Hyundai Heavy Industries, the world's largest shipbuilder, will not meet its full-year profit target after reporting a half-year net loss of 53.1 billion won ($41.68 million), mainly due to a write-off. "Our net profit will
be around 100 billion won or slightly less because we have to clean up losses coming from the cancellation of shares at Hyundai Petrochemical," a spokesman said. The original earnings target was 300 billion won.
However, analysts said the longer term outlook was bright. Hyundai Heavy wrote off 105 billion won, representing its entire 49.87 percent stake in unlisted Hyundai Petrochemical.
Hanvit Bank, main creditor of the petrochemical company, had asked Hyundai Heavy to cancel its shares in Hyundai Petrochemical to help revive the troubled petrochemicals firm. Hyundai Heavy's earnings before interest and tax, or operating profit, fell to 311 billion won in the first half from 488.37 billion won the same period last year. Pre-tax, or current, losses were 65.5 billion won in the first half against a profit of 64.0 billion won a year earlier.
The spokesman said profitability had also worsened because orders for ships delivered in the first half had been received in 1999 when builders had to offer big discounts due to low demand. Despite backlogged orders of $6.6 billion, enough to keep its yard fully occupied for 2.5 years, Hyundai Heavy incurred
a net loss of 81.9 billion won for the first quarter due to losses of 260 billion won at sister firms.
But analysts said the future was bright, as Korean yards would
benefit from tightening environmental rules that would boost demand for double-hulled tankers to replace single-hulled ones and as demand increased for liquefied natural gas carriers. - (Reuters)