202 ANNUAL REPORT DOOSAN HEAVY INDUSTRIES & C
Transcript of 202 ANNUAL REPORT DOOSAN HEAVY INDUSTRIES & C
DOOSANHEAVY INDUSTRIES& CONSTRUCTION
ANNUAL REPORT2002
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A N E W G L O B A L P E R S P E C T I V E
It takes a world of perspective to compete and succeed in the global marketplace. At Doosan
Heavy Industries & Construction, our four decades of experience in our namesake fields
have given us the perspective to know what global customers want and the expertise and
technology to deliver quality results. And now as a fully privatized firm, we are adding
a new perspective that will help us do it more competitively and profitability for our
customers and shareholders around the globe.
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2002 2001
Total Assets 3,094,314 3,079,318
Total Stockholders’ Equity 1,660,150 1,487,055
Net Sales 2,771,630 2,468,417
Power Plants 1,082,897 1,035,924
Industrial Plants 954,172 806,392
Castings & Forgings 199,844 179,433
Civil Engineering & Construction 534,717 446,668
Operating Income 150,056 93,136
Net Income 77,338 25,123
Per Share Performance (In Korean Won)
Net Earnings 904 257
Dividends Declared 150 150
• All figures are for the fiscal years ended December 31
In Millions of KoreanWon
F I N A N C I A L H I G H L I G H T S
NET INCOME
NET SALES
In Millions of
KoreanWon
In Millions of
KoreanWon
2,468,417
2,771,630
2001
2002
2001
2002
77,338
25,123
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In many ways, 2002 saw a major turnaround for Doosan Heavy Industries and
Construction Co., Ltd., and we are now well on our way to becoming a global player.
We are currently implementing our goal attainment strategies to make last year’s vision
a reality, as we diversify to become “A comprehensive plant company that offers the best
value based on world-class technology and price competitiveness.”
C E O ’ S M E S S A G E
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As the result of a far-reaching process of restructuring we have pulled out of
marginal businesses, such as chemicals and steel, to concentrate our efforts on
power and desalination. We have also laid the foundations for future businesses.
We successfully supplied main nuclear power systems to the U.S. and completed
three mega-desalination projects, including UAE Al Taweelah and Umm Al Nar, prov-
ing Doosan to be both a reliable manufacturer and an industrial plant builder.
Internally, we have improved our efficiency and profitability significantly thanks to
the launch of several “Change Programs.”
These efforts, combined with the successful completion of the Shin-Kori and Shin-
Wolsong Nuclear Power projects and the Fujairah Desalination project, have
enabled us to increase our sales by 12.3 percent over 2001 to achieve 2 trillion 771.6
billion won, despite the slow-down in global trade and the stagnant domestic
economy in 2002.
Overall, our net income nearly tripled to 77.3 billion won from 25.1 billion in 2001.
Our slogan for 2003 is “Change & Build,” signaling that we will continue to execute
innovative “Change Programs” that focus on winning domestic and overseas pro-
jects, strengthening internal management capability for efficiency innovation,
establishing a responsible management system and creating a performance-ori-
ented environment.
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We shall concentrate all our efforts on developing new markets and intensifying cus-
tomer-oriented marketing activities to ensure a stable flow of orders in the diffi-
cult business environment, particularly in light of the turmoil following the Iraq War
and what appears to be a prolonged slowdown of the plant market.
In short, we aim to capture a total of 4 trillion 59.4 billion won in orders this year.
We shall deliver higher quality products at lower prices by continuing to improve
our internal management structure. We shall also strive to manufacture the
world’s best products by making key investments in the development of new
designs and technology for power and desalination systems.
Doosan Heavy Industries and Construction Co., Ltd. will remain a trustworthy part-
ner offering reliability and value to its customers.
This year, as every year, all members of the Doosan family promise to do their best
to reciprocate your support.
Thank you.
Dae-Joong KimPresident & CEO
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Quality Assurance In step with the firmly held company policy thatcustomers are our teachers and quality is our pride, we see qualityimprovement as the most important management goal alongside thetwin objectives of technological capability and cost competitiveness.We are making continued quality improvement efforts for customersatisfaction, while constantly striving to listen to ‘the voice of ourcustomers.’ We are also obtaining and renewing international standardcertificates in order to meet various customer needs whilesupplementing and evaluating the validity of our quality assurancesystem.As a result of such efforts made in 2002, we recorded 4.6 Sigma with a24% improvement in quality indexes throughout the company. The COPQ(Cost of Poor Quality) has also decreased by 10%, while total customerclaims shrank by 25% compared to last year.
We have concentrated on the realization of these Major Quality Subjects in 2002:1. Development of Comprehensive Quality Information Management System2. Product Liability Prevention & Defense3. Improving High Quality Technology4. Quality Improvement of Suppliers5. Obtaining of New Global Quality Certificates
As an outstanding result of our continued efforts toward qualityimprovement, we won the Korean Grand Quality Award 2000 bestowedannually by the Korean government. As well, our management staffmembers have been recognized for their contribution to domesticindustries thanks to unstinting efforts and achievements in qualitymanagement. Indeed, the president of Doosan himself was given theSilver Tower Industrial Medal at the National Quality ManagementCompetition of 2002, after receiving the Gold Medal for 11 consecutiveyears as leader of the most excellent quality control circle in Korea.
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R&D In the year 2002, all of our researchers poured their best effortsinto developing advanced technologies and differentiated, first-classproducts with a vision to build ‘a competitive research center with aninternational level of technology.’
In particular, the recent development of nuclear control rod drivemechanisms and next-generation USC (Ultra Super Critical) thermalpower plants were a chance for us to upgrade our technicalcompetitiveness.
In addition, we have concentrated all our resources and capabilities indebottlenecking and design innovation, emphasizing the aspects oftechnology development and product performance/quality improvementwith an aim to building environmentally friendly power plants. We haveregistered a total of 60 patents and published 94 technical papers inKorean and foreign journals.
In 2003 we will continue to stride forward by combining all our efforts, aswe seek to truly achieve the vision of building ‘a research center with aninternational level of competitiveness.’
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Shoaiba Phase II Power & Desalination PlantFacility: Oil-fired thermal power plant and multi-stage flash distillation desalination plant Capacity: 530 MWe + 100 MIGD Location: Jeddah, Saudi Arabia Owner: Saline Water Conversion Corporation Our Role: Turnkey contractor Equipment: 10 MIGD evaporators (10), boiler islands (106 MWe x 5) Receipt: December 1993 Completion: March 2003
Taweelah A2 Power & Desalination PlantFacility: Gas-fired combined-cycle power and multi-stage flash distillation desalination plant Capacity: 720 MWe + 50 MIGD Location: Al Taweelah, UAE Owner: Abu Dhabi Water & Electricity Authority/CMS Energy Our Role: Turnkey contractor Equipment: 12.5 MIGD evaporators (4), 600 ton/hr heat recoverysteam generators (3) Receipt: December 1998 Completion: August 2001
Qinshan Nuclear Power Plant Phase IIIFacility: CANDU nuclear power plant Capacity: 700 MWe x 2 Location: Hangzhou Bay, China Owner: Atomic Energy of Canada Limited Our Role: Prime contractor Equipment: Steam generators (8), feeders (8), pressurizers (2) Receipt: January 1997 Completion: June 2001
Dangjin Thermal Power Plant Units 1~4Facility: Coal-fired supercritical thermal power plant Capacity: 500 MWe x 4 Location: Dangjin, Korea Owner: Korea East-West Power Our Role: Prime contractor, construction, equipment and installation Equipment: Boilers, turbines, generators, balance-of-plant Receipt: August 1994Completion: June 2001 Award: “Project of the Year”, Power Engineering, December 2001
When you’re working with the world’s leading companies, youhave to have a global perspective on results. For the past fourdecades, we’ve been delivering results around the globe.We’ve been making potable water in Saudi Arabia, the UAE,and Kuwait. Generating power in the US, China, Taiwan,Thailand, India, Mexico, and Korea. Building high-speedrailways in Taiwan and Korea. Casting and forging crankshaftsfor the world’s largest ships. Supplying cranes to containerterminals from Sri Lanka to Shanghai and Johor toJacksonville. And the results have made a big impression thatwe’d like to share with you.
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NUCLEAR POWER PLANTS_20
THERMAL POWER PLANTS_28
TURBINES & GENERATORS_36
DESALINATION PLANTS_42
CASTINGS & FORGINGS_50
MATERIAL HANDLING EQUIPMENT_54
PLANT CONSTRUCTION_58
CIVIL CONSTRUCTION_62
A GLOBAL PERSPECTIVE ON TOMORROW’S HEAVY INDUSTRIES
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The world has a “love-hate” relationship with nuclear
power. On one hand, it loves the clean, cost-effective
energy it produces. On the other, the devastating 1986
Chernobyl accident in the Ukraine and the ongoing
legal and political wrangling over permanent waste
storage sites have raised safety and environmental
issues that must be addressed. Ultimately, we believe
that these concerns will be satisfied and that demand
for nuclear power will rebound in the absence of a
trulyviable alternative energy source. And when it does,
we intend to be ready to serve the industry as a
world-class total solution provider that rivals the
best in the business.
