S. Korea: Big three shipbuilders rake in surpluses this year

HHI

Despite stagnation that has been plaguing the global shipbuilding industry over the past few years, Korea’s big three shipbuilders — Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering — have managed to rake in surpluses this year.

On the surface, the country’s top three shipbuilders appear to show signs of recovery in the first quarter, as they landed major ship order receipts, looking to overcome the global shipbuilding financial slump.

Last month, Korea’s shipbuilding exports reached $7.1 billion, a spike of 102.9 percent compared to April 2016, according to the Ministry of Trade, Industry and Energy on Monday.

Despite the local shipbuilding industry’s positive first-quarter turnaround this year, some industry experts say the numbers only show a temporary increase in exports, noting increases in ship exports do not necessarily signal the industry is improving.

Regardless of the increase in shipping supplies, according to the World Container Index that tracks 11 global shipping routes, latest figures show the world’s shipping industry hitting all-time lows as freight rates continue to drop.

The WCI reported average freight rates fell to a record low of $701 per 40-foot shipping container in March, recording the lowest rates since 2011.

For the first quarter of this year, Hyundai Heavy Industries reported operating profits of 618.7 billion won ($547 million), a net income of 462.3 billion won and sales totaling roughly 10 trillion won.

Sales recorded a 1.9 percent fall compared to last year’s first quarter, while HHI’s operating profit rose 90.3 percent compared to the same period last year.

Last month, HHI announced the company had received orders for 39 ships worth $2.3 billion so far this year, posting its largest ship orders in three years. According to a company official, Hyundai Heavy had received twice as many shipbuilding inquiries this year compared to the same period last year.

Samsung Heavy Industries posted an operating profit of 27.5 billion won in the first quarter of this year, marking a surplus for the third consecutive quarter. Samsung Heavy also recorded sales of 2.4 trillion won and a net profit of 58.7 billion won.

Compared to the same period last year, while sales decreased by 3.7 percent for SHI, the company’s operating profit and net profit increased by 350.8 percent and 269.2 percent, respectively.

As of the end of March, Samsung Heavy’s total loans amounted to roughly 4.7 trillion won, down approximately 600 billion won compared to the end of last year.

SHI, however, is in the middle of a police investigation following a crane collision accident at its shipyard in Geoje, South Gyeongsang Province, Monday, which left six people dead and 25 injured.

The collision caused a piece from one of the crane structures to collapse onto an oil platform that was under construction for a French energy company. The platform was originally to be delivered next month. According to the company, the extent of the damage to the $500 million platform order and the impact on the delivery date is not yet known.

Daewoo Shipbuilding & Marine Engineering has also been having its fair share of struggles, as the company filed a petition with the Changwon District Court on April 20 seeking approval for its 2.9 trillion won bailout plan.

However, DSME still managed to post a first-quarter operating profit of nearly 300 billion won and turned a surplus for the first time in four years.

Source: The Korea Herald

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