"Top 4 Defense Companies' Sales Surge in Q1 This Year [Yang Nakgyu's Defence Club]"

Hanwha Aerospace, KAI, Hyundai Rotem, LIG Nex1
Estimated Q1 Sales of 4.3993 Trillion KRW This Year

‘K-Defense Industry’ continues to thrive this year as well. With the first-quarter sales of major domestic defense companies increasing, it is being evaluated that South Korea is one step closer to becoming one of the ‘Top 4 Global Defense Powers.’

[Image source=Yonhap News]

According to disclosures from the four major defense companies?Hanwha Aerospace, Korea Aerospace Industries (KAI), Hyundai Rotem, and LIG Nex1?combined sales for the first quarter of this year are estimated at 4.3993 trillion KRW. This represents an 18.0% increase compared to the first quarter of last year (3.7269 trillion KRW).

The frontrunner is Hanwha Aerospace. Leveraging products such as the K-9 self-propelled howitzer and the Chunmoo multiple launch rocket system, it achieved sales of 2.1031 trillion KRW in the first quarter alone. This year, there remain outstanding contracts for 284 units of the K-9 with Poland. Additionally, Hanwha Aerospace plans to compete for a 1 trillion KRW contract to supply self-propelled howitzers to Romania.

KAI’s sales also increased. Promoting the Korean supersonic fighter KF-21 and the light attack aircraft FA-50, KAI recorded sales of 784.9 billion KRW in the first quarter. From next year until 2028, KAI plans to sequentially deliver 36 units of the upgraded FA-50 PL (Poland) version tailored to Poland’s requirements. Furthermore, discussions are underway regarding FA-50 exports to Egypt, and preparations are being made to secure contracts for Slovakia’s advanced trainer replacement project and the U.S. Air Force and Navy trainer procurement projects, indicating a high likelihood of additional orders this year.

Hyundai Rotem, led by the K-2 tank, posted first-quarter sales of 747.8 billion KRW. Following the initial contract for 180 units, it is currently pursuing remaining contracts for 820 units. Even with just the first contract, performance is expected to improve until the K-2 tanks are delivered to Poland by 2025. There is also a strong possibility of additional exports of 300 tanks to Romania.

LIG Nex1, a guided weapons specialist, also recorded first-quarter sales of 763.5 billion KRW. As of the end of last year, LIG Nex1’s order backlog stood at 19.6 trillion KRW, maintaining an all-time high level. This year, the order backlog is expected to gradually convert into sales, including the contract for the Cheongung-II system with the United Arab Emirates (UAE).

However, the combined operating profit estimate for the four major defense companies in the first quarter was 282.3 billion KRW, down 18.9% from 348 billion KRW the previous year. In the case of Hanwha Aerospace, operating profit was 131.3 billion KRW, a 42.5% decrease compared to the previous year. This decline is attributed to the absence of high-margin sales from Poland. For additional exports to Poland, a separate intergovernmental financial support agreement is required, making swift support from policy finance authorities a pending challenge.