Merchant marine and offshore business dragged down! The shipbuilding giant turned the clock again

Recently, Korea Hanwha Marine (formerly Daewoo Shipbuilding) released its second-quarter performance forecast, the company achieved operating income of 2,536.1 billion won (about 1.83 billion US dollars), a year-on-year increase of 39.3%; The operating loss was 9.6 billion won ($6.92 million), a significant decrease of 94% from the loss of 159 billion won in the second quarter of last year.

Among them, the merchant shipping business and the offshore business both suffered operating losses, with a total loss of 91 billion won (about 65.64 million US dollars), while the military ship business generated an operating profit of 73.4 billion won (about 52.94 million US dollars).

This is the second time that Hanwha Marine has turned into a loss after turning a profit in the first quarter of this year. In the first quarter of this year, the company achieved operating income of 2.2836 trillion won (about 1.66 billion US dollars), a year-on-year increase of 58.6%; The operating profit was 52.9 billion won (about 38 million US dollars), compared with the operating loss of 62.8 billion won in the first quarter of last year. The company achieved a net profit of 51 billion won (about 37 million US dollars), turning losses into profits year-on-year.

In the first half of this year, Hanwha Marine achieved an operating income of 4,819.7 billion won (US$3.48 billion), an operating profit of 43.3 billion won (US$31.32 million), and a net profit of 23.6 billion won (US$17.02 million). Among them, the operating income increased by 47.8% year-on-year, and the operating profit and net profit turned into profits.

Hanwha Marine said that the company's turnaround in the first half of the year was due to an increase in the construction of high-value-added LNG carriers, which improved overall revenue, while the company's focus on reducing costs and increasing efficiency, as well as the increase in the exchange rate of the Korean won against the US dollar, also played a positive role in the improvement in earnings. It is reported that LNG ships accounted for more than half of the company's operating income in the first half of the year.

Commenting on the reason for the slight loss in the second quarter, Shin Yong-in, Vice President and Chief Financial Officer of Hanwha Marine Marine, said, "The company was unable to maintain the earnings tone of the previous quarter due to the impact of the loss of container ships, which resulted in one-time expenses of about 140 billion won, such as a change in production schedules and an increase in outsourcing expenses." In order to be profitable in the second half of the year, the company will focus on stabilizing production and adhering to delivery dates. ”

It is reported that due to labor shortages, the delivery schedule of seven Hanwha Marine vessels was delayed in the first half of this year. Among them, Korea largest shipping company ordered six 13,000TEU container ships in the company in HMM2021.

Hanwha Marine said that the company's low-cost orders in 2020-2021 have suffered or will soon suffer large losses, but most of them will be delivered within this year, and it is expected that by the first half of next year, 90% of low-cost orders such as container ships will be delivered. With the removal of this "hidden danger", it is expected that the proportion of high value-added LNG ship revenue will expand from 50% in the second quarter of this year to 60% in the third quarter.

In terms of business segments, Hanwha Marine's merchant construction business, which accounts for more than 80% of Hanwha Marine's revenue, achieved operating income of KRW 2,112 billion (USD 1.52 billion) and an operating loss of KRW 43.4 billion (USD 31.31 million) in the second quarter. However, the merchant ship construction business is expected to be profitable for the full year as the continuous construction of high-priced ships, mainly LNG carriers, is effective.

Hanwha Marine said that it will maintain a selective order taking strategy until the end of this year, even though it has secured orders for about 2.5~3 years. During the year, the company will also continue to promote additional orders for LNG carriers in Qatar.

According to Korea industry sources, Qatar Energy is considering ordering about 10 additional LNG carriers this year. Previously, Hanwha Marine had taken on a total of 12 LNG carriers in the second batch of its "100 Ships Program".

In addition, Hanwha Marine's special vessel business achieved operating income of 328.9 billion won (about 240 million US dollars) and an operating profit of 73.4 billion won (about 52.94 million US dollars) in the second quarter. Among them, the operating income of the special ship division accounted for 13% of the company's operating income. In the second half of the year, the division is expected to continue to maintain high profit margins with a focus on the maintenance, repair and operation (MRO) business of submarines and ships, which is relatively profitable.

In the offshore business, Hanwha Marine achieved an operating income of 199 billion won (US$140 million) and an operating loss of 47.6 billion won (US$3,433) in the second quarter. This is due to the fact that the company has made some engineering adjustments to stabilize production, and the operating income of the offshore business has decreased. It is expected that the performance will improve in the second half of the year with the advancement of the offshore wind power business.

Hanwha Marine said that the company has secured nearly three years of work. Since the beginning of this year, the company has undertaken a total of 27 orders worth $5.33 billion, nearly three times the 10 ships and $1.9 billion in the whole of last year. There are 16 LNG carriers, 7 crude oil carriers, 2 liquid ammonia carriers, 1 natural gas carrier, and 1 offshore equipment carrier, a total of 27 vessels (seats).

An official from Hanwha Marine said, "In order to secure a stable supply of labor and improve production efficiency, the company is expanding its investment and stabilizing its production system. With the full-scale start of construction of LNG carriers at high prices, the company will concentrate all its efforts on improving profitability. ”

Korea industry insiders said that in the second half of this year, with the delivery of most low-cost ships, Hanwha Marine's performance will improve at an accelerated pace. The company's goal is to achieve annual profitability through a selective order-taking strategy that focuses on high-priced vessels.

In addition, Hanwha Marine is making aggressive investments to enhance its global competitiveness. The company plans to acquire a stake in United States LNG company Next Decade to expand its business opportunities to include LNG sales and transportation, and if necessary, build LNG ships for Next Decade. In order to enter the United States marine market, Hanwha Marine acquired the United States Philly shipyard, which has the largest commercial shipyard in the United States, for $100 million this year, and plans to use it as a factory for Hanwha Marine to enter the United States ship market and carry out ship MRO business, and recently obtained the United States Navy's Ship Maintenance Master Agreement (MSRA) certification, securing a solid bridgehead for Hanwha Marine to enter the world's largest military market. In May, Hanwha Marine also acquired a stake in offshore equipment manufacturer Dyna-Mac Holdings, held by Singapore shipbuilder Keppel Group, which is expected to expand offshore equipment production capacity, strengthen price competitiveness, and position itself well in global offshore equipment bidding.