been very visible on the books so far,” an official from the KDB said. “Losses this big necessitate action by creditors.”

Creditor banks have been planning to sell its money-losing Romanian shipyard since late last year, according to another KDB official.

“But the losses are in line with losses seen at other shipbuilders last year,” a senior official at Export-Import Bank of Korea, another creditor bank, said. “We believe Daewoo will be able to bounce back and steps as [drastic] as a debt workout would not be necessary.”

Daewoo Shipbuilding reported 471.1 billion won in operating profits for fiscal 2014, and 43.3 billion won in operating losses for the first quarter of this year.

Amid a prolonged industry downturn, Hyundai Heavy Industries posted an operating loss of 3.2 trillion won last year, and Samsung Heavy Industries saw its operating profits dip by 80 percent to 183 billion won.

“Daewoo Shipbuilding will probably continue seeing weak numbers for the next couple of quarters,” said an analyst at a brokerage. “It is going to be a difficult year.”

The company’s new CEO Jung Sung-leep warned earlier last month during a media briefing that earnings for the second quarter were likely to be poor as losses from the marine plant businesses were going to be reflected.

Meanwhile, the Korea Exchange asked Daewoo Shipbuilding to clarify rumors of a debt workout program.


BY PARK JUNG-YOUN [park.jungyoun@joongang.co.kr]

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