[THE INVESTOR] Samsung Heavy Industries plans to raise as much as 1 trillion won through a rights offering to cover losses and stay afloat amid a sharp downturn in the global shipbuilding industry.
Shareholders of the world’s third-largest shipyard agreed Friday to raise the upper limit on the number of total outstanding shares, clearing the path for a new stock issue.
“Despite the strenuous efforts to fix the balance sheet on our own, we have come to the conclusion that we can’t help but seek an increase in capital for a stable operation of the business,” CEO Park Dae-young told the shareholders who gathered at a venue near its office in Seongnam, just south of Seoul.
Details of the offering were to be finalized at an ensuing board meeting, but the size will likely be around 1 trillion won, the company said.
The capital increase comes after the shipbuilder based in Geoje, South Gyeongsang Province, reported worse than expected second-quarter results – including an operating loss of 283.7 billion won. The firm has received no new shipbuilding orders this year.
Last month, Korea Development Bank, the firm’s main creditor, said after an external review of its financial conditions that it would face a capital shortage amounting to 1.6 trillion won in the next five years.
Samsung Heavy eyes a foray into more valued-added fields of ship design, operation and maintenance, the chief executive said.
“I have been thinking about whether we really need to build all ships at our Geoje dockyard,” he said during the shareholders’ meeting, in response to a question on future business plans.
“With our expertise and experience in shipbuilding, I think we can push for operating and maintenance projects as well as ship designs, while outsourcing the actual construction of vessels to, for example, China or Indonesia.”
As for cost-cutting efforts, the CEO revealed that all managerial-level staff had taken cuts in their salaries of between 15 percent and 30 percent. The CEO himself received just 9,700 won in salary in July, the minimum required to keep him on the corporate-sponsored health insurance scheme. “We’re persuading lower ranks to accept a 10 percent cut,” he added.
Samsung Heavy is 24.9 percent controlled by Samsung Group. Broken down, Samsung Electronics., the group’s flagship unit, holds the largest stake of 17.62 percent, followed by Life Insurance at 3.38 percent, Electro-mechanics at 2.39 percent; SDI at 0.42 percent; Cheil Worldwide and Construction & Trading identically at 0.13 percent. Samsung Heavy holds 11.25 percent of own shares.
Park said it is not decided whether Samsung Electronics vice chairman and group heir Lee Jae-yong will participate in the rights issue.
By Lee Sun-young/The Korea Herald ()