SHIN-KORI 3 AND 4
Slated for completion in 2010 and 2011,
Shin-Kori 3 and 4 will be the first units built
in Korea using the 1400 MWe nuclear
plant PWR design. This new approach
reflects our construction and operating
experience while integrating the cutting-
edge technology of advanced foreign
nuclear power plants. We will be sup-
plying and installing total nuclear steam
supply systems -including the reactor and
steam generators -while also providing
the turbine generator and balance - of -
plant.
2002 HIGHLIGHTS July 5Ulchin 6 reactor vessel delivery
PROJECT CLIENT COUNTRY
KEDO LWR 1 and 2 KEPCO North Korea
Qinshan Phase III AECL China
Sequoyah #1 TVA USA
Shin-Kori 1 and 2 KHNP Korea
Shin-Wolsong 1 and 2 KHNP Korea
Ulchin 5 and 6 KHNP Korea
Watts Bar #1 RSG TVA USA
Yonggwang 5 and 6 KHNP Korea
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With the rising international clamor for clean
sources of energy, the need for nuclear power plants
is becoming ever present. As we have the distinct
advantage of enjoying a domestic market environment
where nuclear plants are both being actively planned
and built, our performance has significantly improved
in 2002. Indeed, over the last twelve months our orders
have increased roughly 196% from the previous year.
The year 2002 was truly a milestone for Doosan, as it
marked the company’s first export of major nuclear
equipment to the US. In December, Doosan success-
fully delivered on schedule four steam generators to the
Sequoyah Nuclear Plant Unit 1 in Tennessee.
From a financial perspective, our performance for the
year exceeded all set targets. Orders increased 196%
year-on-year to KRW 1,037 billion as we won the
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August 9 Shin-Kori 1 & 2 and Shin-Wolsong 1 & 2 NSSS order
nuclear steam supply system contracts for Shin-
Wolsong 1 and 2 (1,000 MWe x 2) in August, and added
the condenser and ASME III heat exchangers for LWRP
(KEDO Project) 1 and 2 (1,000 MWe x 2) in North Korea.
We were also selected as prime contractor for the
supply of NSSS and T/G of Shin-Kori 3 and 4 (1,400MWe
x 2), which are the first reactors of their kind to be
developed by the Korean nuclear industry.
A solid customer base underscores the excellence of
our technology and quality, as we continue contract work
on the steam generators for Watts Bar Unit 1 in US fol-
lowing our success with a similar project for Sequoyah
Nuclear Plant Unit 1. In August, we received an order
to supply four steam generators for delivery at Watts
Bar Nuclear Plant Unit 1 in 2005. The steam genera-
tor is a core piece of equipment for nuclear power
plants, and generates high-pressure steam using ener-
gy from the reactor.
2002 REVIEW
Steam Generator Shipment for Sequoyah Nuclear Power Plant, US
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Domestic and overseas nuclear markets will
be fairly sluggish in 2003 in step with the worldwide eco-
nomic depression. Thus we expect to win slightly few-
er orders than we were awarded in 2002. At the same
time, however, we intend to intensify our position as
a prominent supplier in the domestic arena.
Life extension projects are being steadily continued in
the nuclear power plant business, and our experi-
ence in supplying steam generators to the US will
make prospects for an advance into overseas markets
even brighter. Customers around the world have tak-
en note of the guaranteed quality and delivery of our
products, and are now requesting for us to make bids
on major international projects. We are promoting
the supply of not only steam generators but also the
reactor closure head, control rod drive mechanism, and
pressurizer for the life extension of nuclear power
plants. We also hope to enter overseas markets with
the spent fuel transportation cask and canister mod-
els. At the same time we are driving hard to participate
in new nuclear power constructions in East Asia,
Europe and North America. The establishment of
strategic alliances with major partners will provide more
opportunities for Doosan.
We supplied major CANDU equipment to Qinshan
Phase III Units 1 and 2 in China, including the steam
generators, feeder and header assembly and major heat
October 18 Sequoyah Plant steam generatorshipment (4 units)
KRW420billion
KRW 260billion
2002
PROJECTED 2003 REVENUES
PROJECTED 2003 ORDERS
2003 PREVIEW
2003
2002
August 14 Watts Bar Unit 1 RSG order
2003
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exchangers. In December 2002, Unit 1 started com-
mercial operation successfully and well before sched-
ule. Unit 2 will commence commercial operation some
time in 2003. Building on two decades of experience
and technology in the nuclear power industry, we can
supply virtually every piece of major equipment for both
PWR and PHWR plants.
Many utilities are considering the cost competitiveness
of their nuclear power plants in comparison to other
energy sources. As an equipment supplier and service
provider, Doosan is making every effort to meet cus-
tomer demand by developing cost-reduced designs and
organizing optimum production processes. New tech-
nology is being continuously developed and adapted to
our product specifications, as we strive to improve
the efficiency of our customers’ nuclear power plants.
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RESEARCH & DEVELOPMENT Accelerated development of next-generation technologies is a key element
in our strategy to become a world-class total solution provider in the nuclear power field. Over the years, we’ve
acquired state-of-the-art engineering and manufacturing expertise through real-world project experience
as well as licensing agreements with industry leaders. But rather than simply operating as an OEM manu-
facturer, we’ve continued to incrementally improve on our technologies and capabilities to enhance the
reliability and safety of the 1,000 MWe Korean standard nuclear plant design. Ulchin 3 and 4, the most recent
units to adopt this design, have compiled a remarkable capacity and availability record since their completions
in 1998 and 1999, respectively. We’re also a key partner in the development of Korea’s next-generation 1,400
MWe reference design—Advanced Power Reactor 1400—slated to enter commercial service by 2010. With
basic design work now complete, we’re optimistic that development will be wrapped up in time to be adopted
for the Shin-Kori 3 and 4 project we won in April 2002.
Steam Generator
Reactor Coolant Pump
Reactor
Pressurizer
REACTOR COOLANT SYSTEM
The Korean standard nuclear plant design is a 1,000 MWe pressurized water reactor system that uses two discrete coolant loops
to supply steam to the turbine generator. The primary coolant loop—the reactor coolant system—consists of one reactor vessel, two
steam generators, one pressurizer, and four reactor coolant pumps.
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PROJECT EQUIPMENT CLIENT COUNTRY
Altamira CCPP HRSG x 4 GE Power Systems Mexico
Dangjin TPP Units 3/4 Turnkey Project Korea East-West Power Korea
Dangjin TPP Units 5/6 Boiler & BOP Korea East-West Power Korea
Gezer & Haifa HRSG x 3 Siemens Israel
Gibraltar & Palos HRSG x 5 Siemens Spain
Hadong TPP Units 5/6 Turnkey Project Korea Southern Power Korea
Ho-Ping TPP Boiler Package x 2 Alstom Power Taiwan
Panglima CCPP HRSG x 2 Siemens Malaysia
Pohang Sintering Plants 3/4 FGCS x 2 POSCO Korea
Ras Laffan LNG Plant HRSG x 4 Enelpower Qatar
Taean TPP Units 5/6 Boiler & De-Sox System Korea West Power Korea
Yongheung TPP Units 1/2 De-SOx Systems Korea South-East Power Korea
The technology and expertise we’ve accumulated
over the years in engineering, manufacturing, and
installing major equipment for thermal power plants
has given us a high degree of engineering and technical
independence in the field. In 1998, we formed a strate-
gic technical alliance with US-based Parsons in the
architecture engineering field that’s enabling us to
holistically synthesize operational, technical, and
efficiency requirements. We’re also collaborating with
UK-based Mott MacDonald on the architecture engi-
neering work for the 660 MWe power portion of the
Fujairah Power & Desalination Plant project in the UAE
as we continue to expand the scope of our project capa-
bilities to bring greater value to our clients.
DANGJIN THERMAL POWER PLANT
In March 2002, we won an order to pro-
vide boilers and installation works for
Dangjin Thermal Power Plant 5 & 6
(500MW x 2 units). This was the first
international contract bidding ever in
the history of the Korean thermal pow-
er plant industry, and we were award-
ed the project after a fierce competi-
tion with major Japanese companies.
February 53 Gezer & Haifa HRSG Units(Contract awarded by Siemens)
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2002 HIGHLIGHTS
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our technology and price competitiveness are now rec-
ognized throughout the world.
We won HRSG orders for a total of 157.3 billion won,
which is nearly as good as last year’s sales figures.
Substituting for the US power market, which has
been stagnant since the 9/11 terrorist attack, we
shifted our focus to Europe and Central Asia so that
our major clients are now Spain and Israel. Particularly,
since we successfully completed the Gezer Project -
the first HRSG project in Israel - and were highly
praised by IEC (Israel Electric Corp.), we have secured
an advantageous position for upcoming coal thermal
plant projects.
With a decreasing number of new projects
and fierce competition in overseas markets, 2002
was a tough year for domestic power plant companies.
Even so, we were successful in achieving 727.5 billion
won in orders, 439.2 billion won in sales and 17.2 bil-
lion won in operating profit.
