Falling oil prices hit maritime firms’ balance sheets
•Daewoo Shipbuilding declares $1.2b loss in Q3
•Maersk to sack 1,250 workers
Falling oil prices and plummeting fortunes of some economies have been assailing key maritime institutions around the globe, with South Korea’s Daewoo Shipbuilding and Marine Engineering (DSME), the second biggest shipbuilder in the world, announcing $1.2 billion loss for the third quarter ended September 30, 2015.
Already, Maersk Oil, the Danish shipping and oil conglomerate, has concluded plans to sack 1,250 of its workers before the end of this year, as the pangs of falling oil prices hit its balance sheet.
Maritime institutions in Nigeria and different parts of the world are also maintaining low profile due to paucity of funds occasioned by drop in the prices of crude oil in the international market.
DSME had for the second quarter ended June 30, 2015, declared $2.1 billion, and it has started reviewing massive restructuring moves, including the sale of non-core assets.
The financial report coincided with yet another delay in the delivery of drillships, after Transocean Ltd. and DSME agreed to push back the delivery date for two ultra-deepwater drillships, ordered back in 2012 and originally scheduled for delivery in October 2016, by 12 months each.
According to agency reports, DSME also saw a contract for one drillship cancelled in August, after an “unidentified American owner failed to make payments.”
Back in July, the shipbuilder’s largest creditors, led by state-run Korea Development Bank, have started reviewing massive restructuring moves for the company, including the sale of non-core assets.
The company explained that the move “follows an extensive internal review of business activities and continued low oil prices.
These are difficult decisions for any business and my immediate concern is for the welfare of those affected directly.”
Maersk Oil Chief Executive Officer, Jakob Thomasen, while commenting on planned trimming of the company’s workforce, said: “We are operating in a materially changed oil price environment and have taken necessary decisions to reduce activity levels through 2015, and ensure we focus where we can see adequate returns from our most robust projects. This approach has seen us sanction mega-projects like Johan Sverdrup and Culzean during the year. We remain focused on longer term growth opportunities, which play to our technical strengths, and the continued safety of all our people and assets.”
Already, the Danish conglomerate has lowered its expectations for Maersk Line’s business results for the year 2015 amid depressed market.
The previous expectation, as announced in the quarter two report was based on an underlying result contribution from Maersk Line above $2.2billion.
However, this has now been reduced to $1.6billion: “The group’s sensitivity guidance for the last six months of 2015 states that a general decline in the freight rate of $100 FFE will impact Maersk Line’s result negatively by around $ 0.5billion and that a volume reduction of 100,000 FFE will have a negative impact of around $0.1billion,” Maersk said in an announcement.
Nevertheless, Maersk said that all other business units maintain their result guidance for 2015.
“It is regrettable that we have to adjust our expectations for the 2015 result. All of our business units delivered a positive result in the third quarter, despite difficult conditions across our industries,” says Maersk Group Chief Executive Officer, Nils S. Andersen.
He added: “Maersk Line has over the years taken steps to ensure a cost effective and resilient operation, but the current deterioration in the container shipping market is impacting also our business.”
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