The financial result of South Korean shipbuilder Daewoo Shipbuilding & Marine Engineering (DSME) has deteriorated into red ink for the first quarter of 2015.
DSME, the country’s third-biggest shipbuilder, had an operating loss of KRW43.3 billion (USD39.6 million) and a net loss of KRW172.4 billion for first-quarter 2015, reversing an operating profit of KRW471.1 billion and a net profit of KRW32.95 billion in the same period a year ago.
The operating loss refers to the loss incurred by the company’s core business and excludes losses from asset sales.
Related news:DSME considers buying STX France stake from KDB
The operating loss was caused by writing off KRW117.3 billion of accounts receivable and booking KRW45 billion in costs related to ordinary wages. Excluding these factors, operating profit would have come in at KRW119 billion.
DSME also incurred non-operating costs in liquidating subsidiary Pangea LNG, tax fines, and forex-related losses, which were higher than expected.
The first-quarter 2015 loss has lifted DSME’s debt ratio from 326% at end-2014 to 374% as at 31 March while net debt rose from KRW7.5 trillion to KRW8.3 trillion over the period as construction of a drilling rig based on heavy-tail payment began.
Samsung Securities analyst Han Young-soo believes that DSME’s net debt should decline for the full year as drilling equipment deliveries will be concentrated in the second half of 2015.
Han said, “Still, if such deliveries or payments are delayed, the firm could have difficulty living up to the expectations the market has for its financial health.”