Damen Takes Over DSME’s Mangalia Shipyard

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  • As Overseas Shipholding Cuts Loss in Q3

Dutch Damen Shipyards Group has entered into a share purchase agreement with South Korea’s Daewoo Shipbuilding & Marine Engineering for the acquisition of DSME’s majority share in Daewoo Mangalia Heavy Industries (DMHI) in Romania.

As informed, the sale of the shipyard, which is worth KRW 29 billion (USD 25.9 million), is expected to be completed by the end of this month.

With the acquisition of DSME’s 51% share in the shipyard, Damen said it “takes the next step in strengthening its international shipbuilding and ship repair activities”.

The Daewoo shipyard in Mangalia was established in 1997 as a joint venture between Daewoo and 2 Mai Mangalia Shipyard with Daewoo as majority shareholder.

Located on the Black Sea coast, the yard is spread over an area of 980,000 square meters, has three drydocks with a total length of 982 meters and 1.6 kilometers of berthing space. The docks, with a width of between 48 and 60 meters, are expected to provide Damen with the capacity “to cater for the largest maritime vessels and structures”.

Damen already owns a shipyard in Romanian Galati, on the banks of the River Danube, which is currently the group’s largest shipyard. With the Mangalia shipyard, the company said it will have its two largest shipyards in close proximity to one another.

The Romanian competition authorities have already approved the envisaged transaction, according to Damen. Furthermore, constructive meetings are being held with the Romanian government in relation to future cooperation in Mangalia and the further development of the country’s shipbuilding industry.

In a separate statement, DSME explained that the sale of the insolvent subsidiary will help the company to focus on Okpo Shipyard and improve its financial structure.

“The financial structure of Daewoo Shipbuilding & Marine Engineering will become more solid as the sale of the Mangalia shipyard will eliminate the burden of supporting subsidiaries,” an official from DSME said.

The two parties have been negotiating the sale of Mangalia shipyard since early 2016. The facility has been undergoing capital erosion since 2008 due to the lack of orders amid the global financial crisis, production delays and accumulated losses.

The sale is in line with a self-rescue plan of the financially-troubled shipbuilder which includes asset sales and workforce reduction, among others. Unveiled in March this year, the restructuring plan sets out three key principles – debt restructuring, financial assistance and bearing the burden of losses by all stakeholders.

As of November 10, DSME implemented KRW 2.48 trillion, about 90% of its target total of KRW 2.77 trillion planned under the restructuring scheme.

The improvement in the financial performance can be seen in the company’s results for the third quarter of this year which show that DSME delivered a profit of KRW 45.7 billion, against a net loss of KRW 284 billion reported in the corresponding period a year earlier.

In the meantime, NYSE-listed Overseas Shipholding Group (OSG) managed to narrow its net loss to USD 6.3 million in the third quarter of this year from USD 98.7 million reported in the corresponding period of 2016.

Shipping revenues were USD 93.3 million for the quarter, down 18.3% compared with the third quarter of 2016. The decrease in shipping revenues primarily resulted from weakening market conditions and reduced charter rates.

TCE revenues for the third quarter of 2017 were USD 84.9 million, a decrease of 22.6%, compared with the third quarter of 2016, primarily due to lower average daily rates earned as a result of a continuing excess supply of vessels in the market and the shift from time charter contracts to spot market charters, according to the company.

“The solid performance of our niche market activities was once again the key take away from our third quarter results,” Sam Norton, OSG’s President and CEO, stated.

“Earnings from spot market voyages disappointed, but a strong balance sheet, continued focus on cost control and a belief that upside potential now outweighs downside risk in accepting short-term market challenges leads us to be optimistic about the future,” Norton added.

For the nine months ended September 30, 2017, the company posted a net income of USD 2.3 million, against a net loss of USD 18.1 million posted in the same period of 2016.

OSG’s 24-vessel fleet consists of eight ATBs, two lightering ATBs, three shuttle tankers, nine MR tankers, and two non-Jones Act MR tankers that participate in the US MSP.

World Maritime News