STX Offshore in Deep Financial Crisis
By Aiswarya Lakshmi
Monday, November 16, 2015
The South Korean shipyard STX Offshore & Shipbuilding is apparently close to a bankruptcy if not yard soon find new vendors who are willing to pump huge sums into the yard. Otherwise, there is the prospect of a collapse in the first half of the 2016th.
STX Shipbuilding CEO Lee Byung-Mo recently sent a message to its employees, saying, “If we operate our company the way it is without special countermeasures, we will be short of funds worth hundreds of billions of won in the next three years. The company will face a crisis at the end of this year and collapse at the first half of 2016.”
Heo expects to suffer severe financial difficulties since the company still couldn’t make profits even after STX Shipbuilding used up 4.5 trillion won (US$3.86 billion) of funds received from the creditors in 2013.
Lead creditor Korea Development Bank (KDB) is expected to announce what it intends to do with the shipbuilder in the next 10 days. STX Offshore & Shipbuilding has already announced plans to slash capacity and staff by 25% next year and to focus on fewer ship types, primarily LR1 product tankers.
Analysts forecast cashflow problems next year as STX begins construction on additional loss-making vessel orders already booked and as the potential rises that shipowners will cancel orders and ask for a deposit refund.
The country’s big three shipyards — Hyundai Heavy, Samsung Heavy Industries Co. and Daewoo Shipbuilding & Marine Engineering Co. — racked up a combined operating loss of 2.1 trillion won (US$1.85 billion) during the July-September period.
The combined operating loss by the country’s big three shipyards is estimated at 7.8 trillion won for the year, marking the first time the top three shipyards have suffered operating losses on an annual basis.