Hyundai Heavy's KSOE expected to turn to black in Q3

Korea Shipbuilding & Offshore Engineering Co. (KSOE), under Hyundai Heavy Industries Group, is forecast to have turned to the black for the first time in four quarters, according to the market consensus.

KSOE is estimated to have earned 80.9 billion won ($56 million) in operating profit in the July-September quarter, financial data provider FnGuide said on Oct. 2.

The estimated third-quarter results will mark the first operating profit for KSOE since the third quarter of last year.

In the past three quarters, its cumulative operating losses amounted to 1.36 trillion won due to higher steel plate prices and lower margins from cheap vessels it has delivered.

However, now that the company has begun delivering high-price ships such as liquified natural gas (LNG) carriers, the holding company of the world's largest shipbuilder is expected to swing to a full-year profit in 2023, capping two years of shortfalls.   

Those shipbuilding orders were received in the second half of 2020. It tends to take about two years to design, build and deliver a vessel after receiving the order.

Its payment is made in installments, depending on the construction progress. The final-tranche payment is much bigger than the previous ones.

FOR WHOLE YEAR OF 2022

In the current quarter, KSOE is also forecast to report an operating profit of 141.5 billion won, compared with a loss of 696.7 billion won in the same period a year earlier.

For all of this year, however, it is expected to remain in the red with an operating loss of 429.3 billion won, weighed by first-half shortfalls of over 600 billion won.

But it is expected to swing to an operating profit of 942.5 billion won for the whole year of 2023, marking its first annual profit since posting a profit of 74.4 billion won in 2020, the market consensus showed.

KSOE controls Hyundai Heavy Industries Co., Hyundai Mipo Dockyard Co. and Hyundai Samho Heavy Industries Co. Its top shareholder is Hyundai Heavy Industries Holdings Co. with a 30.95% stake.

LNG SHIPS

Rising ship prices and a string of orders clinched by South Korea's shipbuilders this year brightened their earnings outlook for the coming years. 

In the January-August period, the country's shipbuilders won orders for a total of 216 vessels, equivalent to 11.9 million compensated gross tons (CGTs). They commanded 43% of the global shipbuilding orders during the period.

Particularly, in the LNG carrier market, South Korea solidified its No. 1 position with a 75% share during the period. It snapped up orders for 83 vessels out of 111 ships ordered in the first eight months of this year.

South Korea’s two other major shipbuilders Daewoo Shipbuilding & Marine Engineering Co. (DSME) and Samsung Heavy Industries Co. are also expected to swing to operating profits of 137.7 billion won and 202.6 billion won next year, based on FnGuide forecasts.

Meanwhile, leading weapons manufacturer Hanwha Group agreed last week to buy a controlling stake in DSME for 2 trillion won ($1.4 billion).

Early this year, Hyundai Heavy's attempt to buy DSME faltered after the European Commission vetoed their merger on monopoly concerns.

Write to Ik-Hwan Kim at lovepen@hankyung.com
Yeonhee Kim edited this article.