Korea Shipbuilding & Offshore Engineering Maintains Profit Trend... 1Q Operating Profit 121.7 Billion Won

[Asia Economy Reporter Park So-yeon] Korea Shipbuilding & Offshore Engineering, the intermediate holding company of Hyundai Heavy Industries Group's shipbuilding division, continued its profit trend by recording operating profits in the 100 billion KRW range for the second consecutive quarter.

Korea Shipbuilding & Offshore Engineering announced on the 29th that it recorded consolidated sales of 3.9446 trillion KRW and operating profit of 121.7 billion KRW in the first quarter. Sales decreased by 9.2% compared to the previous quarter (4.342 trillion KRW), but operating profit continued its positive trend following 169.9 billion KRW in the previous quarter. Compared to the same period last year, sales increased by 20.4% and operating profit rose by 251%. Until the year before last, Korea Shipbuilding & Offshore Engineering posted quarterly operating losses of about 100 billion KRW, but since turning to profitability last year, it has recorded operating profits in the 100 billion KRW range for two consecutive quarters starting from the fourth quarter of last year.

In the first quarter of this year, the shipbuilding division's sales slightly increased due to an expanded proportion of high-priced vessels such as LNG carriers per unit. However, the company explained that overall sales declined due to the disappearance of one-time change orders (additional construction cost compensation) that occurred in the offshore division in the previous quarter and a decrease in volume. Operating profit was maintained thanks to the increased proportion of high value-added vessels and the return to profitability of subsidiaries Hyundai Mipo Dockyard and Hyundai Samho Heavy Industries. The rise in exchange rates and cost reduction efforts also positively impacted the performance.

The three shipbuilding companies of Hyundai Heavy Industries Group recorded orders for 19 vessels worth 1.2 billion USD through the end of March this year. Industry analysts assess that Korea Shipbuilding & Offshore Engineering had cash and cash equivalents and short-term financial assets totaling approximately 3.71 trillion KRW as of the end of 2019, indicating no significant liquidity issues. Unlike competitors, the company completed the sale of canceled drillship orders last year, reducing risks related to inventory assets. The previously identified weakness of insufficient offshore plant order backlog is expected to work positively amid the low oil price environment, leading to more stable performance compared to other companies.

A Hyundai Heavy Industries Group official stated, "If the COVID-19 situation prolongs, there are concerns about a decrease in order volume," adding, "We will do our best to secure work based on differentiated technologies such as eco-friendly and smart ships."

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