Published : Feb. 2, 2015 - 21:05
Doosan Engine, the world’s second-largest marine engine-maker, may face restructuring as its parent Doosan Group has decided to review its worsening business and financial situation.
“The move is aimed at improving the financial health of the affiliate,’’ a spokesperson from the conglomerate said.
Employees work at the Doosan Engine plant in Changwon, South Gyeongsang Province. (Bloomberg)
Doosan Engineering & Construction is another affiliate facing a checkup from outside management consultants.
Industry watchers forecast that it is highly likely Doosan’s two affiliates will face restructuring following the review.
“Korean companies usually receive outside consulting services before making a decision about restructuring,’’ an industry insider said.
Hit by the prolonged shipbuilding slump, Doosan Engine has been under high pressure to restructure.
The marine engine-maker’s sales halved to 744 billion won ($680 million) in 2013 from 1.4 trillion won in 2012, while its operating profit nosedived to 700 million won in 2013 from 70 billion won in 2012.
Stock analysts expect an even worse business performance for 2014, with the results set to be announced on Wednesday.
On top of the continued business slump, the company faces another blow to its financial health ― the stock sale plans of its major shareholder Daewoo Shipbuilding and Marine Engineering.
DSME confirmed on Monday that it would sell its entire 8.06 percent stake in Doosan Engine to improve its financial health. DSME is the third-largest shareholder after Doosan Heavy Industries & Construction (42.66 percent) and Samsung Heavy Industries (14.12 percent).
Shares of Doosan Engine dropped 3.44 percent to 7,580 won on Monday due to growing concerns of a loosening partnership with its biggest customer after the stock sales. Engine-making orders by DSME made up 40 percent of the ship engine-maker’s total orders in 2013.
“At least, it seems to be inevitable for Doosan Engine to restructure its business portfolio in a direction toward lowering dependency on DSME,’’ an industry watcher said.
“Unless the shipbuilding industry recovers in the near future, Doosan Engine could face financial difficulties,’’ LIG Investment & Securities said in a recent report.
The worsening financial health of smaller affiliates like Doosan Engine and Doosan E&C could weigh on the entire conglomerate as its top two affiliates ― Doosan Heavy Industries & Construction and Doosan Infracore ― have also suffered from a business slump over the past few years, affected by the latest global business downturn.
By Seo Jee-yeon (jyseo@heraldcorp.com)