Concerning the Korea Big Three shipbuilders — Hyundai Heavy Industries, Samsung Heavy Industries, and Daewoo Shipbuilding & Marine Engineering – a shipbuilding consulting draft has been released.
This report establishes that Hyundai Heavy Industries, Samsung Heavy Industries, Daewoo Shipbuilding & Marine Engineering have competitiveness in the shipbuilding, offshore plant, and special vessel sector, respectively.
Just to prepare a basis for making mid- to long-term survival strategy, many financial regulators and shipbuilders asked external organizations for consulting. The goal is to focus on a sector according to the strength where each shipbuilder has competitiveness.
A representative of the financial company explained that they are now collecting the opinions of each company based on the consulting draft for the shipbuilding industry. They will listen to the rebuttals of each company and make the final decision.
Based on the request from the Offshore and Shipbuilding Association to help each company seek ways of survival on its own, the consulting on ship-building was arranged.
The association gave McKinsey the consulting work in June with the aim of stymieing low-priced orders and gluts in the supply of offshore plants. McKinsey conducted a survey for about two months.
At the end of the consultation, quantified results of the weaknesses and strengths of business divisions of each company were prepared.
The report on Hyundai Heavy Industries
- The finding highlighted that Hyundai Heavy Industries has strengths in the general shipbuilding sector. It has Hyundai Mipo Shipbuilding and Hyundai Samho Heavy Industries as its affiliates, which enables Hyundai Heavy Industries to possess a shipbuilding platform for most types of ships. The Hyundai Heavy Industries Group accounted for 71.1% of shipbuilding orders on a consolidated basis in the first quarter of this year.
- Hyundai Heavy Industries has a balanced business portfolio leading to a positive evaluation of the company. Shipbuilding, offshore plants and oil refinery account for 33.1%, 15.4% and 28.4% of Hyundai Heavy Industries’ total sales, respectively in the first quarter of this month. Hyundai Heavy Industries can supplement with earnings in other business divisions although a liquidity crisis takes place in its offshore plant division.
Report on Samsung Heavy Industry
- Samsung Heavy Industries’ offshore plant division is both its strength and its weakness. The company has strengths in LNG tankers, drill ships and LNG-FPSOs among others. Among the three shipbuilders, Samsung Heavy Industries was the first company to make a foray into the offshore plant business and earned trust enough to form a strong global network.
- Samsung Heavy Industries had the proportion of offshore plants relatively too high compared to other companies. Offshore plants accounted for about 60 percent of Samsung Heavy Industries’ remaining orders. This means that unless oil prices rise higher than now, crisis situations such as delivery delays and the cancellation of contracts can continue.
Report on Daewoo Shipbuilding & Marine Engineering
- Daewoo Shipbuilding & Marine Engineering has an advantage in the LNG tanker and special ship sectors. The company’s remaining orders for LNG tankers accounted for about 40% of all orders in the global market. This helped its LNG tankers be picked out as an excellent business sector. Daewoo Shipbuilding & Marine Engineering has a strength in defense hardware and LNG tankers. So when selling its divisions one by one, these divisions will sell first.
Following the above evaluations, creditors will give discriminative treatment in terms of financial support in the future among others based on these reports.Their strategy is to lead shipbuilders to reduce the proportion of the businesses where companies do not have competitiveness by conservatively evaluating a guarantee of advance payment refund and ship financing in such businesses.
The consulting includes a plan to sell off Daewoo Shipbuilding & Marine Engineering. It reviewed how to sell off Daewoo Shipbuilding & Marine Engineering with the sustainability of the Korean shipbuilding industry in mind.
A representative of the creditors said that the main purpose of this consulting is how to sell off Daewoo Shipbuilding & Marine Engineering. They intended to analyze which is more competitive, maintaining or selling off Daewoo Shipbuilding & Marine Engineering.
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Source: BusinessKorea
