OSLO, August 8, 2008 (AFP) - Aker Yards shipbuilding said on Friday that a 1.3-billion-dollar bid by STX of South Korea underrated the company's potential, but advised shareholders to accept against a background of weak results.

The group reported a temporary slowdown of cruise-liner construction and downgraded its profit margins for the full year.

And it said that the takeover bid, worth 6.8 billion kroner (850 million euros), although undervaluing the group's potential, was worthy of serious consideration in the current climate.

The group reported a second-quarter net loss of 135 million kroner (16.9 million euros), its third quarterly loss running, from a profit of 200 million euros in the second quarter of last year.

But sales surged by 31.4 percent to 7.9 billion kroner, the company said, reporting that 'activity (in shipbuilding) at the yards continues to be high within all business areas.'

But 'a softening economy, weak US dollar, and continuing escalation of prices of raw materials may have a temporary dampening effect on cruise (ship) new building activity going forward.'

The group said that it was downgrading to 'between 2.0 and 3.0 percent' its forecast for operating margins, a ratio of profitability to sales, for the whole year from '3.0-4.0 percent' expected previously.

The board advised shareholders to give serious consideration to accepting the STX bid.

At the end of June STX raised its interest in Aker Yards above a threshold of 40 percent, and was bound to make a full bid under Norwegian law.

The South Korean company has offered 63 kroner per share, valuing the business at about 6.8 billion kroner.

Aker Yards said in a statement: 'The board believes that the offer price values the company below the long-term value potential identified by the board and management, but can be considered as fair in today's market conditions.'

It said: 'Although the board believes there is a potential for increased value for shareholders in the long term, the board recommends shareholders to seriously consider accepting the offer.'

Aker Yards said it made an operating profit of 72 million euros in the second quarter from a loss of 162 million euros 12 months earlier, but the figure was far below the 239 million euros expected in a consensus forecast polled by TDN Finance agency.

The company said that earnings before interest, tax, depreciation and amortisation had been set back by a project underway in the offshore and special ships division, in a reference to delays and shortcomings in deliveries by sub contractors.

And it booked other exceptional charges of 90 million kroner