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Snowballing losses cloud Hyundai Heavy’s 2021 IPO plans

By Mar 31, 2021 (Gmt+09:00)

Hyundai Heavy dockyard
Hyundai Heavy dockyard

South Korean shipbuilder Hyundai Heavy Industries Co. saw its net losses snowball in 2020, clouding its initial public offering plans for this year.

According to the Financial Supervisory Service on Mar. 30, Hyundai Heavy Industries posted 8.31 trillion won ($7.34 billion) in revenue last year, up 52% from the previous year.

However, its operating profit significantly shrank to 32.5 billion won from 129.5 billion won. Its bottom line remained in the red for the second straight year, with its net loss ballooning almost fivefold to 431.4 billion won from a shortfall of 88.9 billion won in 2019.

Industry watchers say the shipbuilder’s weak results could work as a stumbling block to its planned public share sale as business performance in the year leading up to listing is a key determining factor in the IPO screening process.

Hyundai Heavy announced in January that it will raise up to 1 trillion won via an IPO, in which it plans to issue new shares amounting to a 20% stake in the company.

Earlier this month, the company said it mandated Korea Investment & Securities Co. and four other brokerages to manage its public share sale.


Hyundai Heavy’s assets, one of the criteria in assessing a shipbuilding company's corporate value, shrank last year, with its total equity falling to 5.36 trillion won from 5.62 trillion won in 2019.

As of 2020, the company’s enterprise value was estimated at 4.7 trillion won when the shipbuilding industry’s average price-to-book ratio (PBR) of 0.87 was applied.

Hyundai Heavy’s corporate value should be at least 5 trillion won if it is going to reach its 1 trillion won target by issuing new shares, according to industry officials.

The company said proceeds from the IPO will be used to develop eco-friendly ships fueled by hydrogen and ammonia, alongside maritime autonomous surface ships and dual-fuel ships. Hyundai will also push for fuel cell-related M&A activities and lay the groundwork for environmental, social and governance (ESG) management.

An LNG-powered container ship made by Hyundai Heavy
An LNG-powered container ship made by Hyundai Heavy


The shipbuilding industry is closely watching if Hyundai Heavy’s value will be assessed on a PBR multiple of at least 1 when its shares are listed on the main bourse, given its increasing shipbuilding orders amid signs of a global economic recovery.

Hyundai Heavy’s holding firm, Hyundai Heavy Industries Holdings Co., has said its shipbuilding affiliates target a combined $14.9 billion in new orders for 2021, up 35.4% from last year’s results of $11 billion for 116 vessels.

According to shipping intelligence provider Clarksons Research, global ship orders are likely to reach 23.8 million compensated gross tonnage (CGT) this year, up 21% from the previous year. Clarksons projects an average of 35.1 million CGT order placements to be made annually between 2022 and 2025.

Hyundai Heavy’s parent, Korea Shipbuilding & Offshore Engineering Co. (KSOE), recently saw its shares rise on expectations that shipbuilders will ride the recovery wave.

Shares of KSOE were trading up 0.4% at 135,000 won in the late afternoon session on Wednesday. The stock has gained 24% so far this year.

Write to Ye-Jin Jun at

In-Soo Nam edited this article.

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