Samsung Heavy Industries to recapitalize in KRW 1.5 trillion despite of surplus…To cope with Offshore plant weakness
[ Yang Ji Yun galileo@ ] | 2017-12-07 10:12:14
Why is Samsung Heavy Industries to report unprecedented deficit?
[Digital Times, Yang Ji-yoon] Samsung Heavy Industries` interest paid attention to the background, following a capital increase of KRW 1 trillion in November last year, followed by a further KRW 1.5 trillion in capital increase.
This is due to the company, which has been in the black for five consecutive quarters since 3Q last year, announced that it would issue a rights offering by anticipating a massive deficit at the end of the year.
Samsung Heavy Industries stated that it failed to restructure and raise raw material prices as a cause of deficits. However, some analysts pointed out that it might have been on the offshore plant shipwreck, which had not been revealed before.
Samsung Heavy Industries, on December 6, revealed that it will pursue a capital increase of KRW 1.5 trillion in order to respond to the financial crisis. In the meantime, sales and operating loss are expected to reach KRW 7.9 trillion and KRW 490 billion, respectively.
The consensus (average forecast) of the securities industry has significantly been lower than that of a surplus of KRW 88.4 billion. The prospects for next year are even worse. Samsung Heavy Industries said it expects to incur operating losses of KRW 5.0 trillion and KRW 240 billion next year. This was also out of the market forecast, which was expected to surplus. Total deficits totaled KRW 730 billion this year and next year.
Samsung Heavy Industries said it was aware of the deficit in the process of establishing the business plan next year. △ Fixed cost burden and cost of sales increase due to restructuring and cost reduction targets such as labor efficiency improvement △ Provision for losses expected from some construction projects received in 2017 △ Increase in cost due to increase in the amount of money raised by personnel restructuring and steel price increase .
Some in the industry point out that Samsung Heavy Industries` explanation is unmistakable. It is unusual to volunteer for a large-scale deficit "confession" at a time when it is more than a month before the annual earnings announcement, considering that the implementation rate of restructuring is only 50%. The company said it did not have any signs of abnormalities, such as a record profit of KRW 71.7 billion won in the first three quarters of this year.
Samsung Heavy Industries opened a conference call with securities analysts on the morning to explain earnings adjustments and forecasts.
Some in the securities industry are weighing the possibility that Samsung Heavy Industries could have overhauled offshore plants that have not been cleaned up. Samsung Heavy Industries has 14 remaining offshore plants, of which 7 are drill rigs. If the delivery of the drill ship receives most of the contract price at the delivery of the ship and the delivery is delayed, the shipbuilder can suffer a great loss. Samsung Heavy Industries has been canceling delivery of two of the seven drill-ships, and negotiations are under way to extend the deadline.
"Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering have had the opportunity to shake up the insolvency before and after replacing the CEO," stated an analyst at a securities firm that asked for anonymity. Samsung Heavy Industries said it is likely that the part that Dae-young Park has repeatedly failed to deal with has been revealed late."
Analysts at other securities firms also pointed out, "The Company explained that there was no provision for offshore plant, but there is a great possibility of additional insolvency in the projects that have not yet been delivered." Even if the financing becomes more difficult to finance in the financial sector,” he stated.
Some in the shipbuilding industry have also interpreted that Hyun-Pak, president of Hyundai Motors, has been in trouble beforehand in order to ease the burden on his successor.
A related representative of Samsung Heavy Industries stated, "The number of offshore plant insolvencies was mostly reflected at the time of earnings announcement, and two cases in which arbitration is in progress due to the cancellation of India are expected to reflect losses in the fourth quarter while cost increase is the main factor. "
By Yang Ji Yun galileo@
[ copyright ⓒ The Digitaltimes ]
[Digital Times, Yang Ji-yoon] Samsung Heavy Industries` interest paid attention to the background, following a capital increase of KRW 1 trillion in November last year, followed by a further KRW 1.5 trillion in capital increase.
This is due to the company, which has been in the black for five consecutive quarters since 3Q last year, announced that it would issue a rights offering by anticipating a massive deficit at the end of the year.
Samsung Heavy Industries stated that it failed to restructure and raise raw material prices as a cause of deficits. However, some analysts pointed out that it might have been on the offshore plant shipwreck, which had not been revealed before.
Samsung Heavy Industries, on December 6, revealed that it will pursue a capital increase of KRW 1.5 trillion in order to respond to the financial crisis. In the meantime, sales and operating loss are expected to reach KRW 7.9 trillion and KRW 490 billion, respectively.
The consensus (average forecast) of the securities industry has significantly been lower than that of a surplus of KRW 88.4 billion. The prospects for next year are even worse. Samsung Heavy Industries said it expects to incur operating losses of KRW 5.0 trillion and KRW 240 billion next year. This was also out of the market forecast, which was expected to surplus. Total deficits totaled KRW 730 billion this year and next year.
Samsung Heavy Industries said it was aware of the deficit in the process of establishing the business plan next year. △ Fixed cost burden and cost of sales increase due to restructuring and cost reduction targets such as labor efficiency improvement △ Provision for losses expected from some construction projects received in 2017 △ Increase in cost due to increase in the amount of money raised by personnel restructuring and steel price increase .
Some in the industry point out that Samsung Heavy Industries` explanation is unmistakable. It is unusual to volunteer for a large-scale deficit "confession" at a time when it is more than a month before the annual earnings announcement, considering that the implementation rate of restructuring is only 50%. The company said it did not have any signs of abnormalities, such as a record profit of KRW 71.7 billion won in the first three quarters of this year.
Samsung Heavy Industries opened a conference call with securities analysts on the morning to explain earnings adjustments and forecasts.
Some in the securities industry are weighing the possibility that Samsung Heavy Industries could have overhauled offshore plants that have not been cleaned up. Samsung Heavy Industries has 14 remaining offshore plants, of which 7 are drill rigs. If the delivery of the drill ship receives most of the contract price at the delivery of the ship and the delivery is delayed, the shipbuilder can suffer a great loss. Samsung Heavy Industries has been canceling delivery of two of the seven drill-ships, and negotiations are under way to extend the deadline.
"Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering have had the opportunity to shake up the insolvency before and after replacing the CEO," stated an analyst at a securities firm that asked for anonymity. Samsung Heavy Industries said it is likely that the part that Dae-young Park has repeatedly failed to deal with has been revealed late."
Analysts at other securities firms also pointed out, "The Company explained that there was no provision for offshore plant, but there is a great possibility of additional insolvency in the projects that have not yet been delivered." Even if the financing becomes more difficult to finance in the financial sector,” he stated.
Some in the shipbuilding industry have also interpreted that Hyun-Pak, president of Hyundai Motors, has been in trouble beforehand in order to ease the burden on his successor.
A related representative of Samsung Heavy Industries stated, "The number of offshore plant insolvencies was mostly reflected at the time of earnings announcement, and two cases in which arbitration is in progress due to the cancellation of India are expected to reflect losses in the fourth quarter while cost increase is the main factor. "
By Yang Ji Yun galileo@