SEOUL: South Korea’s Daewoo Shipbuilding & Marine Engineering Co Ltd is expected to report on losses in excess of 1 trillion won ($862 million) in its next quarterly result, two people with direct knowledge of the matter said on Thursday.
The losses stem mostly from costly construction delays in offshore plants such as oil and gas rigs, said the people, who declined to be identified as they were not authorised to speak to media about the matter.
The high-end offshore plant business has been loss-making for the world’s three biggest shipyards, all in South Korea, as offshore floating production facilities for oil and gas are often complex, one-of-a-kind designs that can lead to unforeseen construction delays, analysts said.
Hyundai Heavy Industries announced its worst-ever annual operating loss last year at 3.2 trillion won, partly due to the offshore plant business, while Samsung Heavy Industries set aside about 500 billion won in Q1 2014 for losses on offshore structure projects.
The exact amount of Daewoo’s losses and the size of any capital infusion that might be needed from creditor banks would not be finalised until after a due diligence process, the people added.
A Daewoo spokesman said the company had no comment. Daewoo is due to report second quarter earnings by Aug. 14.
State-run Korea Development Bank (KDB) holds a controlling stake in Daewoo with 31.5 percent, first acquired when the government bailed out the firm around the Asian financial crisis of the late 1990s.
Daewoo’s three biggest creditors, state-run Korea Export-Import Bank, KDB and the banking arm of South Korea’s largest agricultural cooperative Nonghyup Bank, are participating in the due diligence, KDB said in a statement earlier this week.
Korea Economic Daily reported earlier on Thursday that Daewoo has close to 3 trillion won ($2.6 billion) in unbooked losses, and may need to liquidate foreign units, citing an unnamed KDB official and a KDB report to a parliament member.
Daewoo said on Wednesday that some 90 executives and management officials had entrusted their resignations to the discretion of new CEO, Jung Sung-leep, who came to the position in May.
