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S. Korean shipbuilders to tighten belt as orders dry up

All News 16:47 June 08, 2016

SEOUL, June 8 (Yonhap) -- South Korea's major shipbuilders are expected to tread water over the next three years as orders are drying up amid the prolonged industry slump stemming from the oil price plunge, company and government officials said Wednesday.

The nation's big three players -- Hyundai Heavy Industries Co., Samsung Heavy Industries Co. and Daewoo Shipbuilding & Marine Engineering -- have come under growing pressure to overhaul its money-losing businesses as the slump in oil prices has led to delays or cancellations of offshore projects.

With their debts mounting following last year's losses, the government on Wednesday released a set of restructuring measures that also calls for the state lenders and central bank to join efforts to help them stay afloat.

At a policy meeting in Seoul, Finance Minister Yoo Il-ho said the three shipbuilders proposed a combined 8.4 trillion won (US$7.3 billion) restructuring plan over the next three years, which includes job and salary cuts as well as asset sales to reduce debts.

Hyundai Heavy Industries, the world's largest shipbuilder, said the company and its two smaller affiliates are expected to bag an annual average of US$15.6 billion in new orders until 2018, about 85 percent of the past six year average of $18.3 billion.

Hyundai cut its earlier 2016 sales target from $18.7 billion to $13.1 billion, though it expected the amount to rise to $15.7 billion in 2017 and 18.1 billion in 2018.

To streamline its capacity, Hyundai said it has been phasing out three floating docks and plans to sell equipment and reduce workforce in the coming years.

Samsung Heavy Industries also said it will sell noncore assets and downsize workforce, expecting its annual average of orders to fall to $5.5 billion from 2016-18.

The company expected to win $5.3 billion worth of orders in both 2016 and 2017, and $5.9 billion in 2018, projecting a grim outlook in the near future.

Daewoo Shipbuilding expects to win an annual average of $8.1 billion in new orders until 2018, compared with a volume of $12.3 billion over the past six years.

Daewoo said this year will be the toughest with $6.2 billion in orders due to shrinking demands, hoping to raise the volume to $9 billion a year in the next two years.

The company, whose biggest shareholder is the state-run Korea Development Bank, has decreased the production capacity by 30 percent, reducing the number of floating docks from seven to five.

The government estimates the restructuring plan would decrease the three shipbuilders' combined capacity by 20 percent by 2018.


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