Daewoo Shipbuilding & Marine Engineering, Last Year's Sales 4.4 Trillion KRW and Operating Loss 1.7 Trillion KRW

Sharp Decline in Sales and Rising Raw Material Prices
Large-Scale Construction Loss Provisions Set
Securing Stable Workload for Over 3 Years

A worker at Geoje Daewoo Shipbuilding & Marine Engineering Okpo Shipyard starts the morning shift with the rising sun. / Geoje = Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Jeong Dong-hoon] Daewoo Shipbuilding & Marine Engineering (DSME) announced its preliminary results for last year through consolidated financial statements.

On the 8th, DSME revealed that its sales for last year amounted to 4.4866 trillion KRW, operating loss was 1.7547 trillion KRW, and net loss was 1.6998 trillion KRW. Compared to the previous year, sales decreased by approximately 36.2%, and both operating profit and net profit turned to losses, marking an annual deficit for the first time in five years since 2016.

DSME cited the main reasons for the deterioration in last year's performance as a sharp decline in sales due to poor orders over the past two to three years and a rapid increase in material costs, including steel, resulting in the recognition of construction loss provisions amounting to about 1.3 trillion KRW. Additionally, provisions of around 200 billion KRW were recorded related to claims from offshore construction clients and evaluations concerning undelivered drillships.

The company evaluated that "the deterioration in performance is due to provisions reflecting future losses in advance." DSME has secured a stable workload for three years by achieving its order targets last year. As of the end of February this year, it secured orders worth 2.72 billion USD, steadily securing work according to plan. The continuous rise in ship prices is also a positive factor.

To improve profitability, all executives and employees at DSME are continuously engaged in cost reduction activities. In particular, through an order strategy focused on high value-added vessels such as liquefied natural gas (LNG) carriers and LNG-powered ships, the company aims to improve future profitability and build a structure capable of generating stable profits even if rapid environmental changes like those last year occur.

A DSME official stated, "Although the domestic and international environment remains unstable due to Russia's invasion of Ukraine and COVID-19, we will do our best to secure orders and improve productivity."