By Lee Hyo-sik
Hyundai Heavy Industries (HHI) and other local shipbuilders are disposing of almost everything they can to secure much-needed cash to improve their deteriorating bottom lines.
HHI and its smaller affiliates have been unloading their stakes in Hyundai Motor and other companies, while Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering (DSME) have sold real estate holdings and other non-core assets to bolster their cash flow.
On Sept. 25, Hyundai Heavy disposed of its 1.44 percent stake in Hyundai Motor for 500 billion won ($424 million), while its affiliate Hyundai Samho Heavy Industries sold a 1.5 percent stake in POSCO for 226.1 billion won.
In addition, the world’s largest shipbuilder and its affiliates are expected to unload their shares in other listed companies.
HHI has a 16.6 percent stake in Hyundai Merchant Marine, while Hyundai Samho and Hyundai Mipo Shipbuilding each have a 1.03 percent stake in Hyundai Motor and 3.77 percent in KCC.
Samsung and Daewoo have been no exception in the ongoing asset disposal drive.
On Sept. 10, Samsung unloaded properties in Hwaseong, Gyeonggi Province, for 31 billion won, and is planning to sell its plant in Dangjin, South Chungcheong Province, and employee apartment buildings in Geoje, South Gyeongsang Province.
Following its dismal performance, DSME has also been carrying out sweeping restructuring measures to cut expenses and increase operational efficiency. It vowed to dispose of real estate properties and other non-core assets.
The shipbuilder is seeking to unload its headquarters building in downtown Seoul and several other properties in the capital. It is also trying to sell a golf course in Yongin, Gyeonggi Province, and a nearby employee training center.
On the back of these and other overhaul steps, the three shipbuilders are projected to post better earnings results in the third quarter than in the second quarter.
According to financial data provider FN Guide, Monday, Samsung is projected to have earned 29.8 billion won in operating profits during the July to September period, compared with a 1.55 trillion won operating loss in the second quarter.
Hyundai Heavy is set to report a 26.1 billion won operating profit in the third quarter, compared with the second quarter’s 171 billion won operating loss.
FN Guide said DSME likely lost 35 billion won in the third quarter, down sharply from a 3.03 trillion won operating loss in the second quarter.
“Domestic shipbuilders performed better in recent months as they completed reflecting bad debts in their balance sheets,” said Yoo Jae-hoon, an analyst at NH Investment & Securities. “However, things have not improved much for the companies as they continue to struggle to secure new orders amid the global industry slump. Shipbuilders will likely remain in the doldrums through 2016.”