Amid a stagnant global economy, many power plant
projects were either cancelled or dominated by a few
major companies. Despite the reduction in thermal pow-
er plants and HRSG markets that resulted from this
trend, we were able to win the Dangjin Thermal Power
Plant 5 and 6 project after a heated competition
against MHI, IHI and other Japanese companies that
participated in the international bid. This means that
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March 132 Gibraltar HRSG Units (Contractawarded by Siemens)
March 29Dangjin Units 5 and 6 boiler package order
2002 REVIEW
In billions of Korean won
HADONG THERMAL POWER PLANT DE-NOx/DE-SOx FACILITY
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As for technology development, we were able to com-
pletely assemble the boiler unit, steel structure, pipes
and electric systems in our factory before shipping the
five 1,100-ton steam boilers to the 62.5MIGD Umm Al
Nar Project. The one-module boilers greatly shortened
the usual 18-month process by nine months, while the
boiler efficiency rate exceeded 92% in reliability and
performance tests. With outstanding performance
and quality, our technology competitiveness in the
design and manufacturing of one-module boilers is now
at an international level.
Our goal for this year is 926.1 billion won
in orders, 565 billion won in sales and 11.6 billion won
in operating profit. We will bolster our cost competi-
tiveness and quality to win more domestic coal ther-
mal plant projects, while sharpening our business
edge through local outsourcing and sustaining our
market share in foreign markets. To this end, we aim
to strengthen business alliances with our major clients
like Siemens, GE and Alstom. As for HRSG projects, we
are planning to win more orders from major buyers like
Simens and major companies in China and Iran through
package deals by regions and products.
September 4Grand Opening of Taean ThermalPower Plant 5 & 6 (Contract award-ed by Korea Western Power Co.)
2003 PREVIEW
KRW565billion
KRW926billion
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2002
PROJECTED 2003 REVENUES
PROJECTED 2003 ORDERS
2003
2003
May 20 2 Amorebieta HRSG Units(Contract awarded by GE)
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Based on technology and experience accumulated
over the supply of nearly 20 supercritical pressure
boilers, we are currently developing a mode of next-
generation ‘ultrasupercritical’ boilers to keep pace
with the global trend of building higher tempera-
ture/pressure/capacity power plants. Also, to improve
and differentiate our technology in the area of Circulating
Fluidized Bed (CFB), we are carrying out R&D activi-
ties to come up with more environmentally friendly and
superior CFB combustion technology. This will be
accomplished by developing new and improved com-
ponents for CFB combustion, such as fluidizing noz-
zles and solid recycling systems. All of this is aimed
at establishing a basis that will enable convenient
supply to the increasingly popular low-pollution coal
thermal and combined cycle power plants using low
quality fuels.
Other detailed plans of action include cost reduction
activities, the development of design and core technology,
project risk management and an establishment of
comprehensive management systems in accordance
with our “Change program.”
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RESEARCH & DEVELOPMENT Driven by intense competition in combustion technology and increasingly strict
international environmental regulations, R&D in the thermal power plant industry today is largely focused
on advanced firing systems designed to maximize efficiency and minimize emissions. Our efforts have
focused on optimizing combustion efficiency by combining low-NOx burners with air staging and reburning
to create firing systems that are significantly more cost-effective to build, operate, and maintain. In
addition to new and retrofit coal-fired power plant installations, our research has applications in fossil fuel
combustion equipment design. It will also serve as the basis for future development projects involving
emissions reduction and other clean coal technologies.
Boiler technology for next-generation ultrasupercritical power plants is another area we’re actively invest-
ing in. Backed by technology and expertise acquired through our delivery of over twenty 500 MWe coal-fired
supercritical boilers to date, we’re now working on boiler designs for future plants that will operate at steam
temperatures exceeding 600°C to generate upwards of 1,000 MWe. In short, our firing system
and ultrasupercritical boiler R&D projects are helping position us as an emerging player in the fastest-
growing segment of the power generation industry.
500 MWe KOREAN STANDARD COAL-FIRED POWER PLANTSince our first boiler order for Poryong Thermal Power Plant Units 3 and 4 in 1989, we’ve installed a total of twenty-two 500 MWe supercritica
fired plants across Korea. We’re proud that three of the plants we’ve helped build have won international recognition in recent years. In 1996, Power Engineering Internatio
honored Taean Thermal Power Plant Units 1 and 2 with its “Project of the Year” award. That same year, Electric Power International recognized Poryong Thermal Power
Plant Units 3 and 4 with its “1996 Power Plant Award.” Most recently, Power Engineering named Dangjin Thermal Power Plant the “Project of the Year” in its December
2001 edition. And we expect the accolades to keep coming.
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Our experience in the nuclear power generation
equipment industry dates back to the mid-1980s
when we delivered the steam turbine-generator sets
for Yonggwang Nuclear Power Plant Units 3 and 4
(1,000 MWe x 2). Since then, we’ve made inroads
into virtually every area of turbine and generator
manufacturing, building mutually profitable rela-
tionships with major clients that provide a large
majority of our overall orders as well as access to the
most advanced technology in the industry. And now
we’re applying our extensive experience and exper-
tise in design, manufacturing, service, and mainte-
nance to offer clients around the world total solutions
to their turbine and generator needs.
SHIN-KORI NUCLEAR POWER PLANT
In August 2002, we booked orders for two
1,000 MWe turbine-generator sets for
Units 1 and 2 of Shin-Kori Nuclear Power
Plant. We’re currently developing a 1,400
MWe set that will power Korea’s next-gen-
eration Advanced Power Reactor 1400
reference design slated to enter com-
mercial service by 2010.
March 29
Dangjin Thermal Power PlantUnits 5 & 6 Turbine/Generatorsets order
2002 HIGHLIGHTS
GENERATOR STATOR BARS UNDERGOING ASSEMBLY
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With a momentous awarding of two 500MWe
turbine-generator sets of Dangjin Thermal Power
Plant Units 5 and 6, which was the first international
open bid ever in the Korean power generation mar-
ket, Doosan secured orders of six 1,000MWe Turbine-
generator sets in Nuclear Power Plants.
Orders amount to KRW 400.9 billion, continuing the
growth trend that accelerated with orders from GE
Power Systems and Harbine Turbine Company in
China. Revenues reached to KRW 296.3 billion.
2002 REVIEW
May 1
Light Water Reactor Projects Units 1& 2 Turbine/Generator sets order
PROJECT EQUIPMENT CLIENT COUNTRY
Andong HPP Units 1/2 Excitation System Korea Water Resources Korea
Dangjin TPP Units 5/6 Turbine-Generator Sets Korea East-West Power Co. Korea
GE Sourcing Agreement Turbine-Generator Sets GE Power Systems USA
Laem Chabang CCPP Gas Turbine Generator LCP/Fortum Power Engineering Thailand
Light Water Reactor Units 1/2 Turbine-Generator Sets Korea Electric Power Corp. Korea
Shin-Kori NPP Units 1/2 Turbine-Generator Sets Korea Hydro & Nuclear Power Korea
Shin-Wolsong NPP Units 1/2 Turbine-Generator Sets Korea Hydro & Nuclear Power Korea
Ulchin NPP Units 1/2 Moisture Separator Reheater Korea Hydro & Nuclear Power Korea
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As the downturn in the global power gen-
eration industry continues to redefine the competitive
landscape, we’re confident that we have the critical mass
of technical, manufacturing, and real-world experi-
ence necessary to compete with the world’s best.
We’re now well positioned to win orders at home and
around the globe for new equipment, replacement,
upgrade, and repair projects and will take on a business
opportunity through long-term cooperation with steam
turbine manufactures in China. Our advanced capabilities,
especially in respect to service and repair projects,
were demonstrated in mid-2001 when we serviced
and repaired the generator rotor of Unit 3 at Ulsan
Combined-Cycle Power Plant in a record time of 30 days,
and our selection as preferred bidder of generator,
excitor and IPB replacement of Kori Nuclear Power Plant
Unit 1.
From a financial perspective, we expect orders to lev-
el out in 2003, holding at just under KRW 328 billion as
domestic and overseas orders for steam turbines,
generators, and other equipment begin to recover. At
the same time, we expect revenues of KRW 287 billion
as we continue to optimize our manufacturing process-
es and accelerate our ability to fulfill the order back-
log in a timely way.
2003 PREVIEW
KRW287billion
KRW 328billion
2002
2002
PROJECTED 2003 REVENUES
PROJECTED 2003 ORDERS
August 9
Shin-Wolsong Nuclear Power PlantUnits 1 & 2 Turbine/Generator setsorder
2003
2003
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RESEARCH & DEVELOPMENT As with any industrial facility project, limited space and environmental consid-
erations are becoming increasingly important issues for power plant owners. We currently have two main pro-
jects underway that are focusing on improving plant efficiency and capacity. The first is a 1,000 MWe ultrasupercritical
turbine generator for thermal power plants that promises to achieve higher efficiency and reliability as well as
lower operating costs and emissions than the supercritical 800 MWe design we’re currently developing for
Yongheung Thermal Power Plant Units 1 and 2. The second is a 1,400 MWe turbine-generator set for the next-
generation Korean nuclear power plant reference design—Advanced Power Reactor 1400—that’s expected to be
adopted for the eight nuclear units scheduled for tender over the remainder of the decade.
