Refusing low-price orders, focusing on high-tech vessel types, avoiding direct competition with Chinese shipbuilders. HD Korea Shipbuilding & Offshore Engineering, South Korea’s largest shipbuilding group, achieved another peak in its first-quarter performance, with net profit surging nearly 90% year-on-year. This impressive report card seems to provide sufficient confidence for this global shipbuilding giant.
“New HD Hyundai Heavy Industries” sees substantial profit increase in Q1! Synergistic effect of merging two shipyards “into one” is significant.
On May 7, HD Korea Shipbuilding & Offshore Engineering released its first-quarter performance report for this year. It achieved operating revenue of 8.1409 trillion KRW (approximately $5.537 billion, 37.7 billion RMB), a year-on-year increase of 20.2%; achieved operating profit of 1.356 trillion KRW (approximately $922 million, 6.28 billion RMB), a year-on-year increase of 57.8%; achieved net profit of 1.1414 trillion KRW (approximately $776 million, 5.284 billion RMB), a year-on-year increase of 86.6%; the operating profit margin reached 16.66%, an increase of nearly 4 percentage points from 12.69% in the same period last year.
Among this, the shipbuilding business achieved operating revenue of 6.6963 trillion KRW (approximately $4.56 billion, 31 billion RMB), a year-on-year increase of 14.6%; achieved operating profit of 1.1107 trillion KRW (approximately $755 million, 5.142 billion RMB), a year-on-year increase of 42.1%; the operating profit margin was 16.6%, an increase of over 3 percentage points from 13.37% in the same period last year.
HD Korea Shipbuilding & Offshore Engineering stated that in the first quarter of this year, despite a reduction in working days due to seasonal factors, the company’s operating revenue and profitability improved simultaneously due to factors such as the expanded proportion of high-value eco-friendly vessel sales, improved production efficiency, and improved earnings from the offshore business.
Among this, the integrated HD Hyundai Heavy Industries, a shipbuilding subsidiary after merging with HD Hyundai Mipo, achieved operating revenue of 5.9163 trillion KRW (approximately $4 billion, 27.4 billion RMB), an increase of about 18.2% compared to the 5.0063 trillion KRW operating revenue of the two shipyards in the same period last year; achieved operating profit of 905.4 billion KRW (approximately $616 million, 4.2 billion RMB), an increase of 80% compared to the 502.2 billion KRW operating profit of the two shipyards in the same period last year; its operating revenue and operating profit accounted for as high as 72.7% and 66.8% respectively of HD Korea Shipbuilding & Offshore Engineering. After the two shipyards “merged into one,” by fully leveraging synergistic effects, production efficiency was greatly improved, playing a leading role in HD Korea Shipbuilding & Offshore Engineering’s performance growth.
Another shipbuilding subsidiary, HD Hyundai Samho, achieved operating revenue of 2.1245 trillion KRW (approximately $1.445 billion, 9.836 billion RMB) and operating profit of 395.2 billion KRW (approximately $269 million, 1.83 billion RMB), both up 8% year-on-year, providing support for the overall performance growth of HD Korea Shipbuilding & Offshore Engineering with its stable performance.
In the first quarter, HD Hyundai Marine Engine (formerly STX Heavy Industries), the marine engine subsidiary of HD Korea Shipbuilding & Offshore Engineering, achieved operating revenue of 133.5 billion KRW (approximately $90.8 million, 618 million RMB), a year-on-year increase of 60.8%; achieved operating profit of 32.6 billion KRW (approximately $22.17 million, 151 million RMB), a year-on-year increase of 216.5%. This was mainly due to the increase in engine sales unit price, increased engine delivery volume, and growth in parts sales, with both revenue and profit increasing simultaneously.
HD Hyundai Energy Solutions, the solar energy subsidiary of HD Korea Shipbuilding & Offshore Engineering, achieved operating revenue of 159.9 billion KRW (approximately $109 million, 740 million RMB), a year-on-year increase of 87.6%, due to increased module sales volume and higher selling prices both domestically and internationally; achieved operating profit of 29 billion KRW (approximately $19.72 million, 134 million RMB), turning a loss into profit year-on-year.
