Korean Shipyards – Afloat, But Taking On Water
By David Fickling
(Bloomberg View) — Things had been trying extra longing for Korea’s three largest shipbuilders, till at the moment.
After seven consecutive quarters of losses, analysts reckoned that earnings earlier than curiosity and tax on the world’s largest shipyard — Hyundai Heavy — have been going to show constructive within the three months to Sept. 30. Um, that didn’t occur. Samsung Heavy a minimum of seems extra promising, posting internet earnings for the third quarter that beat estimates. Daewoo Shipbuilding can also be forecast to be again within the black by the primary quarter of subsequent 12 months, however then once more, it’s been in talks with lenders and is value barely half its e book worth after working capital drifted into destructive territory.
So put that ceremonial ship launching champagne again on ice. Ebit shouldn’t have been a very difficult metric on which to interrupt even. Until it drifts into comfortably constructive territory, the trio must meet the majority of their curiosity funds from gross sales of property, new shares, or by taking over extra debt.
Meantime, the macro outlook’s nonetheless gloomy. Sure, Korea’s shipbuilders moved nimbly over the previous 5 years to colonize the offshore oil market after Chinese yards undercut them on a lot of their conventional enterprise. But that’s left them closely uncovered to upstream petroleum at a time when an fairness index of oil companies firms has fallen about 40 p.c over 12 months and the variety of energetic drilling rigs is languishing at its lowest since 2009.
With oil costs nonetheless subdued, there’s unlikely to be a rush of recent orders any time quickly. Worse nonetheless, oil and fuel producers are additionally tightening their belts, so most of the vessels already on the market within the deep blue sea aren’t doing a lot in the way in which of exploring:
A decision to Daewoo’s debt issues, or a breakthrough in Samsung Heavy’s thwarted makes an attempt to merge with its Samsung Engineering affiliate, would possibly nonetheless allow Korea’s shipyards to shock on the upside. But for now you can draw a parallel with the oil tankers they construct: Weighed down, and intensely sluggish to show round.
This column doesn’t essentially mirror the opinion of the editorial board or Bloomberg LP and its homeowners.
©2015 Bloomberg View
Weekly Insights from the Helm
Dive right into a sea of knowledge with our meticulously curated weekly “Dispatch” electronic mail. It’s greater than only a publication; it’s your private maritime briefing.
