Hyundai Heavy reports red ink quarter

JULY 30, 2014 — Hyundai Heavy Industries Co., the world's largest shipbuilder, yesterday reported its worst ever quarterly net loss — 616.6 billion won (US$601.7 million) in the April-June period, compared with a net profit of 66.8 billion won a year ago, according to a regulatory filing.

The shipbuilder also posted its worst ever quarterly operating loss of 1.1 trillion won, compared with a 289 billion won profit a year ago. Sales fell 2.1 percent to 12.81 trillion won in the period.

"The main reason (for the sluggish second-quarter results) is a reserve for expected loss from large-scale construction projects such as offshore plants, which is about 500 billion won," Yonhap news agency reports the company as saying. "The appreciation of the won against the U.S. dollar was another reason for the poor second-quarter results, causing a fall in sales and a huge operating loss."

With fewer orders for containerships and bulk carriers, Korea's major shipbuilding companies have focused increasingly on the offshore plant area. Unlike the highly standardized production process for commercial ships, however, highly customized offshore projects are extremely vulnerable to delays and cost overuns.
 
Hyundai Heavy says it plans to restructure the company and reshuffle personnel. It also says that it expects to recover part of its provisional losses through renegotiation with clients.