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Business

Samsung Heavy pre-empts investors with negative 2018 guidance

Stock dives as South Korean company piles on with more bad news

Samsung Heavy Industries is struggling as Chinese competitors expand their market share.

SEOUL -- Samsung Heavy Industries said Wednesday that it is bracing for a group operating loss of 240 billion won ($219 million) for the year through December 2018, hit by delays in structural reforms and the rise of Chinese rivals. 

The South Korean shipbuilder noted that it disclosed the disappointing outlook along with current year projections to minimize the impact on the market, which had high expectations for improved earnings as the economy recovers. The company also revealed that it is considering issuing some 1.5 trillion won in new shares.

Samsung Heavy forecasts a 35% plunge in sales to 5.1 trillion won for next year. It received more than 7 trillion won in orders in 2017 but will only be able to book less than 3 trillion won of that in 2018.

Although next year's operating loss is expected to be 250 billion won less than the current year forecast, the company will remain in the red, as efforts to cut fixed costs stall. The company was able to shed just 700 jobs out of a planned 1,500 due to delays on a labor-management agreement.

Samsung Heavy stock was trading above 12,000 won Tuesday, but the bad news sent its price tumbling nearly 30% to a one-year low of 8,960 won.

South Korean media have called on the country's shipbuilders to review their strategies amid a growing Chinese presence in the high-end shipbuilding and offshore platform construction markets.

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