Offshore Slump Keeps HHI in the Red

South Korea’s Hyundai Heavy Industries (HHI), the world’s largest shipbuilder, racked up KRW 1.36 trillion (USD 1.13 billion) in net loss, a 38.2 % drop from a year earlier when HHI posted KRW 2.21 trillion loss.

HHI’s sales reached KRW 46.2317 trillion, 12.1 % decline from the previous year while operating loss stood at KRW 1.5401 trillion, down by 52.6 % year-on-year.

“2015 was a tough year for us due to unfavorable market conditions such as prolonged low oil prices and global economic downturn. We suffered losses incurred from the cancellation of semi submersible rigs and increased manhours and delivery delays of offshore projects triggered by design changes,” an HHI officer said.

On a quarter-on-quarter basis, HHI posted sales of KRW 11.1391 trillion during the October-December period while generating an operating loss and net loss of KRW 279.1 billion and 378 billion, respectively.

On the other hand, compared to the 3Q 2015, sales increased 2% thanks to the completion of, and the change order payment from major offshore projects. Operating loss and net loss narrowed by KRW 618.5 billion and KRW 239.6 billion respectively.

HHI said that it remained in deficit due to a one-off maintaining cost for drillships it delivered, loss provision for NASR offshore project, and increased on-site installation costs for Jeddah South and Shuquaiq power plant projects. Construction equipment business also stayed in the red due to lackluster sales caused by global economic downturn and restructuring costs for ailing subsidiaries. Meanwhile refinery sector saw profit increases on the back of the refining margin growth.

Engine & Machinery, Electro Electric System and Green Energy business also reported profits with the help of continuing cost cutting efforts.

“Even though we have failed to turn a profit in 2015, we believe that we laid the groundwork for a turnaround for 2016 with a series of comprehensive restructuring measures ranging from liquidating unprofitable overseas subsidiaries and launching HR efficiency enhancement program to shoring up our finances by selling off stock assets. We are committed to returning to profitability this year with rigorous cost cutting and manufacturing process stabilization,” the officer added.