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S. Korea: Shipbuilders forecast to narrow losses in Q4

South Korea’s top three shipbuilders are expected to post smaller operating losses for the fourth quarter of 2015 after passing through hard times, but their prospects remain grim for this year, industry sources and analysts said.

S. Korea: Shipbuilders forecast to narrow losses in Q4
27 January 2016 - 12:13

South Korea’s top three shipbuilders are expected to post smaller operating losses for the fourth quarter of 2015 after passing through hard times, but their prospects remain grim for this year, industry sources and analysts said.

The nation’s top three shipyards — Hyundai Heavy Industries Co., Samsung Heavy Industries Co. and Daewoo Shipbuilding & Marine Engineering Co. — logged massive operating losses in the first nine months of last year due to canceled or delayed offshore projects amid an industrywide slump.

Their combined operating loss was estimated at 2.1 trillion won (US$1.85 billion) during the third period.

Analysts estimated the shipbuilders’ financial statements to be in better shape in the latest quarter but still to be disappointing.

Samsung Heavy Industries is estimated to have swung to a profit in the fourth quarter on the back of its efforts to offload its potential burdens over the past three quarters.

After posting 1.5 trillion won of operating deficit in the January-September period, Samsung Heavy was estimated to have logged 30-50 billion won of operating income in the last quarter, according to multiple reports by local brokerage houses.

“Samsung Heavy Industries had booked operating losses from overseas plant projects in advance, so it is expected to swing to the black in the fourth quarter,” a company official said.

Hyundai Heavy Industries, which accumulated 1.26 trillion won in operating loss through September, was forecast to barely turn to a profit or narrow its loss, guidance reports showed.

Daewoo was predicted to remain in the red in the fourth quarter following 4.53 trillion won in losses in the January-September period, but the amount was forecast to be far below the previous level, they said.

Experts say the slump and worsening profitability may continue into this year due to lower oil prices and weak demand for new vessels.

The stuttering shipbuilding sector has been a major drag on South Korea since it is one of the key growth engines for Asia’s fourth-largest economy, along with electronics and automobiles.

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