Sumitomo Heavy Industries, Ltd. announced on February 14th that it will withdraw from the shipbuilding business. Due to sluggish domestic shipbuilding demand, the business continued to be in the red. The repair vessel business will continue. The docks and personnel will be allocated to the manufacture of floating offshore wind power generation equipment.
The target of the withdrawal is the new construction business of medium-sized tankers handled by its subsidiary, Sumitomo Heavy Industries Marine Engineering. The company has stopped accepting orders from the fiscal year ending December 2024. The shipbuilding business’s sales for the fiscal year ended Dec. 23 were 19.5 billion yen. As a result of the withdrawal, an extraordinary loss of 840 million yen was recorded as an allowance for business restructuring losses.
Toshiro Watanabe, Chief Financial Officer (CFO), explained, “We have been covering the repair ship business, but in recent years it has become difficult and we have decided (to withdraw).” The company will manufacture seven vessels with a backlog of orders as of the end of FY23 and withdraw from the company.
The final delivery is scheduled for January 26. The repair business of the U.S. military’s transport fleet vessels and after-sales services for ships built so far will continue.
Sumitomo’s shipbuilding business traces its roots back to 1879 with the establishment of Uraga Senkyo Corporation. Sumitomo Heavy Industries Marine & Engineering was spun off from Sumitomo Heavy Industries in 2003. The yard has built more than 100 aframaxes.
Docks and personnel will be allocated to the project of floating offshore wind power generation foundations. A portion of the land for shipbuilding will be used by Sumitomo Construction Machinery, a subsidiary, to build its Yokosuka plant. The company will invest approximately 6.5 billion yen to produce large hydraulic excavators and other products.
The consolidated financial results for the fiscal year ended December 23, announced on the 14th, showed net sales of 1,081.5 billion yen, up 6.2% from the same period last year. Sales of construction machinery were strong. Net profit doubled to 32.7 billion yen. Extraordinary losses of 11.5 billion yen were recorded due to changes in the development plan for core systems.
Japan ranked as the world’s largest shipbuilding nation at the start of the century, but has seen its market share massively erode, unable to compete on price with rivals in East Asia with many famous yards merging or exiting the business entirely. The Japanese shipbuilding industry has been facing fierce competition from South Korea and China in recent years. This intense competition has made it increasingly difficult for Japanese shipyards like Sumitomo to remain profitable.