South Korea's No. 2 shipbuilder Daewoo Shipbuilding & Marine Engineering Co., will push for restructuring moves, including asset sales and a reduction in the number of executives, as it reels from massive losses, reports Yonhap.
The shipyard will cut the number of executives by some 30 percent and slim down its structure. It also said it will push to sell assets, including its overseas affiliates that suffer continued losses and its headquarters in Seoul, to improve its financial footing.
In a briefing on the shipbuilder's financial health to some 300 executives on Monday, DSME Chief Executive and President Jung Sung-leep said the company will liquidate most of the affiliates whose businesses are not involved in shipbuilding and offshore facilities.
"We are also planning to put our headquarters in central Seoul and most non-core properties up for sale as part of our drastic rescue program," the CEO said.
The cost-cutting measures came as the world's No. 2 shipyard suffered a record loss in the second quarter of the year, largely due to increased costs stemming from a delay in the construction of low-priced ships and offshore facilities.
The net loss came in at 2.39 trillion won (US$2 billion) in the April-June period, compared with a profit of 76 billion won a year earlier, the company said earlier.
Orders to build offshore facilities such as drill ships won since 2010 were all mega-sized and sophisticated projects. As most of the deals were engineering, procurement and construction, or EPC-based, we couldn't pass increased raw materials costs onto the shippers who placed the orders, DSME said.
"We had to deal with unexpectedly-high extra costs during the construction process in the past years and the increased budget was all reflected in the bottom-line as losses," a DSME spokesman said.
Daewoo said its three largest creditor banks, state-run Korea Export-Import Bank, Korea Development Bank and the banking arm of South Korea’s largest agricultural cooperative Nonghyup Bank, are currently conducting due diligence on the company to determine the cause of the second-quarter losses and the level of capital infusion that may be required.
