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Daewoo Ship profit jumps to record high

Daewoo Ship profit jumps to record high

Daewoo Shipbuilding & Marine Engineering Co., the world's third-largest shipyard, said fourth- quarter profit jumped more than fivefold to a record after building more vessels at higher prices.
Net income increased to 293 billion won (US$210 million) in the three months to Dec. 31, from 53.1 billion won a year earlier, the Seoul-based company said today in an e-mailed statement. Sales rose 69 percent to a record 3.67 trillion won.
South Korean shipyards are still working on orders they received in 2006 when prices rose as much as 22 percent to a record, helping spur earnings. Daewoo Shipbuilding won US$11.8 billion of contracts in 2008, the first decline in six years, and hasn't received a new order since September except for a submarine from the South Korean navy.
"Earnings will be better this year considering their backlog," said Cho In Karp, an analyst at Good Morning Shinhan Securities Co. in Seoul. "But the slump in demand for new vessels still remains a concern."
Operating profit, or sales minus the cost of goods sold and administrative expenses, jumped more than fivefold to a record 567.4 billion won. That helped widen the margin to sales to 15 percent from 4.8 percent a year earlier.
Profit Margins
Margins at Hyundai Heavy Industries Co., the world's largest shipbuilder, was 11 percent in the quarter and Samsung Heavy Industries Co., the world's No. 2 shipyard, was 6.4 percent. Hyundai Mipo Dockyard Co.'s margin was 9.9 percent. That helped counter a doubling in prices of steel plates used to make the hulls and the single biggest material expense.
Raw material costs softened in the last quarter as the recession sapped steel demand from carmakers and builders. That prompted Dongkuk Steel Mill Co., South Korea's third-largest steelmaker, to lower prices of steel plates by 18 percent on Jan. 19, the first decline in more than two years.
"We were able to achieve better earnings despite a surge in raw material costs because we are building more vessels that bear higher prices such as gas carriers and drill ships," Daewoo Shipbuilding said today in an e-mailed statement.
Daewoo Shipbuilding plans to deliver about 75 vessels this year, 67 percent more than the 45 it handed over to clients in 2008. That is expected to help increase annual sales to a record of more than 13 trillion won.
Hyundai Heavy said on Jan. 29 it expects record sales of 22.9 trillion won this year, 15 percent higher than in 2008.
Orders Slump
Even so, orders for new vessels have slumped since the third quarter as the economic recession may cause global trade to shrink 2.1 percent this year, the first drop since 1982, according to the World Bank forecast.
New contracts in terms of tonnage dropped an "alarming" 90 percent in the fourth quarter from the previous three-month period, according to London-based Clarkson Plc, the world's biggest shipbroker.
In December, only 0.2 million deadweight tons were ordered, which is "unheard of in recent years," and compares with 24.9 million tons contracted in the same month a year earlier, Clarkson said.
A total of 153.6 million deadweight tons were ordered last year, 43 percent less than in 2007, Clarkson said in its monthly shipbuilding report. That is the lowest since 2006.
Daewoo Shipbuilding on Jan. 5 said it aims to win more than US$10 billion worth of orders this year. The company won an order for a submarine from South Korea's navy in December.


Updated : 2021-10-18 08:45 GMT+08:00