TOKYO– Kawasaki Heavy Industries, Ltd. (KHI) will withdraw from the offshore structure market and revamp its merchant ship business, reducing its Japanese-based merchant ship business by 30% and relocating it to China.
The company said its offshore service vessel for Norway that is currently in progress will be its final offshore structure build.
In January 2014, KHI signed a shipbuilding contract with Island Offshore Shipholding LP to build a UT 777 mobile offshore drilling unit.Offshore has reached out for confirmation that this is indeed the aforementioned vessel.
“[A]lthough there is still no resolution of the excessive construction capacity in sight, we have judged that the growth in the demand for LNG and LPG and the strengthening of environmental regulations is a good opportunity for KHI,” the company said.
“Based on this recognition of the situation, we considered all options and judged that the most rational and feasible option to increase enterprise value is to shift merchant ship construction from Japan to China at the current time.”
In addition, a project risk management committee will be established to cover all of KHI. It will offer continuing follow-up support for projects and strengthen the checking function for orders before they are accepted, KHI said.
“Through these initiatives, we will actively take on the challenges of the projects while also eliminating the risks as much as possible and will also make an effort to reinforce risk management with a focus on prevention of the occurrence of losses, the early detection of any change in the situation and the prompt action,” it said.
In moving its merchant ship construction business from Japan to China, the company said it will rescale its domestic business accordingly, by around 30%, reducing its number of orders. It plans to accept contracts mainly for gas-related ships such as LNG and LPG carriers, LNG-fuled ships, and others.
In a presentation accompanying the statement, the company said: “Based on the assumption that the severe shipbuilding market will continue for the time being, all possible options including corporate spin-offs, alliances etc. were considered.”
The company said it has experienced a slump in its Ship & Offshore Structure segment over the past few years, recording losses. The market moves prompted it to form a restructuring committee in October 2016 to fundamentally revise the segment’s business structure.
The restructuring was decided at the March 31 board of directors meeting.