Low Price Order? Daewoo Shipbuilding Lost Nearly $40 Million In 2019

- Mar 13, 2020-

Daewoo shipbuilding in South Korea suffered a sharp decline and loss in 2019 due to the previous low price orders and increased costs.

On March 10, Daewoo shipbuilding disclosed its performance in 2019. Last year, Daewoo lost 46.5 billion won (US $39 million), compared with a net profit of about 320 billion won (US $269 million) in 2018.

Daewoo shipbuilding explained that last year, Daewoo shipbuilding began to build new ships that were ordered at low prices many years ago. At the same time, due to the decrease of new ship orders and the increase of fixed costs, the company's profitability declined.

In addition, Daewoo shipbuilding has set aside additional reserves to prevent losing in the damage compensation lawsuit filed by shareholders, which also has a negative impact on its performance.

In 2019, Daewoo Shipbuilding's operating profit was 292.8 billion won (about 246 million US dollars), down 71% from 1.02 trillion won in 2018. Sales fell 13% to 8.36 trillion won (US $7.02 billion) from 9.64 trillion won in 2018.

This year, Daewoo shipbuilding set the annual order receiving target at US $7.21 billion, higher than the annual order receiving volume of US $6.88 billion last year.

Daewoo shipbuilding expects that the uncertainty in the global market will continue to increase, and ship enterprises will face a difficult period for the time being. Under the influence of novel coronavirus epidemic, the order of new vessels in the world in the first 2 months of this year was only 1 million 170 thousand CGT, down 76% from the same period last year. Industry insiders predict that with the spread of the new coronavirus epidemic, uncertainty in the new shipbuilding market is expected to increase this year. In addition, due to the collapse of international oil price, the market of high value-added marine equipment and LNG ship may be stagnant.

Meanwhile, novel coronavirus has to cope with the shipyard's production. Last month, the mayor of Juji City, where Daewoo shipbuilding is located, summoned Daewoo shipbuilding and Samsung heavy industry to discuss countermeasures and seek possible solutions to minimize shipyard losses. Affected by the epidemic prevention and control measures, the production efficiency of Samsung Heavy Industry and Daewoo shipbuilding has been reduced.