Korea's three shipbuilders posted combined sales exceeding 30 trillion won in the first half of this year, dispelling concerns about a peak-out. New orders during the same period also surpassed $30 billion, driven by increased orders for liquefied natural gas (LNG) carriers, a high value-added vessel type. As MASGA, a Korea-U.S. shipbuilding cooperation project, gains full momentum, the possibility of expanding special-purpose vessel businesses such as U.S. warships is growing, raising expectations of benefits from a shipbuilding super cycle.
HD Korea Shipbuilding & Offshore Engineering (009540), the intermediate holding company of HD Hyundai, said on the 29th that it recorded preliminary consolidated sales of 8.927 trillion won and operating profit of 1.6451 trillion won in the second quarter. Compared with the same period last year, these figures rose 20.2% and 72.5% respectively, significantly exceeding market forecasts of 8.711 trillion won in sales and 1.4797 trillion won in operating profit. In particular, operating profit marked the highest ever on a quarterly basis since the company's launch in June 2019. The operating profit margin, a profitability indicator, rose to 18.4% in the second quarter of this year from 12.8% in the second quarter of last year. HD Hyundai Heavy Industries, its main subsidiary, joined the "1 trillion won club" by posting operating profit of 1.0399 trillion won in the second quarter.
On a first-half basis, HD Korea Shipbuilding & Offshore Engineering's sales rose 20.2% to 17.0679 trillion won. Operating profit surged 65.6% to 3.0011 trillion won. This is the first time HD Korea Shipbuilding & Offshore Engineering's first-half operating profit has surpassed 3 trillion won. The strong results are attributed to improved productivity, an increased share of high-priced vessel sales, and selective orders. Improved profitability was also influenced by the full-scale integration synergy from the merger between HD Hyundai Heavy Industries and HD Hyundai Mipo at the end of last year.
Hanwha Ocean (042660) and Samsung Heavy Industries (010140) also each reported double-digit growth in their earlier earnings announcements. The Big 3 shipbuilders' combined sales in the first half of this year reached 31.854 trillion won, up 23.4% from the same period last year, while operating profit grew 72.4% to 4.7764 trillion won. The three companies' combined orders also came to $31.1 billion, more than double the figure a year earlier.
Despite the geopolitical crisis stemming from the clash between the United States and Iran, the three Korean shipbuilders delivered better-than-expected results in the first half, putting annual sales of 60 trillion won and operating profit of 10 trillion won within reach. This is because exchange rate conditions are favorable and new LNG carrier orders are following one after another. In the second half of this year, the possibility of securing contracts for U.S. LNG projects and warship orders has grown, centered on the recently opened Korea-U.S. Shipbuilding Cooperation Center.
Despite this boom, shipbuilders are focusing on developing "next-generation growth drivers." Having experienced the prolonged downturn of the 2010s, they are engaging in preemptive risk management. A representative example is the floating data center (FDC). Called a "data center on the sea," FDCs are emerging as an alternative to solve the difficulties of securing sites and the enormous costs of power supply and server cooling faced by land-based data centers. An HD Korea Shipbuilding & Offshore Engineering official said, "We are working to produce tangible results for FDCs while holding close discussions with various companies."
Samsung Heavy Industries, based on the EPC (engineering, procurement and construction) capabilities it has accumulated in offshore plant sectors such as floating liquefied natural gas production facilities (FLNG), is busy developing a standard platform for floating small modular reactors (FSMR) in partnership with Sargent & Lundy (S&L), a U.S. nuclear power design and engineering firm. Hanwha Ocean is seeking new opportunities in the next-generation destroyer (KDDX) project and "Jangbogo N," a nuclear-powered submarine development project.