August 9 Shin-Kori Nuclear Power PlantUnits 1 & 2 Turbine/Generatorsets order
Located between the high-pressure and low-pressure sections of the turbine, the MSR plays a key role in optimizing the efficiency
of the nuclear steam cycle. We design and manufacture compact, high-efficiency MSRs with either two- or four-pass tube bun-
dles for both horizontal and vertical installations.MOISTURE SEPARATOR REHEATERS
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Back in 1999, desalination was a small but growing
part of our business portfolio, supplying just over
8% of overall revenues. In the two years that have
passed, it’s become our top business field, providing
28% of the total in 2002. With a number of projects
either underway or fully completed in Kuwait, Saudi
Arabia and the UAE, we are today the undisputed
world leader in thermal desalination plant con-
struction. And with our unique ability to deliver seam-
lessly integrated turnkey water and power solutions
as well as next-generation hybrid desalination sys-
tems, we expect to be an even more dominant play-
er in the Middle East and markets around the world
in the years to come.
2002 HIGHLIGHTS
IDA PRESIDENTIAL AWARD
In March 2002, we won the IDA Presidential
Award as the first company in the world
to apply the hybrid method of plant tech-
nology, which we applied at the UAE
Fujairah Project.
January 24Completion of Az-Zour South Phase 3
PROJECT CAPACITY CLIENT COUNTRY
Az-Zour Phase 3 28.8 MIGD MEW Kuwait
Fujairah 660 MWe + 100 MIGD UOG UAE
Shoaiba Phase II 530 MWe + 100 MIGD SWCC Saudi Arabia
Taweelah A2 720 MWe + 50 MIGD ADWEA/CMS Energy UAE
Umm Al Nar B 62.5 MIGD ADWEA UAE
Brought to you by Global Reports
REVENUES ORDERS
1000
900
800
700
600
500
400
300
200
100
90
80
In billions of Korean won
200220012000
March 12IDA (International DesalinationAssociation) Presidential Award
In the last two years, we have proven our
uncontested status as a leading company in the
world desalination market by completing the Middle
East’s first IWPP project Al Taweelah A2 in 2001, Az-
Zour South Phase 3 in Kuwait and Umm Al Nar B
Station in the UAE, as well as the Al-Shoaiba Phase
2 project of Saudi Arabia in 2002.
In March of 2002 we applied a groundbreaking new
hybrid method at the 100MIGD Fujairah Water and
Power Plant project, which began in June 2001 and
is currently under construction. In recognition of this
accomplishment and our continued efforts toward
technology development, we won the Presidential
Award from IDA (International Desalination
Association). The hybrid method is a combination
of Reverse Osmosis Process and Multi-Stage Flash
2002 REVIEW
AERIAL VIEW OF TAWEELAH A2 POWER & DESALINATION PLANT
Brought to you by Global Reports
FUJA
IRAH
DES
ALIN
ATIO
N P
LAN
T EV
APOR
ATOR
SHI
PMEN
T
Distillation, and our project was the
world’s first case of applying this
method to a 100MIGD desalination
plant.
As a result, we have achieved 799.7 bil-
lion won in sales (30% increase from
2001) and an operating profit of 79.4 bil-
lion won, which is significantly higher
than the year before.
The global desalination market has been
showing steady growth, and is expected to reach a total
size of 27 trillion won by the year 2010. Such unprece-
dented market expansion is largely due to a serious
water shortage in the Middle East and Africa caused
by industrialization and climate change, as well as
the increasing number of independent water and pow-
er projects underway in Middle Eastern countries.
We have set a goal of achieving a total of 1 trillion 255
billion won of orders in 2003.
2003 PREVIEW
KRW895billion
KRW700billion
2002
2002
PROJECTED 2003 REVENUES
PROJECTED 2003 ORDERS
2003
2003
June 1Completion of Umm Al Nar B Station
Brought to you by Global Reports
In order to achieve this goal, we intend to maximize the
number of orders through the Attractive Value
Proposition plan and world-class marketing. Our main
goal for this year is to ensure price competitiveness over
our competitors by positioning sales teams further into
Middle Eastern regions, establishing strategic ties
with Saudi Arabia in the area of IWPP, establishing our
value proposition and winning combined package con-
tracts.
In terms of business management, we will establish
an EPC basis by creating a comprehensive manage-
ment system and drafting standard procedures.
As for technology development, we plan to seize new
market share through the realization of MED/RO
development. The objective is to gain world-class
leadership in terms of cost dimension through continued
operational improvement. We will concentrate on
heightening the operation of DTC/PSM and work on
developing made-in-Korea package items.
Brought to you by Global Reports
RESEARCH & DEVELOPMENT Over the past 20 years, we’ve emerged as the world’s leading builder of thermal
distillation plants using the multi-stage flash (MSF) distillation process—the most common desalination tech-
nology for large-scale facilities. Today, we’re expanding our thermal technology portfolio with multi-effect (ME)
and vapor compression (VC) distillation technologies for installations with water production requirements of under
5 MIGD and 1 MIGD per evaporator, respectively. We’re also moving into the membrane separation field with reverse
osmosis—the second most common desalination technology in terms of installed capacity—through the Fujairah
project. The world’s largest hybrid facility to date combining multi-stage flash distillation and reverse osmosis sys-
tems, Fujairah promises to deliver greater operational flexibility, optimal water quality, and lower costs, making
it a model for future projects in the region and around the world.
SeawaterBrineSteam
DistillateNon-Condensible Gas
Anti-Scale Chemical
Anti-Foam ChemicalSodium Sulphite
Deaerator
Distillate Pump
Blow-Down Pump
Adjustable Orifice
Flash Chamber
Distillate Tray
Condensate Pump
Brine Heater
LP Steam
To Outfall
After Condenser
To ATM
3rd StageEjector
2nd StageEjector
1st StageEjector
MP Steam
Precondenser
From Stage 10
From Stages 1~4
Brine RecirculationPump
To Outfall
Mak
e-Up
Wat
er
From Seawater
Widely used in large-scale desalination facilities, the MSF distillation process begins with the boiling of seawater in a brine heater. The
brine is then fed through a succession of 15 to 25 “flash chambers” where the air pressure is progressively reduced, causing the brine
to “flash” or instantly boil as it enters each new stage. The water vapor released is then condensed and collected for use.MULTI-STAGE FLASH DISTILLATION
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January 31Forge shop sets a world record ofmonthly production of forged mate-rials
While it generated only 8% of total rev-
enues in 2002, our casting and forging operation
plays a key supporting role virtually in all our busi-
nesses; it is what keeps our steel foundry and forge
shop operating 24 hours a day. In terms of industries
served, turbine runners, rotors, and other power
plant equipment lead with 37% of the total, while
marine engine components like crankshafts and
connecting rods stepped in with 23%. Special steels
for plastic molds, tools and dies came next with 17%,
followed by shipbuilding components like rudder
horn and propeller shaft at 10%. Rounding out the list,
rolls and mill housings for steel mills provided 7%,
and others added the final 6%.
Although orders and revenues for this business have
enjoyed solid growth in recent years, we’ve recorded
operating losses since 1998. We set out to rectify this
problem in 2002 with a focus on qualitative growth that
targeted the most profitable industries. In our home
market, we identified the shipbuilding, marine engine,
tool and die, and steel plant industries as strategic fields.
In our largest international market - China - the short-
list consisted of only three central elements: ship-
building, marine engines, and power generation.
Armed with this perspective, we then determined an
optimal product mix based on our sales and production
capabilities and set out on the road to profitability.
WORLD’S LARGEST CRANKSHAFT
PRODUCTION CAPACITY
Ten years after it first opened its doors
in December 1992, the Doosan Crankshaft
Factory has grown to be the world’s
largest crankshaft factory with a pro-
duction capacity of 150 units per year.
Based on synergy effects achieved through
a decade of applied know-how, advanced
manufacturing technology and system
capabilities, it is now the most compet-
itive factory in the world.
2002 HIGHLIGHTS
Plastic Mold & Tool Steels Runner Crowns, Blades & Bands Rotors & Casings
2002 REVIEW
Roll & Mill Housings
Brought to you by Global Reports
As our select-and-focus strategy took effect, orders
increased nearly 15% to KRW 247.4 billion for the year,
roughly 8% short of our 2002 target. Revenues continued
to outpace projections to reach KRW 206.6 billion as we
made significant progress in reducing our order back-
log. But the most remarkable accomplishment of the
year was our return to profitability as our focus and hard
work helped us rebound from a KRW 3.8 billion gain in
2001 to post a KRW 20.8 billion profit.REVENUES ORDERS
In billions of Korean won
200220012000
240
230
220
210
200
190
180
170
160
150
140
March 21Shaft forging order for BharatHeavy Electricals Ltd. (India)
May 31Casting component order forpress from Canton Drop Forge(USA)
POURING 350 TONS OF CAST STEEL AT FOUNDRY SHOP
PROJECT EQUIPMENT CLIENT COUNTRY
Azumi Dam Crown and Band Toshiba Corp. Japan
General Order Shield Shells Precision Components Corp. USA
Gwangan Bridge Various Components Dongah Construction Korea
Indra Sargar Dam Runner Bharat Heavy Electricals Ltd. India
Ongoing Order Crankshafts and Components HSD Engine Korea
Ongoing Order Rudder Horn Daewoo Shipbuilding Korea
Three Gorges Dam Crown and Band Harbin Electrical Machinery China
Brought to you by Global Reports
With a basic foundation for profitability
now in place, our next challenge is to keep building on
that success. In 2003, we’ll continue to expand our
international marketing efforts as we move ahead
with a business-wide initiative to sharpen our competitive
edge. We’ll be cutting manufacturing costs through
process improvements as well as pursuing incre-
mental cost reductions across the board. We’ll also be
reducing lead-time as we trim inventories and fine-tune
processes to cut reworking time and costs. Taken
together, we expect this strategic focus on profitabil-
ity to boost orders more than 2% to over KRW 252.5 bil-
lion in 2003 as it keeps revenues growing, pushing them
upwards of 13% to KRW 233.2 billion.
