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Riding the shipbuilding supercycle, Hanwha Ocean (042660) and Samsung Heavy Industries (010140) posted contrasting second-quarter results, with the exchange rate proving the decisive variable.
According to the Financial Supervisory Service on the 28th, Hanwha Ocean posted preliminary consolidated operating profit of 736.1 billion won in the second quarter, up 98.0% from a year earlier and well above the market consensus of 533.5 billion won. Samsung Heavy Industries, by contrast, posted operating profit of 325 billion won, a 58.7% increase but short of the market consensus of 374.4 billion won.
The difference came down to their hedging approaches. Hanwha Ocean has taken an open approach that leaves it almost fully exposed to exchange rate fluctuations. With a hedging ratio of only single digits, its earnings benefit as the won-dollar exchange rate rises.
In fact, the order volumes that contributed to second-quarter revenue consisted of 25% from 2023 orders, 50% from 2024 orders, and 25% from 2025 orders, and all of these contracts were signed at exchange rates lower than the second-quarter average (1,502 won). The company thus fully reaped the benefits of the recent won weakness (exchange rate rise). However, amid the recent high-exchange-rate trend, Hanwha Ocean is shifting its strategy toward raising its hedging ratio.
Samsung Heavy Industries, on the other hand, has maintained "100% currency hedging," immediately entering forward exchange contracts with banks when winning ship orders to lock in the entire future dollar payment at the exchange rate at the time of contract. As of the end of March, Samsung Heavy Industries' remaining hedged volume relative to its order backlog reached 105%, far higher than Hanwha Ocean's roughly 8.6% over the same period. This reflects hedged volumes accumulated over several years.
Samsung Heavy Industries' second-quarter revenue was made up of 20% from 2022 orders, when the average annual exchange rate was 1,292 won, and around the mid-30% range from 2023 orders, when it was 1,305 won. Revenue recognized at those lower exchange rates dragged down profit margins. According to the company, the forward exchange rate reflected in second-quarter revenue was below 1,300 won.
A Samsung Heavy Industries official predicted, "Margin improvement will become visible from late this year to early next year, when ships contracted at the mid-1,400 won to 1,500 won range are reflected in revenue."
