According to South Korea’s *Chosun Ilbo*, thanks to strong performance in high-value-added ship orders, the combined operating profits of the country’s three major shipbuilders—HD Korea Shipbuilding & Offshore Engineering (KSOE), Hanwha Ocean, and Samsung Heavy Industries—are expected to surpass 2.5 trillion won in the first half of this year, reflecting continued improvement in their financial performance.
Industry sources indicate that the combined operating profits of HD KSOE, Hanwha Ocean, and Samsung Heavy Industries are projected to reach 2.57 trillion won (approximately 13.4 billion yuan) in the first half of 2024, marking a 226% increase compared to the same period last year, when the three companies reported a combined operating profit of 788.5 billion won. In the second quarter alone, their combined operating profits are estimated at 1.3293 trillion won, a surge of 167% year-on-year.
Breaking it down by company:
– HD KSOE, the shipbuilding holding company of HD Hyundai Group, is expected to report an operating profit of around 900 billion won in Q2, up 139% year-on-year. Its first-half operating profit is projected at 1.759 trillion won, a 228% increase.
– Hanwha Ocean, which ended four consecutive years of losses last year and achieved its first annual profit, continues to see rising operating profits. In Q2, its operating profit is estimated at around 250 billion won, successfully turning a profit compared to the same period last year. For the first half, its operating profit is expected to exceed 510 billion won, more than ten times higher than last year.
– Samsung Heavy Industries is projected to post an operating profit of approximately 298.8 billion won in the same period, up 43% year-on-year.
Industry analysts note that the key reason for the improved profitability of the three shipbuilders is the near-completion of low-margin, low-priced ship orders secured during the industry downturn. This has led to a rising proportion of high-value orders, further boosting their profitability, which is expected to strengthen in the second half of the year.
In terms of profit margins:
– HD Hyundai Heavy Industries, a subsidiary of HD KSOE, is expected to see its operating margin rise to around 12% in Q2, up from 11.3% in Q1, as low-margin ships from 2020-2021 now account for only about 2% of its revenue. In contrast, its operating margins in the last three quarters of 2023 were approximately 5%, 5%, and 7%, respectively. Data shows that LNG carriers now make up 69.1% of HD Hyundai Heavy Industries’ Q2 revenue, up from 60.7% in Q1. Meanwhile, HD Hyundai Mipo, another HD KSOE subsidiary, is projected to achieve a 17% operating margin in Q2.
– Hanwha Ocean, which posted an 8.2% operating margin in Q1, is expected to maintain a margin in the 7% range for Q2. In the first half of last year, the company was still in the red, with a full-year operating margin of just 2.2%. Analysts attribute Hanwha Ocean’s improved profitability not only to LNG carrier orders but also to growth in its submarine-related business and maintenance, repair, and overhaul (MRO) services for U.S. Navy vessels.
Currently, concerns are growing in the industry that the sharp year-on-year decline in global new ship orders in the first half of 2024 may signal the end of the shipbuilding “super cycle.” In response, the three major South Korean shipbuilders are adjusting their strategies by increasing their share of high-value-added orders while continuing to focus on the high-end and eco-friendly ship segments to prepare for potential industry shifts. For instance, gas carriers now account for about 70% of HD Hyundai Heavy Industries’ order backlog, while LNG carriers make up over 60% of Hanwha Ocean’s orders. Samsung Heavy Industries, meanwhile, is concentrating on securing orders for floating LNG (FLNG) facilities.
