South Korea’s Big Three shipbuilders are expected to post combined operating profit approaching 2 trillion won for the second quarter of this year. The figure represents an increase of more than 80% year-on-year, driven by a higher proportion of high-value vessel construction and improved productivity.
According to financial data provider FnGuide on the 14th, the combined Q2 operating profit forecast for HD Hyundai Heavy Industries (329180), Hanwha Ocean (042660), and Samsung Heavy Industries (010140) stands at 1.89 trillion won (approximately $1.3 billion). This marks an 80.6% surge from the 1.05 trillion won (approximately $701.1 million) recorded in the same period last year. The growth trajectory is also clear on an annual basis. The three shipbuilders’ combined annual operating profit forecast for this year is 7.19 trillion won (approximately $4.8 billion), a projected 76.7% increase from last year’s annual figure of 4.07 trillion won (approximately $2.7 billion).
Among the individual companies, HD Hyundai Heavy Industries stands out with the most pronounced earnings growth. The company’s Q2 revenue is projected at 6.31 trillion won (approximately $4.2 billion), up 52.2% year-on-year, while operating profit is expected to soar 111.5% to 997.3 billion won (approximately $667.2 million). The shipbuilding division is expected to continue driving performance by maintaining a high operating margin of around 15%, following Q1, while the offshore division is also anticipated to sustain stable profitability with an operating margin of approximately 8%. Key drivers for the earnings improvement include expanded construction of high-value commercial vessels, enhanced productivity, and an increase in operating days. However, a potential variable is whether costs related to the fire that broke out in April on the submarine Hong Beom-do, which was under construction, will be reflected. The company previously stated during its Q1 earnings conference call that related provisions would not be booked in the second quarter.
Hanwha Ocean is forecast to post Q2 revenue of 3.48 trillion won (approximately $2.3 billion) and operating profit of 497.1 billion won (approximately $332.6 million). These figures represent increases of 5.63% and 33.7%, respectively, compared to the same period last year. SK Securities estimated Hanwha Ocean’s Q2 consolidated revenue at 3.47 trillion won (approximately $2.3 billion) and operating profit at 516.7 billion won (approximately $345.7 million), aligning with market expectations. Improved profitability in the commercial ship segment and a narrowed deficit in the offshore segment are analyzed as the main drivers. In particular, revenue from a floating production storage and offloading (FPSO) project worth approximately 1.5 trillion won (approximately $1.0 billion) was reflected in Q2, contributing to the margin improvement. SK Securities expects Hanwha Ocean’s annual revenue mix by order year to be less than 10% from 2022, 15% from 2023, 42% from 2024, and 28% from 2025, predicting that the earnings improvement trend will continue as the proportion of high-value orders gradually expands. By vessel type, LNG carriers are expected to account for less than 50%, containerships less than 10%, and very large crude carriers (VLCCs) around 12%.
Samsung Heavy Industries is projected to see Q2 revenue of 3.23 trillion won (approximately $2.2 billion) and operating profit of 398.5 billion won (approximately $266.6 million), increases of 20.5% and 94.6% year-on-year, respectively. Revenue growth is continuing as the effects of expanded overseas production cooperation and the normalization of operations at its second dock are fully reflected. Existing large-scale projects, such as the Qatar LNG project, are being steadily reflected in revenue, while the expansion of the floating liquefied natural gas (FLNG) business is expected to underpin profitability improvement. The annual revenue share from FLNG is also projected to expand to 21-22% this year. Furthermore, the 50MW-class floating data center (FDC) project, which has secured Approval in Principle (AIP) from the American Bureau of Shipping (ABS) and Lloyd’s Register (LR), is also drawing attention as a future growth driver.
Hanwha Ocean’s share price recently declined after it lost out to Germany’s ThyssenKrupp Marine Systems (TKMS) in the competition for Canada’s next-generation submarine project (CPSP), but the prevailing analysis is that this will not significantly impact its mid-to-long-term earnings outlook. SK Securities noted that Hanwha Ocean has secured a naval vessel order pipeline from key countries including Greece, Estonia, Saudi Arabia, Morocco, Egypt, the Philippines, and Chile, excluding Canada, and expressed expectations for additional orders based on its submarine competitiveness demonstrated during the competition with Germany’s TKMS. In particular, the outlook suggests that growth momentum remains intact, as the company can create synergies in securing U.S. logistics support vessel orders through its Philly Shipyard in the U.S. and Austal shipyard in Australia, and opportunities for special-purpose vessel orders remain in regions such as the Middle East and Southeast Asia.
The earnings improvement trend for South Korea’s shipbuilding industry is expected to continue into the second half of this year. While the increased revenue share from high-value vessels and productivity gains persist, new businesses such as offshore plants, FLNG, and FDCs are expected to act as additional growth engines. In particular, there are observations that the “MASGA” (Maritime Security and Global Alliance) project, a South Korea-U.S. shipbuilding cooperation initiative, will gain momentum following the recent dispatch of Requests for Information (RFI) by the U.S. Department of Defense and the U.S. Navy to the three South Korean shipbuilders for the construction of combatants and replenishment oilers. Han Seung-han, an analyst at SK Securities, forecast, “With the U.S. Department of Defense and Navy recently sending RFIs to domestic shipbuilders for the construction of combatants and medium-sized replenishment oilers, the likelihood of the MASGA project materializing in the second half is growing.” He added, “As overseas naval vessel orders are also expected to continue, including frigates for Thailand and the Philippines and offshore patrol vessels (OPVs) for Malaysia, this is anticipated to drive the expansion of domestic shipbuilders’ special-purpose vessel businesses.”