Hanwha expected to sign $751 mn howitzer deal with Romania

Hanwha Aerospace Co., South Korea’s major aerospace and defense system developer, is set to sign a 1 trillion won ($751 million) contract to supply its K9 howitzers to Romania next month in what would its first export deal to the country and the sixth in Europe.

The company said during its earnings conference call on Friday that it will announce a weapons export deal with Romania in the first quarter. It is reported to be a contract to supply the Eastern European country with 54 units of its K9 howitzers in a deal worth about 1 trillion won.

Other defense companies from Germany and Turkiye, or Turkey, are known to have joined the bid.

If Hanwha Aerospace finally clinches the deal, it would mark not only its first weapon exports to Romania but also the sixth of its kind to a country in Europe.

It has bagged orders to export its weapons to Turkiye, Norway, Finland, Estonia and Poland in the region so far.

Expectations are growing that the Korean defense company and its local peers will win more weapon orders in the region amid the intensifying arms race among countries in Eastern and Northern Europe since Russia’s attacks on Ukraine in early 2022.

The company also confirmed that it is currently in negotiations with related parties to sell the K9 howitzers to the UK next year.

In September last year, the company unveiled the latest model of its K9 self-propelled howitzer, the K9A2, at the Defense and Security Equipment International (DSEI) trade show in London.

BRIGHT OUTLOOK

Encouraged by a slew of export deals, Hanwha Aerospace has set a target to earn over 5 trillion won in defense sales this year, up more than 20% from last year’s sales of 4.1 trillion won.

The operating profit of its defense division reached 572.7 billion won in 2023.

Hope is high that the company will achieve the target as the Korean parliament is set to pass a revised law that will lift the cap on the equity capital of the Export-Import Bank of Korea, or the Korea Eximbank, to 25 trillion won from the current 15 trillion won.

The revision is designed to allow the Korea Eximbank to increase financial support for local export companies. The law currently limits the policy bank’s credit extension to a business or an individual to 40% of its equity capital.

With the bigger equity capital, the revision is expected to speed up Korean companies’ exports worth about 30 trillion won to Poland, according to analysts.

“Immediately after the (Korean) National Assembly passes the legal revision concerning the Korea Eximbank, we will complete our deal with Poland to export K9 howitzers and K239 Chunmoo rocket artillery systems,” said an official from Hanwha Aerospace.

The parliament is due to vote on the revised bill on Feb. 29.

In July 2022, Hanwha Aerospace inked a deal with the Polish government to export 672 units of the K9 howitzers and 288 units of Chunmoo multiple-launch rocket systems.

In December last year, it also announced a $2.6 billion deal to export additional K9 self-propelled howitzers to the Eastern European country.

Hanwha Aerospace will go all out to earn more from overseas sales than domestic sales this year with defense sales, the official said.

The company’s other notable major overseas deal is a $2.4 billion armored vehicle supply contract to Australia announced in December last year.

On high expectations of further weapon export deals for the company, its stock has jumped more than 30% since Nov. 27, 2023.

Hanwha Aerospace shares climbed 7.9% to end at 166,200 won on Monday.

Write to Hyung-Kyu Kim at khk@hankyung.com


Sookyung Seo edited this article.