DSME swings to loss in Q1, 2021

 South Korean shipbuilder Daewoo Shipbuilding & Marine Engineering (DSME) reported a net loss for the first quarter of 2021, reversing from last year’s profit amid lower than expected order intake.

DSME said that the net loss for the first quarter was KRW 234 billion ($207 million), against a profit of 242 billion from Q1, 2020.

So far this year, the shipbuilder has won orders for 25 vessels, including 11 VLCCs, 9 VLGCs, 4 containerships and one wind turbine installation vessel booked last week.

Namely, Eneti Inc., formerly Scorpio Bulkers, entered into a binding agreement with DSME for the construction of the WTIV, worth $330 million. The vessel is scheduled for delivery in the third quarter of 2024.

It will be capable of installing up to 20 MW turbines at depths of up to 65 metres of water, and it can be adapted to operate on LNG or ammonia, Eneti said.

DSME expects to receive additional orders for these types of ships as its MoU with Eneti includes an option for one more sister WTIV.

DSME’s total orderbook for this year is worth $2.5 billion, which 33% of this year’s target of $7.7 billion.

Moving forward the company expects its orderbook to pick up amid recovery of the global shipbuilding industry.

Meanwhile, regulatory approvals for the merger between DSME and Korea Shipbuilding & Offshore Engineering (KSOE) are still pending.

KSOE, a shipbuilding holding company of Hyundai Heavy Industries Group, has extended the deadline for the acquisition of shares in compatriot DSME amid regulatory delays.

The mega-merger deadline has been extended from September 2020 to June 2021 after KSOE signed a contract amendment with DSME on January 22, 2021.

At the beginning of this year, HHIH confirmed it expects to complete the acquisition of its smaller rival by the end of the first half of 2021.

However, the European Commission is likely to ask for assurances that the competition on the market would not be distorted in order to bless the merger.

In practice this will probably mean that HHI Group would need to transfer its LNG shipbuilding technology to the medium-sized shipbuilders such as STX Offshore & Shipbuilding and Hanjin Heavy Industries, BusinessKorea reports.

The approval of the merger has been under an in-depth probe in the EU since 2019. The EU regulatory body voiced concerns that the proposed transaction may remove DSME as an important competitive force in the markets of large containerships, oil tankers, LNG, and LPG carriers.

Over the past year, the process has been on and off due to the impact of the corona pandemic hampering the shipbuilders’ ability to meet deadlines on the delivery of the necessary documentation and feedback.