Shipbuilding Industry Riding the 'Super Cycle' Wave

Samsung Heavy Industries Achieves Consecutive Strong Earnings Including 100 Billion KRW Operating Profit for the First Time in 10 Years

Perspective view of HD Hyundai Heavy Industries' ultra-large ammonia carrier. Photo by HD Hyundai Heavy Industries

Domestic shipbuilders, having entered a 'super cycle,' have consecutively reported strong earnings.

According to industry sources on the 26th, HD Hyundai Heavy Industries recorded an operating profit of 376.4 billion KRW in the second quarter of this year, a 428.7% increase compared to the same period last year. This marks five consecutive quarters of profitability. Sales reached 6.6155 trillion KRW, up 21.3% from the same period last year. The company explained that this strong performance was achieved through improved profitability from selective order intake and cost reduction via production stabilization.

HD Hyundai Heavy Industries' subsidiaries, HD Hyundai Heavy Industries Co., Ltd., posted sales of 3.884 trillion KRW, up 26.7% year-on-year, while HD Hyundai Samho and HD Hyundai Mipo recorded sales of 1.8106 trillion KRW and 1.1291 trillion KRW, increasing by 16.9% and 9.3%, respectively. Operating profits for HD Hyundai Heavy Industries Co., Ltd. and HD Hyundai Samho surged by 185.5% and 182.2% during the same period. Notably, HD Hyundai Mipo achieved an operating profit of 17.4 billion KRW, marking a return to profitability after seven quarters.

Samsung Heavy Industries surpassed 100 billion KRW in quarterly operating profit for the first time in 10 years. In the second quarter of this year, sales were 2.532 trillion KRW, and operating profit was 130.7 billion KRW. This is the first time since the fourth quarter of 2014 that quarterly operating profit exceeded 100 billion KRW. Operating profit increased by 121.9% compared to the same period last year.

The increase in sales is largely due to the recognition of revenue from FLNG (Floating Liquefied Natural Gas production facilities), which began production in April and was fully reflected from the second quarter. The company explained that this was due to ▲a decrease in fixed costs from increased sales ▲a reduction in the proportion of ships with construction loss provisions ▲an increase in high-margin offshore segment sales ▲one-time factors such as settlement of change orders (additional work) for offshore projects. The company expects the sales structure by ship type to remain similar to that of the second quarter in the second half of the year.

Hanwha Ocean announced that its consolidated operating loss for the second quarter of this year was 9.6 billion KRW, a decrease in deficit compared to 159 billion KRW in the same period last year. Sales increased by 39.3% year-on-year to 2.5361 trillion KRW. Net loss narrowed to 27.4 billion KRW. Although the company showed strong performance with an operating profit of 53 billion KRW in the first quarter, costs to recover delays in container ship deliveries were reflected in the second quarter. However, there are optimistic forecasts that a turnaround to profitability is likely from the third quarter onward.