TECHNICAL CAPABILITIES It takes state-of-the-art facilities and experience to produce quality castings
and forgings. Our steel foundry is capable of producing 216,000 tons of melting iron and 20,000 tons of steel
castings annually, including individual castings of up to 350 tons. Our forge shop is equipped with a 10,000-
ton forging press and vertical heat-treatment furnace that enable us to produce 100,000 tons of steel forg-
ings annually, including individual forgings of up to 270 tons. Finally, our ISO 9001 quality management sys-
tem and full range of ASME certificates covering nuclear fabrication, boiler piping and vessels, and casting
and forging materials are backed up by a comprehensive start-to-finish inspection and testing regime to ensure
top quality, performance, and client satisfaction.
2003 PREVIEW
KRW 233billion
KRW 253billion
2002
2002
PROJECTED 2003 REVENUES
PROJECTED 2003 ORDERS
June 27Crown and band order forWujiangdu project from TianjinAlstom (China)
September 31Long-term contract for roll withPOSCO (Korea)
2003
2003
Brought to you by Global Reports
SAGT RTGC DELIVERY
In February of 2001 and 2002, we shipped
9 RTGCs (first shipment) and then anoth-
er 9 RTGCs (second shipment) to the
South Asia Gateway Terminals in Sri
Lanka. We’ve now delivered a total of 28
RTGCs to that port, including the last
shipment of 10 RTGCs shipped in February
2003.
2002 HIGHLIGHTS February 7Busan/Gwangyang Port RMQCand RTGC order
As part of our efforts to keep pace with the international
trend of informationalization, we also provide COMIS
(Crane Operation Maintenance Information System)
apparatus to our clients to enable the more effective
maintenance of equipment we have supplied.
Besides our Doosan Changwon Plant, we also have fac-
tories in Haiphong, Vietnam and Lampung, Indonesia
to support the success of our marketing activities.
Engineers and quality management staff from our home
offices are assigned to these factories, ensuring that
all products manufactured in these factories are as
good as the ones manufactured in Changwon Plant,
by applying the most strict production and quality
management procedures.
Our BU (Business Unit) is engaged in the business of
designing, manufacturing and installing all kinds of
material handling equipment for ports, power plants, steel
mills and other industrial plants on a turnkey basis. The
business unit is particularly noted for its manufacture of
products that satisfy various aspects of customer demand
based on its own engineering capability.
Through continued technology development and strict
quality management procedures, we at Doosan are
always trying to supply the high-quality material han-
dling equipment that will best meet the demands of
our customers. As a result, our clients are well sat-
isfied with our equipment and the fact that it records
a lower ‘break-down time’ in commercial operation
compared to those supplied by other companies.
Brought to you by Global Reports
PROJECT EQUIPMENT/FACILITY CLIENT COUNTRY
Busan/ Gwangyang Container Terminal Ship-to-Shore Gantry Cranes Korea Express Co., Ltd. Korea/Rubber-Tyred Gantry Cranes
Busan Port Container Terminal Ship-to-Shore Gantry Cranes Korea Container Terminal Authority KoreaDangjin TPP Coal Handling System Korea East-West Power Co., Ltd. KoreaJakarta Int. Container Terminal Ship-to-Shore Gantry Cranes Huchison Port Holdings JakartaKEDO Polar Crane Korea Electric Power Corp. KoreaKoja Container Terminal Ship-to-Shore Gantry Cranes Huchison Port Holdings Ltd. IndonesiaPOSCO CSU Continuous Ship Unloader POSCO KoreaPort of Tanjung Pelepas Rubber-Tyred Gantry Cranes Port of Tanjung Pelepas MalaysiaSouth Asia Gateway Terminals Rubber-Tyred Gantry Cranes P&O Group Sri Lanka
MaterialHandlingEquipment
September 24Koja Container Terminal RMQCorder
July 15 Dangjin coal handling systemorder
For the past few years, a great number of
projects have been postponed or cancelled due to
stagnant economies at home and abroad. However,
with the recent resumption of projects and new invest-
ment plans, our orders and sales have increased by
a respective 90% and 75% compared to last year.
Particularly in the domestic market, we have won a
number of new projects including the coal handling
system for Dangjin Thermal Power Plant continuous
ship unloader for POSCO and container cranes for
Busan and Gwangyang Ports. Of particular note is the
rail mounted quayside gantry cranes for Korea Express
Co., Ltd., which are capable of handling 22 rows of con-
tainer vessels and are nearly complete.
We are also continuously paring down manufactur-
ing costs through our “Change program” and process
innovation, with which we aim to establish an improved
project management system.
2002 REVIEW
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The domestic economy has been showing
signs of recovery since 2002, and although there may
be a number of unexpected turns it is highly proba-
ble that continuous investment will be made in pow-
er plants and social overhead capital. In line with the
Government’s plan to build Korea into a logistics cen-
ter for Northeast Asia, scheduled investment will be
made in the Busan New Port project and other port
construction projects.
Also, a worldwide trend for shipping cargo in containers
and the supply of large containerships are expected
to bring increased port investment and a demand for
equipment replacement.
Accordingly, our goal in 2003 is to focus all efforts on
increasing our orders by 40% and sales by 20% com-
pared to last year.
SUPER POST-PANAMAX CRANES, BUSAN PORT, KOREA
October 25POSCO continuous ship unloaderorder
December 19Jawaharlal Nehru Port Trust RMQCshipment
2003 PREVIEW
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In 2002, the power plant construction market in
Korea withered by 1.9 trillion won as the Shin-Kori and Shin-
Wolsong Nuclear Power Plant projects, biddings and con-
tracts expected for issuance in 2002 were deferred until 2003.
Furthermore, the privatization of KEPCO and decreasing
electricity prices forced clients to squeeze their budgets
for power plant construction, while the need for price com-
petitiveness and more efficient management systems
impacted all construction companies.
Likewise in the overseas plant construction market, the
construction plans for many projects have been delayed
or cancelled due to a stagnant economy in Asia and the
sluggish growth of plant markets in South and Central
America.
However, under such restrictive and adverse circum-
stances, Doosan managed to win the construction con-
tract for Dangjin Thermal Power Plant Units 5 and 6 - the
only project in the domestic power plant market this year
- thanks to our continuous endeavors to improve com-
petitiveness through PRM (Project Risk Management), PSM
(Purchasing & Supply Management) and PI (Process
Innovation). Our victory was an exemplary case of prov-
ing our unsurpassed experience and price competitive-
ness, and confirmed that we still occupy an unchallenged
position in the Korean industry.
At the same time, our business in 2002 demonstrated sig-
nificant growth by recording a nearly 300% increase with
222.3 billion won in orders. Our sales also increased by
4% to record 158.1 billion won while operating profit
reached 19.7 billion won, which is nearly 97% of the oper-
ating profit recorded in 2001. All of this proved indis-
putably that we are the plant construction company
leader in all areas of system manufacturing, installa-
tion, construction and testing.
September 14Hoping Thermal Power PlantCompletion
DANGJIN THERMAL POWER PLANT 5 & 6
In April 2002, we won an order to build two
coal thermal plants using 500MW super-
critical boilers. The project is slated for
completion by June 2006, and we are
the first domestic company ever to build
a 500MW thermal power plant single-
handedly.
2002 HIGHLIGHTS
2002 REVIEW
Combined-Cycle Power Plants Pumped-Storage Power Plants Transmission Facilities
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Since KEPCO subsidiaries have been plan-
ning to build additional power plants in accordance
with their Power Supply Milestone, a number of bidding
opportunities for new power plant projects are expect-
ed to be issued in the next three to four years. At least
four nuclear and thermal power projects are to take place
in the year 2003, and competition between a number of
plant companies - including firms that have newly
launched into the power plant market -will be greater
than ever.
