Daewoo Shipbuilding & Marine Engineering, already reeling from a massive second-quarter deficit after revealing hidden losses from offshore plant projects, could see its full-year result become even worse than previously forecast.
Testifying at a parliamentary inspection of state-owned policy bank Korea Development Bank (KDB), its chairman Hong Ki-taek said the possibility of further losses at DSME could not be ruled out.
KDB is both a major shareholder and creditor of DSME, which had a second-quarter loss of KRW2.4 trillion (USD2.5 billion) after conceding it hid KRW3 trillion in losses from offshore plant orders from its balance sheet.
Hong was replying to a question as to whether additional losses had been found at DSME during the bank’s ongoing due diligence process, which was needed to determine if additional funding should be provided to the shipbuilder.
This process is being carried out by the bank and auditing firm Samjong KPMG.
Hong said, “As soon as the due diligence results are finalised, we will decide how much financial support to provide and how this should be structured. KDB will give its sincere support.”
Since the global financial crisis, payment conditions at DSME have been tail-heavy, and balance sheets have deteriorated since 2012. In particular, the delivery of some vessel types, such as drillships, have been delayed at the customers’ request, creating a working capital burden.
Analysts predict that DSME, South Korea’s third-biggest shipbuilder, could post a KRW270 billion loss for 2015.
It is restructuring its workforce and selling non-core businesses to bolster its cashflow. On 6 October DSME said it had sold its 6.23% stake in compatriot steel supplier Besteel, gaining KRW6.5 billion.