[Click eStock] Samsung Heavy Industries 9 Consecutive Quarters of Losses... Must Overcome Non-Recurring Costs Instead of One-Time Expenses

Sales Increase Due to Order Expansion but One-Time Losses Persist
"Consecutive One-Time Expenses Are No Longer One-Time"

[Asia Economy Reporter Minwoo Lee] It has been pointed out that for Samsung Heavy Industries, which is facing an 'earnings shock,' to rebound, it is essential to improve repeated one-time loss costs and prove its order-winning capabilities.

On the 4th, Meritz Securities pointed out that resolving one-time losses is urgent for Samsung Heavy Industries. In the fourth quarter of last year, Samsung Heavy Industries recorded consolidated sales of 2.1572 trillion KRW and an operating loss of 215 billion KRW. Although sales increased by 58.2% compared to the same period last year, operating losses have continued for nine consecutive quarters since the fourth quarter of 2017.

Researcher Kim Hyun of Meritz Securities said, "In particular, one-time costs including provisions for the Ichthys offshore production facility, drillship-related expenses, and long-term employee benefit liabilities amount to 180 billion KRW," adding, "Considering the reversal of 10 billion KRW in provisions for the unraised steel plate price (20,000 KRW per ton), 79.1% of the fourth-quarter operating loss is so-called one-time loss." Given that drillship-related losses have occurred for three consecutive quarters, these one-time costs can no longer be dismissed as 'one-time.'

There are also positive aspects. Last month, Samsung Heavy Industries raised 700 billion KRW in long-term borrowings under conditions allowing early repayment secured by inventory assets of five drillships, dispelling liquidity concerns. Additionally, with the annual delivery of ships increasing from 24 vessels last year to 45 vessels this year, the inflow of delivery payments is expected to increase by 1.6 trillion KRW compared to last year. This means a net increase of 800 billion KRW in cash. Researcher Kim said, "60-70% of the bulk carrier order target (6 billion USD) is practically confirmed to be achieved solely through LNG carriers," and added, "Although there is uncertainty in the offshore sector (2.4 billion USD), the possibility of exceeding last year's order amount of 7.1 billion USD is very high."

Meritz Securities diagnosed that the virtuous cycle of 'order increase → sales regrowth → profitability improvement → efficient use of capital → corporate value re-evaluation' remains uncertain for Samsung Heavy Industries. They analyzed that the operating profit turnaround, initially expected in the first quarter of this year, should be delayed to the third quarter. Although the investment opinion was 'buy,' the target price was lowered by 9.7% from the previous level to 8,400 KRW. The closing price the previous day was 6,580 KRW.

This content was produced with the assistance of AI translation services.