To lead the power plant construction market and max-
imize profitability, we have established new management
policy, detailed strategies, established bidding com-
petitiveness and cost competitiveness, while at the
September 27Renewed KEPIC (MN,EN,SN)Mark and Obtained DN Certificate
November 7Completion of Wolsong CanisterInstallation
REVENUES ORDERS
In billions of Korean won
200220012000
350
300
250
200
150
100
50
0
-50
-100
-200
2003 PREVIEW
YON
GH
EUN
G T
HER
MAL
PO
WER
PLA
NT
UN
ITS
1 AN
D 2
KRW 216billion
KRW 528billion
2002
2002
PROJECTED 2003 REVENUES
PROJECTED 2003 ORDERS
2003
2003
Brought to you by Global Reports
Econ
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EXPRESSWAY PAVING WORK
FACILITIES Expressways Railways & Subways Bridges & Tunnels
Brought to you by Global Reports
SEOSUWON-OSAN-PYEONGTAEK
EXPRESSWAY
In 2002, we won the SeoSuwon-Osan-
Pyeongtaek Expressway construction
project on an SOC basis. The 39.54km long
expressway is to be completed by
November 2007.
2002 HIGHLIGHTS
Following our licensing in 1980, our first project was
to build the infrastructure that has helped our affili-
ated heavy industries businesses collectively emerge
as Korea’s leading power and industrial plant solution
provider—our Changwon plant. Our civil construction
business has continued to grow over the past 23 years
as we’ve expanded our portfolio beyond transporta-
tion infrastructure to include apartment complexes,
distribution centers, and sports stadiums. Today, we
are an ISO 9001- and ISO 14001-certified general
construction firm capable of project planning, engi-
neering, construction, and supervision duties for pro-
jects of all types and sizes.
FebruaryCompletion of HSD EnginePlant Expansion
KOREA TRAIN EXPRESS HIGH-SPEED RAILWAY PROJECT
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In 2002, backed by government policy/sup-
port and economic recovery, the number of con-
struction projects in the civil construction industry
was nearly 90% of the total projects awarded in 1997
before the economic crisis struck at the end of that year.
However despite the increasing number of projects, win-
ning contracts became increasingly difficult due to
the excessive number of construction companies and
an expansion of the Lowest Price Bid policy. The con-
ditions in the industry were further worsened due to
a declining economy and the Housing Stabilization
Program.
REVENUES ORDERS
900
800
700
600
500
400
300
200
100
90
80
In billions of Korean won
20022001
MarchCompletion of Hanaro Building
JuneCompletion of HwigyeongApartment Complex
2002 REVIEW
PROJECT CLIENT COUNTRY
Agro-Fisheries Distribution Center City of Seongnam Korea
Busan Container Port Expansion Busan New Port Korea
Busan Subway Busan Urban Transit Authority Korea
Central Expressway Korea Highway Corp. Korea
Daegu-Busan Expressway Korea Highway Corp. Korea
East Coast Expressway Expansion Korea Highway Corp. Korea
High-Speed Railway Korea Train Express Korea
High-Speed Railway Viaduct Taiwan High Speed Rail Corp. Taiwan
HSD Engine Plant Expansion HSD Engine Korea
Hwigyeong Apartment Complex Korea National Housing Corp. Korea
Jeju World Cup Stadium City of Seogwipo Korea
Sangam World Cup Stadium City of Seoul Korea
Woomyun Tunnel Woomyun San Development Korea
Brought to you by Global Reports
Although the number of public and civil
engineering construction projects has increased, the
total project amount is expected to decrease by about
1% to 76 trillion 200 billion won compared to last year.
This situation is largely due to the housing stabiliza-
tion policy and unstable economic conditions at home
and abroad. It is also forecast that from early this year,
national construction laws and policy environments
will undergo major changes following the inaugura-
tion of a new federal government.
2003 PREVIEW
July Completion of Incheon DistrictPublic Prosecutor’s Office
NovemberCompletion of Sri Lanka WalaweLeft Bank Irrigation
Even amongst difficult business conditions in 2002, with
excessive competition for contracts and an increasing
number of construction companies, we recorded 405
billion won in orders and 394.7 billion won in sales, show-
ing a 3.2% and 33.8% respective increase compared
to 2001.
Particularly by winning construcition projects for the
SeoSuwon-Osan-Pyeongtaek Expressway following
the two SOC projects of Mt. Woomyun Tunnel and
Daegu-Busan Expressway awarded earlier, we have
secured our position as the market leader in the area
of SOC businesses.
KRW345billion
KRW 450billion
PROJECTED 2003 REVENUES
PROJECTED 2003 ORDERS
2002
2002
2003
2003
Brought to you by Global Reports
As a survival strategy to cope with changes in the con-
struction industry, we proposed a new vision for 2003:
“Transition into a Strategic Plan Oriented for High
Added Values.” We established the four major strate-
gies of: 1) Expansion of strategic plan-oriented busi-
nesses, 2) Winning contracts in the order of prof-
itability through the improvement of public construc-
tion bid competitiveness, 3) Improvement of cost com-
petitiveness through Operational Excellence and 4)
Maximization of company value by KMS establish-
ment and manpower training.
Based on these four strategies for the year 2003, we plan
to achieve 450 billion won in orders, 345 billion won in
sales and 42.9 billion won in operating profit.
We will combine all our efforts to achieve these goals
and maximize shareholder value by employing skilled
and experienced manpower, ensuring market com-
petitiveness, and strengthening our internal capabili-
ties as we benchmark other construction companies in
a similar situation to us.
DecemberCompletion of Jangyu TelephoneOffice
DecemberCompletion of Gyeongbu High-Speed Railway section 2-1
GYEONGBU HIGH-SPEED RAILWAY
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DOOSAN AFFILIATES
A WORD ABOUT DOOSAN... Doosan Heavy Industries & Construction is proud to be a core member of
Korea’s oldest business group. Starting out in August 1896 as a small textiles store in Seoul, Doosan is
today a healthy 107-year-old group of 16 multinational companies involved in the industrial, consumer
goods, and service sectors. We build everything from power plants to apartments. We make high-tech
materials and machines. We brew beer and serve food. We sell fashion and publish books. We build
brands and invest in dreams. We educate and entertain. We consult and incubate. And we do all these
things with professionalism, passion, positivity, and pride. Visit us soon at www.doosan.com to find out
more about who we are and what we do.
Doosan Corporation
Liquor BGFood BGFashion BGTrading BGPublishing BGElectro-Materials BGTechpack BGMagazine BUInformation &Communication BU Doosan Tower BUBiotech BU
Oricom
Doosan Enterprise
Doosan Bears
Neoplux Capital
Korea Book Promotion
Wilus
Novos
Dentsu, Young & Rubicom Korea
HSD Engine
Doosan Mecatec
Doosan TMS
Samhwa Crown & Closure
Semicontech
Doosan Construction & Engineering
Doosan Heavy Industries & Construction
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OVERSEAS BRANCHES
Doosan Heavy Industries America Corp.140 Sylvan Avenue, Suite 3BEnglewood Cliffs, NJ 07632, USAPhone: 1-201-944-4554 Fax: 1-201-944-5022/5053
Doosan Heavy Industries Japan Corp.Room 2410, Mita Kokusai Bldg. 1-4-28Mita, Minato-ku, Tokyo 108-0073, JapanPhone: 81-3-3452-5451~3Fax: 81-3-3452-5624
Doosan Malaysia Sdn. Bhd.(Kuala Lumpur Office)Letter Box No. 86, 22nd FloorUBN Tower, 10, Jalan P. RamleeKuala Lumpur 50250, MalaysiaPhone: 60-3-2026-8890/60-10-513-3708 Fax: 60-3-2026-8891
Inkor Engineering Private Ltd.1508, Maker Chambers-VINariman Point, Mumbai 400 021, IndiaPhone: 91-22-202-6504/6516, 287-0674Fax: 91-22-202-6557
Beijing OfficeRoom 1904, Landmark Bldg.8 North Dongsanhuan RoadChaoyang Dist., Beijing 100004, ChinaPhone: 86-10-6590-0924/0109Fax: 86-10-6590-0991
Dubai OfficeOffice #1002, Al Moosa Tower IISheikh Zayed Road, P.O. Box 11859Dubai, UAEPhone: 971-4-332-2703Fax: 971-4-332-2714
Frankfurt Office4th Floor, Arabella CenterLyoner Strasse 44-4860528 Frankfurt am Main, GermanyPhone: 49-69-69-5004 0Fax: 49-69-69-5004 10
Riyadh OfficeP.O. Box 9656, Riyadh 11423Saudi ArabiaPhone: 966-1-419-1920/1696/0397Fax: 966-1-419-1995
Taipei Office704, No. 51, Keelung Road Sec. 2Taipei, TaiwanPhone: 886-2-2739-2255Fax: 886-2-2739-2266
Schenectady OfficeRoom 33-202A, General Electric Bldg.One River Road, SchenectadyNY 12345, USAPhone: 1-518-385-5218/2629Fax: 1-518-385-4984
Windsor Office2000 Day Hill Road, P.O. Box 500Windsor, CT 06095, USAPhone: 1-860-731-6482/6479Fax: 1-860-731-6478
OVERSEAS SUBSIDIARIES
Ceylon Heavy Industries & Construction Co., Ltd. (CHICO)Oruwala Athurugiriya, Sri LankaPhone: 94-1-561310/561448Fax: 94-74-440030
Han-Viet Heavy Industry & ConstructionCorp. (HANVICO)933 Ton Duc Thang StreetHong Bang Dist., Hai Phong, VietnamPhone: 84-31-712-708~711Fax: 84-31-712-714~5
HF Controls Corporation16650 Westgrove Drive, #500Addison, TX 75001, USAPhone: 1-972-367-4600Fax: 1-972-367-4689
Hanjung Power Ltd. (HPL)P.O. Box 2803, Boroko, NCDPort Moresby, Papua New GuineaPhone: 675-320-0529/321-2932Fax: 675-321-2984
Perak-Hanjoong Simen Sdn. Bhd. (PHS)Batu 14, 33700 Padang Rengas State of Perak, MalaysiaPhone: 605-758-5648/758-4002-202Fax: 605-758-4052
PT. Doosan IndonesiaJl. Raya Soekarno-Hatta Km. 115 Srengsem, PanjangBandar Lampung, IndonesiaPhone: 62-721-32288/32292Fax: 62-721-33216
Shada Industrial Construction Services Co., Ltd.P.O. Box 9656, Riyadh 11423, Saudi ArabiaPhone: 966-1-460-0665~7Fax: 966-1-460-0682
DOMESTIC AFFILIATES
Doosan Mecatec Co., Ltd.64, Sincheon-dong, ChangwonGyeongsangnam-do, KoreaPhone: 82-55-279-5600/5700Fax: 82-55-279-5777
HSD Engine Co., Ltd.69-3, Sincheon-dong, ChangwonGyeongsangnam-do, KoreaPhone: 82-55-260-6001Fax: 82-55-260-6983
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Financial Statements
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I N D E P E N D E N T A U D I T O R S ’ R E P O R T
To the Stockholders and Board of Directors of Doosan Heavy Industries and Construction Co., Ltd.
