OCTOBER 27, 2015 — South Korean shipbuilding accountants must be buying red ink in 10 gallon jugs by now.
After yesterday's announcements of heavy losses by Hyundai Heavy Industries, today Daewoo Shipbuilding & Marine Engineering Co.(DSME) added to the misery. The world's number two shipbuilder reported that it had swung to a loss in the third quarter of the year.Net loss came in at 1.36 trillion won (US$1.2 billion) in the July-September period, compared with a net profit of 10 billion won ($880,600) a year earlier.
DSME posted an operating loss of 1.22 trillion won ($1.07 billion) in the third quarter, compared with an operating income of 135 billion won a year earlier.
For the first nine months of the year, DSME's net loss has now reached 3.83 trillion won ($3.37 billion), and its operating loss a staggering 4.3 trillion won ($3.87 billion).
There is, however, some good news in the DSME story. Its key creditor, Korea Development Bank, now says it will unveil bailout measuresthat may include a capital injection of some 4 trillion won ($3.5 billion.
"We will hold a board of directors meeting to vote on the normalization measures for Daewoo Shipbuilding on Thursday," Korean media quote a KDB official as saying.
The state-run KDB and other creditors are considering an injection of 4.3 trillion won, including a capital increase of 1 billion won to 2 billion won and a debt-for-equity swap, according to media reports.
News of the bail out plan came after the DSME union reached an agreement late Monday not to seek pay hikes or to go on strike.
The union backed down after creditors had threatened to puts the yard into receivership.
"We had to make a tough decision for the sake of 50,000 unionized workers' rights of living," the union said in a press release.