By business segment, the shipbuilding business benefited from improved production efficiency and product mix optimization, achieving operating revenue of 6.6963 trillion KRW (approximately $4.56 billion, 31 billion RMB) and operating profit of 1.1107 trillion KRW (approximately $755 million, 5.142 billion RMB) in the first quarter, up 14.6% and 42.1% year-on-year respectively.
The engine and machinery business continued its growth trend, affected by the expansion of dual-fuel engine demand driven by strengthened global maritime environmental regulations and increased sales unit prices, achieving operating revenue of 717 billion KRW (approximately $488 million, 3.32 billion RMB), a year-on-year increase of 7.5%; achieving operating profit of 218.1 billion KRW (approximately $148 million, 1 billion RMB), a year-on-year increase of 41.3%; the operating profit margin reached 30.4%, an increase of over 7 percentage points from 23% in the same period last year.
In the offshore equipment business, due to the expansion of revenue recognition brought about by the increased project progress rate, coupled with vigorous cost-saving efforts, it achieved operating revenue of 457.8 billion KRW (approximately $311 million, 2.12 billion RMB), a year-on-year increase of 183.8%; achieved operating profit of 86.6 billion KRW (approximately $58.9 million, 400 million RMB), a year-on-year increase of 1212.1%.
Focusing on high value-added vessel types, HD Korea Shipbuilding & Offshore Engineering states: “No direct competition with China!”
HD Korea Shipbuilding & Offshore Engineering stated that it will adopt a strategy different from China, which undertakes low-price vessel orders, and will continue to undertake orders for high value-added vessel types based on technological advantages.
At the first-quarter business performance conference held on the same day, a representative from HD Korea Shipbuilding & Offshore Engineering said: “Although China is undertaking orders centered on oil tankers and bulk carriers, the company will not directly compete with China in these vessel type areas.”
He emphasized: “The company will focus on high value-added vessel types such as LNG carriers and VLGCs, centering on its own competitively advantageous technologies, and ensure order volume and profitability. Based on having sufficient order backlogs, the company is fully promoting quality improvement.” As the company has adhered to this selective order-taking strategy for many years, its reflection in performance is becoming increasingly evident.
At the same time, under the combined influence of factors such as the expanded proportion of high-value eco-friendly vessel sales, improved production efficiency, and improved earnings from the offshore business, the sales and profitability of all business segments of HD Korea Shipbuilding & Offshore Engineering achieved simultaneous growth.
A representative from HD Korea Shipbuilding & Offshore Engineering said: “Currently, new ship orders centered on large oil tankers continue to increase, and orders for gas carriers and container ships are also continuous. In the second half of this year, as bidding for large-scale US LNG projects officially begins, demand for LNG carriers is expected to expand further. In addition, the strengthening of maritime environmental regulations and the increased demand for replacing old ships will continue to support the new ship ordering environment, and orders for LPG carriers and container ships are also expected to continue growing. Therefore, the company will closely monitor risks, promptly capture market opportunities, and continue to implement a selective order-taking strategy centered on high value-added vessels.”
HD Korea Shipbuilding & Offshore Engineering emphasized that the company will secure order volume in advance this year to cope with the downward cycle. A representative of the company said: “Considering economic slowdown and geopolitical risks, the company has set challenging order-taking targets to lock in order volume in advance. In the first quarter of this year, the company’s new ship order value reached $6.39 billion, equivalent to 37.5% of the full-year target of $17.03 billion.”
Regarding newbuilding prices, HD Korea Shipbuilding & Offshore Engineering predicts that high ship price levels will be maintained in the short term. The company official explained that as major global shipbuilders have all secured sufficient order backlogs, new ship prices will be able to remain at high levels.
However, despite the current good order intake situation, HD Korea Shipbuilding & Offshore Engineering believes that factors such as the prolonged conflict in the Middle East may lead to an economic downturn, resulting in differentiated investment trends among different vessel types.
In addition, regarding the submarine fire accident at the Ulsan shipyard last month, HD Korea Shipbuilding & Offshore Engineering responded: “The cause of the accident is still under investigation. As losses and restoration costs have not yet been determined, it is not expected to be reflected in the second-quarter performance.”
