S. Korea Shipbuilders Post Positive Earnings This Year

Korean-Yards

South Korea’s top three shipbuilders posted positive earnings in the third quarter again. As not only Hyundai Heavy Industries and Samsung Heavy Industries but also Daewoo Shipbuilding and Marine Engineering (DSME) turned into a surplus this year, all three companies made operating profits for the first time in five years since 2012.

According to shipbuilding industry sources on November 5, Hyundai Heavy Industries, which announced its Q3 results on the 1st, posted 3.8 trillion won (US$3.41 billion) in sales and 93.5 billion won (US$83.71 million) in operating profit. Samsung Heavy Industries is expected to record 1.78 trillion won (US$1.59 billion) in sales and 32.4 billion won (US$29 million) in operating profit in the third quarter. DSME is also expected to post 2.7 trillion won (US$2.42 billion) in sales and 125.4 billion won (US$112.26 million) in operating profit.

However, all three companies saw their operating profits decrease rapidly compared to the previous quarter. This is because they failed to win any orders in the past one and two years and it adversely affected the Q3 results. An official from the shipbuilding industry said, “This year’s third and fourth quarters will be the most difficult time due to a lack of orders.” The number of orders received by the companies is increasing but it takes more than six months to design ships after obtaining orders. When a company recently wins an order, workers can actually build ships at docks next year.

However, an increasing number of orders is a good sign. The cumulative orders won by the three companies from January to September this year stood at 15.93 million CGTs, or 573 vessels, up nearly 63 percent from 9.79 million CGTs, or 438 ships, a year earlier. By country, China ranked first with cumulative orders won of 5.09 million CGTs, or 217 vessels, from January to September this year, followed by South Korea with 5.4 million CGTs, or 133 ships. There is a large gap with Japan with cumulative orders of 1.47 million CGTs, or 76 ships.

In particular, three shipbuilders affiliated from Hyundai Heavy Industries Group won US$6.7 billion (7.49 trillion won) orders to build a total of 110 vessels as of the end of October, achieving 90 percent of its goal. Hyundai Heavy Industries is planning to make every effort to win more orders by the end of this year and accomplish the total amount of orders surpassing US$9 billion to 10 billion (10.06 trillion won to 11.18 trillion won). In addition, the company announced its plan at the Q3 performance conference call to set up its new order goal of more than US$10 billion (11.18 trillion won) next year again. The figure is US$2.5 billion (2.79 trillion won) higher than that of this year. Hyundai Heavy Industries initially set up its new ship order target at US$7.5 billion (8.39 trillion won).

Source: Business Korea

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