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Wednesday, July 08, 2009

STX Pan Expects Turnaround

Wednesday, 08 July 2009

STX Pan Ocean will turn profitable in the second half, the company's top executive said Tuesday. ``The group's shipping unit ― STX Pan Ocean ― will generate profits,'' Kang Duk-soo, the head of the nation's mid-sized conglomerate said. Kang based his optimistic view on the rising Baltic Dry Index, which tracks costs of shipping key commodities. The index rose to 4,000, after plummeting last year when the size of commodity deliveries shrank due to the global downturn.
``The global bulk-shipping industry is showing signs of a turnaround from its years-long black hole,'' an analyst at Shinyoung Securities said. ``This will help the shipping industry.''
Kang said STX plans to inject 500 billion won in fresh cash for its shipbuilding affiliate.
``That investment is intended to optimize our shipbuilding capability,'' Kang said.
The expansion plan, however, raises questions over the group's liquidity soundness. STX's borrowing has rapidly increased amid the downturn.
``Investing with borrowed money will hurt the group's financial soundness,'' Seoul-based Korea Ratings said.
STX Shipbuilding will sell 180 billion won in corporate bonds. In May, it sold 220 billion won worth of corporate bonds.
The total borrowings of STX Shipbuilding as of the first quarter of this year rose by 300 billion won to reach 782.7 billion won.
``This investment carries a high risk over its financial soundness. Investors need to watch out how the situation in its shipyard in Dalian, China and STX Europe will develop,'' said the rating agency.
In a separate move to nurture overseas business projects, the group hired a former vice president of Korea Gas Corp., Lee Byung-ho, as the chief of the group's trading unit.
Lee, an expert in shipbuilding-related industries, will be tasked with sharpening the group's next cash cows, a group spokesman said.

Source: The Korea Times