We have audited the accompanying non-consolidated balance sheets of Doosan Heavy Industries and Construction Co.,Ltd. (the "Company") as of December 31, 2002 and 2001, and the related non-consolidated statements of income,appropriations of retained earnings and cash flows for the years then ended (all expressed in Korean won). Thesefinancial statements are the responsibility of the Company's management. Our responsibility is to express an opinionon these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the Republic of Korea. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includes assessing the accounting principles usedand significant estimates made by management, as well as evaluating the overall financial statement presentation. Webelieve that our audits provide a reasonable basis for our opinion.
In our opinion, such non-consolidated financial statements present fairly, in all material respects, the financial positionof the Company as of December 31, 2002 and 2001, and the results of its operations, the appropriations of its retainedearnings and its cash flows for the years then ended in conformity with financial accounting standards generallyaccepted in the Republic of Korea.
Without qualifying our opinion, we draw attention to the following:
Through 2001, the Company recognized the dividends in the year when they were proposed as a liability at the balancesheet date. Effective January 1, 2002, the Company early adopted the Statement of Korea Accounting Standard(“SKAS”) No. 6, “Events Occurring after the Balance Sheet Date,” which requires recognition when dividends aredeclared which, for the Company, is after the balance sheet date. The Company's financial statements for the yearended December 31, 2001, which are presented herein for comparative purposes, are restated. This change resulted inan increase in the Company’s stockholders’ equity as of December 31, 2002 and 2001 by 12,829 million and 12,857million, respectively, and a decrease in liabilities as December 31, 2002 and 2001 by the same amounts. Suchaccounting change did not affect ordinary income, net income, ordinary income per share and net income per share forthe years ended December 31, 2002 and 2001.
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A major portion of the Company’s sales are made to related parties, including HSD Engine Co., Ltd. The Company hadsales to its related parties, totaling 217 billion and 191 billion, and made purchases from its related parties,totaling 166 billion and 195 billion, during the years ended December 31, 2002 and 2001, respectively. The relatedreceivables were 26 billion and 57 billion, and the related payables were 39 billion and 29 billion as ofDecember 31, 2002 and 2001, respectively.
Effective March 23, 2001, the Company changed its name from Korea Heavy Industries and Construction Co., Ltd. toDoosan Heavy Industries and Construction Co., Ltd.
Accounting principles and auditing standards and their application in practice vary among countries. Theaccompanying non-consolidated financial statements are not intended to present the financial position, results ofoperations and cash flows in accordance with accounting principles and practices generally accepted in countries otherthan Korea. In addition, the procedures and practices utilized in Korea to audit such financial statements may differfrom those generally accepted and applied in other countries. Accordingly, this report and the accompanying financialstatements are for use by those knowledgeable about Korean accounting procedures and auditing standards and theirapplication in practice.
March 5, 2003
Deloitte ToucheTohmatsu
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ASSETSIn thousands of Korean won
ASSETS 2002 2001
CURRENT ASSETSCash and cash equivalents 211,975,507 148,909,087Short-term financial instruments 113,676,934 157,065,642Marketable securities 9,664,775 16,508,534Accounts and notes receivable - net
Trade 724,212,236 627,452,321Other 109,419,117 91,023,040
Accrued income 514,145 5,515,747Short-term loans 1,094,428 938,565Inventories 81,915,171 171,161,159Advance payments - net 31,141,346 67,134,488Prepaid expenses 7,640,346 5,586,099Prepaid taxes and other 1,184,888 1,276,481Total current assets 1,292,438,893 1,292,571,163
NON-CURRENT ASSETSInvestments and other assets
Long-term financial instruments 80,065 6,596,065Investment securities 417,093,569 281,932,142Long-term loans 6,221,787 6,909,713Long-term receivables - net 32,656,833 37,778,365Guarantee deposits 113,614,113 154,414,393Deferred income tax assets 92,087,115 107,103,334Other 7,526,083 3,347,748Total investments and other assets 669,279,565 598,081,760
Property, plant and equipmentCost 1,535,704,951 1,521,091,876Less accumulated depreciation (451,306,809) (389,393,817)Property, plant and equipment - net 1,084,398,142 1,131,698,059
Intangible assets 48,197,477 56,966,532Total non - current assets 1,801,875,184 1,786,746,351
TOTAL ASSETS 3,094,314,077 3,079,317,514
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AS OF DECEMBER 31, 2002 AND 2001
LIABILITIES AND STOCKHOLDERS’ EQUITY 2002 2001
CURRENT LIABILITIESAccounts and notes payable
Trade 281,280,977 189,646,330Other 97,662,290 201,116,903
Short-term borrowings 108,915,990 105,432,522Advance receipts 15,557,854 25,199,822Withholdings 10,023,081 6,608,530Accrued expenses 10,753,181 24,974,780Income taxes payable 11,978,414 —Billings in excess of costs and recognized profit 141,128,403 260,275,427Current portion of debentures - net of discounts — 299,111,563Current portion of conversion bonds - plus accrued interest
and net of discounts 34,534,321 —
Current portion of long-term debt 153,631,459 117,528,364Total current liabilities 865,465,970 1,229,894,241
LONG-TERM LIABILITIESConvertible bonds - plus long-term accrued interest and
net of discounts — 34,233,999
Long-term debt - net of current portion 338,331,249 52,813,792Long-term accounts payable - other 31,338,003 42,312,801Guarantee deposits received 5,363,619 20,123,419Accrued severance indemnities
- net of transfers to the National Pension Fund 96,664,066 103,628,797and deposits for severance indemnities
Reserve for loss on construction contracts 10,088,603 12,785,363Reserve for warranty costs 28,875,012 30,447,692Reserve for penalties for delays 6,175,487 10,642,241Retention for warranty 51,861,738 44,701,157Other — 10,678,789Total long-term liabilities 568,697,777 362,368,050Total liabilities 1,434,163,747 1,592,262,291
STOCKHOLDERS’ EQUITYCommon stock 521,000,000 521,000,000Capital surplus
Asset revaluation reserve 594,261,662 594,261,662Other capital surplus 2,618,558 33,609,107Total capital surplus 596,880,220 627,870,769
Retained earningsLegal reserve 58,383,000 57,083,000Reserve for corporate rationalization 36,407,000 35,407,000Other reserves 467,398,028 458,898,026Unappropriated retained earnings
(Net income of 77,338,111 in 2002 and 25,123,063 in 2001) 77,165,667 23,667,672Total retained earnings 639,353,695 575,055,698
Capital adjustment accountsTreasury stock (151,490,602) (180,659,519)Loss on valuation of investment securities (10,653,331) (2,260,533)Overseas operations translation credit (debit) (13,550,790) 12,328,254Gain (loss) on valuation of forward contracts 78,201,243 (66,279,446)Stock options 409,895 —Total capital adjustment accounts (97,083,585) (236,871,244)
Total stockholders' equity 1,660,150,330 1,487,055,223
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 3,094,314,077 3,079,317,514
In thousands of Korean won
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2002 2001
NET SALES 2,771,630,264 2,468,417,290
COST OF SALES (2,452,849,495) (2,184,765,745)
GROSS PROFIT 318,780,769 283,651,545
SELLING AND ADMINISTRATIVE EXPENSES (168,724,921) (190,515,783)
OPERATING INCOME 150,055,848 93,135,762
OTHER INCOME (EXPENSES)Interest income 20,745,669 29,608,976Interest expense (42,923,880) (61,051,857)Dividend income 1,181,286 —Guarantee expense — (1,297,436)Gain (loss) on foreign currency exchange - net 10,275,185 (1,856,212)Gain (loss) on foreign currency translation - net 14,644,225 (3,255,911)Loss from strikes (28,430,732) (6,438,243)Gain (loss) on valuation of marketable securities - net (5,014,748) 8,289,700Bad debts — (563,299)Reversal of allowance for doubtful accounts 1,591,306 11,693,068Loss on valuation of inventories (94,085) (211,178)Loss on disposal of investment securities — (1,271,109)Impairment losses on investment securities (10,935,935) —Gain (loss) on valuation of investment securities
