Refusing low-price orders, focusing on high-tech vessel types, and avoiding direct competition with Chinese shipbuilders. South Korea’s largest shipbuilding group, HD Korea Shipbuilding & Offshore Engineering, achieved another peak in its first-quarter performance, with net profit soaring 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 a significant profit surge in Q1! Synergistic effects from the merger of two shipyards are notable.
On May 7, HD Korea Shipbuilding & Offshore Engineering released its first-quarter performance report for this year, achieving operating revenue of 8.1409 trillion KRW (approximately $5.537 billion, 37.7 billion RMB), a year-on-year increase of 20.2%; achieving operating profit of 1.356 trillion KRW (approximately $922 million, 6.28 billion RMB), a year-on-year increase of 57.8%; achieving 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%; achieving 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 an increased proportion of sales of high-value eco-friendly vessels, improved production efficiency, and improved earnings in the offshore business.
Among this, the integrated HD Hyundai Heavy Industries, a shipbuilding subsidiary after the merger 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; achieving 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 merger of the two shipyards, by fully leveraging synergistic effects, production efficiency has been greatly improved, playing a leading role in the performance growth of HD Korea Shipbuilding & Offshore Engineering.
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 stable performance.
In the first quarter, HD Korea Shipbuilding & Offshore Engineering’s marine engine subsidiary, HD Hyundai Marine Engine (formerly STX Heavy Industries), achieved operating revenue of 133.5 billion KRW (approximately $90.8 million, 618 million RMB), a year-on-year increase of 60.8%; achieving 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 an increase in engine sales unit prices, an increase in engine deliveries, and growth in parts sales, with both revenue and profit increasing simultaneously.
HD Korea Shipbuilding & Offshore Engineering’s solar energy subsidiary, HD Hyundai Energy Solutions, achieved operating revenue of 159.9 billion KRW (approximately $109 million, 740 million RMB) due to increased domestic and international module sales volume and rising selling prices, a year-on-year increase of 87.6%; achieving operating profit of 29 billion KRW (approximately $19.72 million, 134 million RMB), turning a loss into a profit year-on-year.
By business segment, the shipbuilding business benefited from improved production efficiency and product mix, 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, driven by the expansion of demand for dual-fuel engines due to strengthened global maritime environmental regulations and rising 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, driven by the expansion of revenue recognition due to an increased project progress rate and 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%; achieving 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 focuses on securing low-price vessel orders, and will continue to secure orders for high-value-added vessel types based on technological advantages.
At the first-quarter business performance conference held on the same day, an official from HD Korea Shipbuilding & Offshore Engineering said: “Although China is securing 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 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 an increased proportion of sales of high-value eco-friendly vessels, improved production efficiency, and improved earnings in the offshore business, the sales and profitability of all business segments of HD Korea Shipbuilding & Offshore Engineering have achieved simultaneous growth.
An official 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. An official from the company said: “Considering the 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 secured sufficient order backlogs, newbuilding prices will be able to maintain 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 the losses and restoration costs have not yet been determined, it is expected that it will not be reflected in the second-quarter performance.”
