Defense Industry's Top 4 Companies Enter "2 Trillion Won Operating Profit Era" [Yang Nakgyu's Defence Club]

KAI's Operating Profit Declines, but Hanwha Aerospace Drives Growth
Export Pipelines Essential to Achieve This Year's Defense Export Target

Last year, the operating profit of the four major domestic defense companies (Hanwha Aerospace, Korea Aerospace Industries (KAI), Hyundai Rotem, and LIG Nex1) reached 2 trillion KRW. Although KAI's operating profit decreased, Hanwha Aerospace led the performance by achieving record-high results for two consecutive years.

According to the defense industry on the 11th, Hanwha Aerospace announced that it achieved sales of 11.2462 trillion KRW and an operating profit of 1.7247 trillion KRW the previous day. These figures represent increases of 43% and 190%, respectively, compared to the previous year, marking the highest performance for two consecutive years. This growth was influenced by exports and increased domestic deliveries of major weapon systems such as the K9 self-propelled howitzer, the Chunmoo multiple launch rocket system, and the 120mm self-propelled mortar Bigung. Hanwha Aerospace's export of the K9 self-propelled howitzer to Vietnam is attracting attention. The Korean and Vietnamese governments are negotiating, and if a contract is finalized, it will be the first opportunity for the K9 howitzer to enter a communist country.

Hyundai Rotem achieved an operating profit of 456.6 billion KRW, a 117% increase compared to the previous year. Thanks to the export of the K2 tank, the Defense Solutions division's sales last year reached 2.3652 trillion KRW, surpassing the 50% share of total sales for the first time. Hyundai Rotem's K2 tank is being discussed for export to Romania and a possible second contract with Poland. Negotiations for a second contract with Poland are underway, and new pipelines are being explored in Romania, Peru, and the Middle East.

LIG Nex1 posted an operating profit of 230.9 billion KRW, growing 23.9% year-on-year. After signing a 3.7 trillion KRW export contract last year for the medium-range surface-to-air guided missile Cheongung II with Iraq, LIG Nex1 is expected to expand its export markets.

However, KAI recorded sales of 3.6337 trillion KRW, down 4.9% from the previous year, and an operating profit of 240.7 billion KRW, down 2.8%. While sales in domestic business and airframe structure business increased due to stable progress in key development projects and growth in civilian business, they relatively decreased compared to 2023, which was heavily influenced by the delivery of 12 FA-50 GF aircraft to Poland. KAI presented its order and sales guidance for this year as 8.459 trillion KRW and 4.087 trillion KRW, respectively, expressing its intention to expand business. Helicopter exports, including Surion, which opened the export door to Iraq for the first time last year, are expected.

Combined, the total operating profit of the four defense companies last year was 2.6529 trillion KRW. The growth of 'K-Defense' has been based on excellent cost-effectiveness, fast delivery, and maintenance competitiveness, supported by the accumulated order volume.

Seong Il-jong, chairman of the National Assembly Defense Committee, said at the ruling party-government council held the day before, "K-Defense exports this year will break the record," adding, "The expected annual export scale this year is 24 billion USD, with 7 billion USD from the Poland K2 tank supply project and 1 billion USD from the Saudi Arabia weapons acquisition project."

An industry official said, "The Defense Acquisition Program Administration set this year's order target at 24 billion USD (34.8576 trillion KRW), but to achieve performance growth, it is necessary to establish export pipelines this year."