DSME warns of tough shipbuilding outlook

South Korean builder has managed to stay in the black in the second quarter, but said the prospects for the remainder of the year are expected to be “very difficult”.

News ID: 80422

Date: 14 August 2019 - 14:39

Net profits in the three months stood at Won145.3bn ($120m), down 29.5% compared to the year-ago period.

DSME IS BEING ACQUIRED BY DOMESTIC RIVAL HHI.

DAEWOO Shipbuilding & Marine Engineering has warned of a challenging market outlook, having posted reduced profits and revenue in the second quarter this year.

The South Korea shipbuilder, which is currently controlled by state lender Korea Development Bank, recorded a net profit of Won145.3bn ($120m) in the three months, down 29.5% compared to the year-ago period.

Operating income dropped 15% to Won194.8bn, while sales fell 7.5% to Won2.1trn.

DSME said in a statement that it expected headwinds in the second half amid growing concerns over a flagging global economy.

"We were able to maintain a surplus through cost-cutting efforts and productivity improvement, but we expect to have a very difficult time considering the business environment in the second half,"

The results come as the world shipbuilding markets have been under pressure this year, affected by weak freight markets and a lack of owners’ interests to invest in newbuildings ahead of the 2020 sulphur rules.

According to Clarksons’ estimates, global investment in fresh tonnage in January-June declined 24% from the same period of 2018 to $29.2bn.

DSME achieved $2.77bn of new orders - consisting of six liquefied natural gas carriers and seven tankers - in the six months, hitting only 33.1% of its 2019 annual target.

Nevertheless, the company, which is being sold to domestic rival Hyundai Heavy Industries, has managed to trim its debt load by Won684bn and reduce the debt ratio to 184% as of end-June from 210% at the end of last year.