HHI to do the splits

South Korea's Hyundai Heavy Industries (HHI) is following through with part of its improvement plan that will see the company split into four.

Image from HHI.

Under the company’s plan, HHI’s non-shipbuilding businesses will be spun off to improve management efficiency and competitiveness, the shipbuilder said on Tuesday (15 November), according to Reuters.

It will retain core businesses, including shipbuilding, offshore and industrial plant, while three other firms will focus on electro electric systems, construction equipment and robot business, HHI said in a statement.

Existing Hyundai Heavy stakeholders will be get around 0.75 shares of the company and shares in each of the three other entities. The spinoff is part of its restructuring plan submitted to creditors.

In June, HHI announced it would implement a management improvement plan by 2018, worth nearly US$3 trillion (3.5 trillion KRW) is expected to rebuild trust in the market, improve its balance sheet, and sharpen its competitiveness.

According to HHI’s plan, the company will secure $939 million (1.1 trillion KRW) with the spin off and selloff of a part of its business, and the reorganization of affiliated companies. In addition, HHI will implement an employee salary cut and work sharing program that is expected to secure $768 million (900 billion KRW).

The South Korean shipbuilder is also considering a contingency plan that will secure an additional $3 trillion (3.6 trillion KRW), and expects that its liabilities-to-equity ratio will drop from the current 134% to 80% by 2018.

HHI anticipates to cut down its total debt by some $1.7 trillion (2 trillion KRW) to $5.6 trillion (6.6 trillion KRW).

As of June, HHI said it has practiced pre-emptive and intensive reform measures worth $3.3 trillion (3.9 trillion KRW), since the inauguration of the current management in September 2014.

These measures include sale of corporate shares and treasury stocks, issuance of perpetual bonds, re-engineering of HHI’s portfolio to center on core businesses, and a restructure of its business organization by spinning off its industrial machinery business, the company said.

On the back of these efforts, in Q1 2016, HHI swung to a profit of $277.5 million (325.2 billion KRW), putting an end to a nine-quarter losing streak.