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Financial problems continue for South Korea’s Doosan Heavy Industries

February 24, 2020

Korea Times:

Doosan Heavy Industries & Construction will liquidate its castings and forgings plant in Romania as shipbuilding, offshore plants and energy industries are suffering a protracted slowdown that has dealt a serious blow to the company’s profitability.

The move is the latest in Doosan Heavy’s efforts to downsize its business and workforce, which comes amid growing uncertainties over the company’s overall portfolio. Doosan Heavy has been striving to come up with an exit strategy from its concentration on coal and nuclear power, but industry officials raised concern that industrial trends are changing faster than the company’s efforts to keep up with them.

According to Doosan Heavy, its subsidiary Doosan IMGB will shut down its plant in Romania and withdraw from the business. Doosan IMGB manufactures castings and forgings for power generation and shipbuilding components. In 2006, Doosan Heavy acquired IMGB from Norway’s Kvaerner for 14.5 billion won, and planned to grow Doosan IMGB as its manufacturing base in Europe. However, the company has logged losses for multiple years since then due to the sluggish market environment.

This is Doosan Heavy’s latest move in downsizing its businesses. On Feb. 18, the company said it would launch a voluntary retirement program for 2,600 employees aged over 45. They account for nearly 40 percent of the company’s payroll.

Last year, Doosan Heavy logged a 104.4 billion won net loss, extending its losing streak to six consecutive years. The company posted a 6.1 percent and a 7.3 percent year-on-year growth in sales and operating profit, respectively, but they were attributable to consolidated profits from its subsidiaries. Experts attribute Doosan Heavy’s collapse to the company’s coal- and nuclear-centric portfolio, which is facing serious challenges in and outside Korea as the global trend in the energy industry is tilting toward green and renewable sources.

According to the company, it won orders worth 2.15 trillion won from January to September last year, down 41.8 percent from the previous year. The plunge was largely due to the drop in power plant orders, which halved to 1.56 trillion won from 3.06 trillion won during the same period. Dealing the heaviest blow was the shrinking overseas coal power business. Overseas coal-fired power plant equipment accounted for 62 percent of the company’s overall orders, but it did not bag a single order in 2018, as major markets are making efforts to reduce coal-fired power plants.

[Nam Hyun-woo]

More: Doosan Heavy downsizes as uncertainty clouds portfolio

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