using the equity method of accounting - net (9,457,743) 7,374,499
Gain (loss) on disposal of property, plant and equipment - net (5,287,520) 8,331,904Impairment losses on development costs (7,268,075) (1,762,023)Gain (loss) on valuation of forward contracts 334,178 (1,768,255)Gain (loss) on forward contract transactions - net 28,480,012 (3,769,394)Other - net (13,562,247) 4,627,189Other expenses - net (45,723,104) (13,319,581)
ORDINARY INCOME 104,332,744 79,816,181
EXTRAORDINARY GAIN (LOSS)Other special losses - net — (37,909,310)
INCOME BEFORE INCOME TAXES 104,332,744 41,906,871
INCOME TAX EXPENSE (26,994,633) (16,783,808)
NET INCOME 77,338,111 25,123,063
ORDINARY INCOME PER SHARE 904 526
NET INCOME PER SHARE 904 257
DILUTED ORDINARY INCOME PER SHARE 879 521DILUTED INCOME PER SHARE 879 263
In thousands of Korean won, except for share data
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FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
In thousands of Korean won
2002 2001
RETAINED EARNINGS BEFORE APPROPRIATIONSBeginning of the year 10,811 11,709 Loss on valuation of investments
using the equity method of accounting (183,255) (1,467,100)Net income for the year 77,338,111 25,123,063End of the year 77,165,667 23,667,672
TRANSFERS FROM VOLUNTARY RESERVESReserve for export losses 5,240,000 6,540,000Reserve for overseas market exploration 1,833,333 2,166,666Reserve for technology development 20,000,000 46,666,666Reserve for overseas investment losses 2,110,000 3,210,000Reserve for overseas business losses 5,350,000 7,816,666Total 34,533,333 66,399,998
APPROPRIATIONSLegal reserve (1,300,000) (1,300,000)Reserve for corporate rationalization (6,400,000) (1,000,000)Reserve for technology development (2,300,000) —Reserve for redemption of borrowings (88,800,000) (74,900,000)Cash dividends (12,828,671) (12,856,859)Total (111,628,671) (90,056,859)
UNAPPROPRIATED RETAINED EARNINGSTO BE CARRIED FORWARD TO THE NEXT YEAR 70,329 10,811
In thousands of Korean won
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In thousands of Korean won
In thousands of Korean won
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES Net income for the year 77,338,111 25,123,063 Addition of expenses not involving cash payments :
Provision for severance indemnities 29,768,375 44,058,666Depreciation 76,394,253 78,444,760 Amortization of intangible assets 14,838,983 17,796,064 Amortization of discounts on debentures issued 949,055 2,419,601Stock compensation cost 409,895 —Loss on foreign currency translation 9,007,994 9,953,066 Loss from strikes 4,993,980 —Loss on valuation of marketable securities 5,032,314 —Bad debts — 563,299 Loss on valuation of inventories 94,085 211,178 Loss on disposal of investment securities — 1,271,109 Loss on impairment of investment securities 10,935,935 —Loss on valuation of investments using the equity method of accounting 9,457,743 —Loss on disposal of property, plant and equipment 5,740,760 1,471,434 Impairment losses on development costs 7,268,075 1,762,023Loss on valuation of forward contracts — 1,768,255 Provision for warranty costs 3,717,386 4,006,377 Provision for penalties for delays 611,869 9,095,172Other 3,121,856 4,118,354 Sub-total 182,342,558 176,939,358
Deduction of revenues not involving cash receipts :Gain on foreign currency translation (23,652,220) (6,697,155)Gain on valuation of marketable securities (17,566) (8,289,700)Reversal of allowance for doubtful accounts (1,591,306) (11,693,068)Gain on valuation of investments using
the equity method of accounting — (7,374,499)Gain on disposal of property, plant and equipment (453,240) (9,803,338)Gain on valuation of forward contracts (334,178) —Decrease in reserve for losses on construction contracts (2,696,760) (16,963,662)Payment of warranty costs (5,290,065) (19,029,844)Payment of penalties for delays (5,078,624) (8,029,616)Other (238,224) (181,775)Sub-total (39,352,183) (88,062,657)
Changes in assets and liabilities related to operating activities :Decrease (increase) in accounts and notes receivable - trade (98,512,242) 399,976,872Decrease (increase) in accounts and notes receivable - other 22,110,546 (15,248,093)Decrease in accrued income 5,001,602 2,665,574 Decrease in inventories 84,708,628 16,347,079Decrease (increase) in advance payments 36,126,516 (1,596,285)Increase in prepaid expenses (2,054,247) (156,510)Decrease in other current assets 168,370 1,213,873 Decrease in deferred income tax assets 15,016,219 13,902,790Increase in accounts and notes payable - trade 91,716,867 4,479,696 Decrease in accounts and notes payable - other (43,877,626) (4,635,783)Decrease in advance receipts (9,641,967) (29,871,633)Increase in withholdings 3,479,544 1,833,759 Increase (decrease) in accrued expenses (11,969,976) 6,080,663 Increase (decrease) in income taxes payable 11,978,414 (11,709,461)Increase (decrease) in billings in excess of costs and recognized profit (119,147,025) 831,744 Increase in retention for warranty 7,702,577 2,802,113 Decrease in guarantee deposits received (772,601) (1,900)Payment of severance indemnities (51,426,024) (81,832,512)Transfer of accrued severance indemnities from affiliates 119,399 309,258Decrease in transfers to National Pension Fund 1,760,029 3,865,630Increase in long-term accrued interest — 2,275,706 Sub-total (57,512,997) 311,532,580
Net cash provided by operating activities 162,815,489 425,532,344
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FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
In thousands of Korean won
2002 2001
CASH FLOWS FROM INVESTING ACTIVITIESCash inflows from financing activities :
Decrease in short-term financial instruments 43,388,708 —Decrease in marketable securities — 99,451Decrease in short-term loans — 678,589Disposal of investment securities 4,187,210 4,835,116Decrease in long-term financial instruments 516,000 —Decrease in long-term receivables 6,509,201 29,347,768Derease in long-term loans 687,926 1,716,960Decrease in deposits for severance indemnities 12,813,491 67,997,468Decrease in guarantee deposits 38,371,274 —Disposal of property, plant and equipment 6,480,487 117,084,815Sub-total 112,954,297 221,760,167
Cash outflows for investing activities :Increase in short-term financial instruments — (122,049,086)Increase in marketable securities (72,391) —Increase in short-term loans (155,862) —Increase in long-term financial instruments — (6,367,500)Acquisition of investment securities (124,001,521) (71,123,126)Increase in guarantee deposits — (65,866,483)Acquisition of other investments (4,178,335) (2,400,960)Acquisition of property, plant and
equipment and intangibles (67,848,718) (76,280,938)Decrease in guarantee deposits received (13,987,199) (15,172,475)Sub-total (210,244,026) (359,260,568)
Net cash used in investing activities (97,289,729) (137,500,401)
CASH FLOWS FROM FINANCING ACTIVITIESCash inflows from financing activities :
Increase in short-term debt 1,262,165 —Issuance of convertible bonds — 31,901,880Increase in long-term debt 1,017,487,635 252,614,027Increase in overseas operations translation credit — 1,845,499Sub-total 1,018,749,800 286,361,406
Cash outflows for financing activities :Payment of dividends (12,856,859) (2,026,377)Decrease in short-term borrowings — (1,506,429)Repayment of current portion of debentures (300,000,000) —Repayment of current portion of long-term debt (117,528,364) (213,964,404)Repayment of long-term debt (564,944,873) (267,041,738)Decrease in overseas operations translation credit (25,879,044) —Acquisition of treasury stock — (120,987,567)Sub-total (1,021,209,140) (605,526,515)
Net cash used in financing activities (2,459,340) (319,165,109)
NET INCREASE (DECREASE) INCASH AND CASH EQUIVALENTS 63,066,420 (31,133,166)
CASH AND CASH EQUIVALENTSAT THE BEGINNING OF THE YEAR 148,909,087 180,042,253
CASH AND CASH EQUIVALENTSAT THE END OF THE YEAR 211,975,507 148,909,087
In thousands of Korean won
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www.doosanheavy.com
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Head Office & Changwon Plant: 555, Gwigok-dong, Changwon, Gyeongsangnam-do 641-792, Korea • Phone: (82) 55-278-6114 • Fax: (82) 55-264-5551~2
Seoul Office: 838, Yeoksam-dong, Gangnam-gu, Seoul 135-982, Korea • Phone: (82) 2-513-6114 • Fax: (82) 2-513-6200
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