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HHI sets new order target of $19.5bn for 2016

HHI sets new order target of $19.5bn for 2016
South Korea’s Hyundai Heavy Industries (HHI) has set a 2016 sales target of KRW21.94trn ($18.53bn) and new order target of $19.5bn, as the company struggles with losses and restructuring in a tough shipbuilding and offshore market.

Kwon Oh-gap, president and ceo of HHI, said in his New Year’s address that apart from the seemingly “lofty” sales and new order targets, the group would also need to re-establish a stronger management and continue to secure technological prowess.

“If we remain in the red this year however, the market will no longer wait for us. Productivity gains and cost control must be achieved to safeguard our workplace,” Kwon said.

“Let us admit that our complacency bred our sufferings of today. Critics say that the yard is left mismanaged and we are bungling out job,” he criticised.

In the third quarter of 2015, HHI booked a massive loss of KRW451.4bn, hit by delays in offshore projects and muted sales from its construction equipment business.

“Even though we hoped to return to profitability last year, we were faced with significant losses following the contract cancellation of a semi-submersible rig and massive losses of the offshore business. New orders bagged on relaxed payment terms and cheaper pricing have taken their toll on the shipbuilding, offshore and industrial plant business division,” Kwon pointed out.

“Other divisions, namely engine & machinery, electro-electric systems and construction equipment, have suffered as well: the work has reduced by 20-30%, and several construction equipment shops have even halted operations.”

In order to turn the company around, the sales targets need to be met, and each of the group’s business divisions needs to foster its own competitiveness, according to Kwon.

“In other words, it is important that division representatives have the highest level of authority and accountability as the ceo of their own organisations, with the management support function merged into each of the divisions,” he explained.

It is also equally important for HHI to attain technological prowess, as Kwon believed thaht without technology it would be difficult for the company to survive. “Areas of improvement are not very difficult to find, if we look closely at every detail of the work we do. Small changes, combined with R&D efforts, will yield workdclass technologies,” he said.

Last year, HHI made deep capex cuts to tighten its belt with the aim of returning to profitability this year. In November 2015, the group’s ceos and presidents resolved to return their salaries as part of an intensive cost-cutting program. Executives were also asked to return up to half of their salaries, and department heads 10% of their salaries.