Samsung Heavy swings to profit

One of South Korea’s biggest shipbuilders, Samsung Heavy Industries (SHI), has seen its net income surge to KRW 128.6 billion (USD 112 million) in the third quarter of 2016, from a net loss of KRW 212.4 billion (USD 185 million) reported in the second quarter of the year.

The company’s operating profit for the period jumped to KRW 84 billion from an operating loss of KRW 283.3 billion recorded three months earlier.

SHI’s revenue for the third quarter increased by mere 2.1 percent to KRW 2.77 trillion from KRW 2.72 trillion seen in the second quarter of 2016.

The improvement of the company’s financial performance comes on the back of SHI’s self-rescue plan, introduced in June this year. Within the KRW 1.5 trillion reorganization scheme, the shipbuilder decided to make the necessary workforce cuts and required a return of part of the salaries from its executives.

On a year-on-year basis, the shipbuilder’s net income also increased from a KRW 25 billion net loss repored in the third quarter of 2015. The company’s operating profit improved as well, compared to an operating loss of KRW 10 billion in the third quarter of 2015, while its revenue increased by 14 percent compared to KRW 2.43 trillion reported in the third quarter last year.

During the first half of the year, South Korea’s Big Three shipbuilders, namely, Hyundai Heavy Industries (HHI), Daewoo Shipbuilding & Marine Engineering (DSME) and SHI, reportedly cut their joint workforce by some 5,000 workers amid the global oversupply and the lack of demand in the shipbuilding industry. The companies initially planned to cut their combined workforce by up to 6,000 in 2016, however, earlier reports noted that this number could be even larger given the persistent slowdown in the shipbuilding industry.

As part of its intentions to decrease losses and secure liquidity, in August SHI said that it was looking to raise up to KRW 1.1 trillion through a rights offering as it planned to issue 159.1 million of new shares at a price of KRW 6,920 each.

However, following months of diminished shipbuilding orders, Samsung Heavy added a number of orders to its orderbook starting from September. Some of these include an order for two liquefied natural gas (LNG) carriers from Monaco-based GasLog, four oil tankers from Norwegian Viken Shipping, and three Suezmax tankers from Nordic American Tankers Limited.

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