Hyundai Heavy Industries Holdings Turns Profitable Despite COVID-19... Korea Shipbuilding Focuses on LNG Orders in Second Half (Comprehensive)

Operating Profit and Net Income Both Turned Positive Compared to Q1
Korea Shipbuilding "Merger Review with Daewoo Shipbuilding Expected to Complete Within the Year"
Hyundai Oilbank "With Heavy Oil Input, Successfully Weathered Sharp Drop in International Oil Prices and COVID-19"

[Asia Economy Reporter Hwang Yoon-joo] Hyundai Heavy Industries Group succeeded in turning a profit despite the impact of the novel coronavirus disease (COVID-19).

Hyundai Heavy Industries Holdings announced on the 30th that its consolidated operating profit for the second quarter was 104.3 billion KRW, down 48.3%. Sales fell 41.3% to 4.0058 trillion KRW, and net profit dropped 59% to 22.2 billion KRW. However, compared to the first quarter, which was heavily impacted by COVID-19, both operating profit and net profit turned positive, while sales decreased by 29.9%.

The sales decline was influenced by the drop in oil prices and the scheduled maintenance of Hyundai Oilbank's Daesan refinery. Despite COVID-19, operating profit recorded a surplus as all affiliates, including Hyundai Construction Equipment and Hyundai Electric, posted solid earnings through proactive cost-cutting measures.

In particular, Hyundai Oilbank succeeded in turning a profit, the only domestic refinery to do so, despite negative refining margins. By actively utilizing industry-leading advanced facilities, it increased the proportion of low-cost heavy and extra-heavy crude oil input by 5 to 6 times compared to competitors, reducing costs. Additionally, it improved profitability by increasing the production ratio of high-margin diesel and minimizing jet fuel production.

During the second-quarter earnings conference call, Hyundai Oilbank explained, "Based on a Singapore complex refining margin of 4 to 6 dollars, scheduled maintenance would reduce operating profit by 80 billion KRW, but international oil prices plummeted in the second quarter," adding, "Refining margins turned negative, so the operational losses from scheduled maintenance were virtually nonexistent."

Regarding the completion of SK Networks' direct management gas station acquisition, they added, "With the acquisition of SK Networks' gas stations, our market share in the domestic gas station market has jumped to first or second place," and "We expect strengthened competitiveness through the gas station network and plan to actively expand hydrogen and electric vehicle charging businesses by utilizing gas station infrastructure concentrated in the metropolitan area."

Korea Shipbuilding & Offshore Engineering also announced on the same day that it recorded sales of 3.9255 trillion KRW and operating profit of 92.9 billion KRW in the second quarter. Sales decreased by 0.5% compared to 3.9446 trillion KRW in the previous quarter, and operating profit fell 23.7% from 121.7 billion KRW in the previous quarter.

Operating profit was solidly positive in all sectors except the offshore division. The offshore division reduced its deficit compared to the previous quarter due to lower fixed costs from ongoing large-scale project construction, and the engine machinery division maintained profitability through cost-cutting efforts.

However, despite an increased proportion of high value-added shipbuilding in the shipbuilding division, the profit margin slightly decreased due to a lower exchange rate compared to the previous quarter.

A Korea Shipbuilding & Offshore Engineering official explained, "We expect new orders to slightly decrease in the second half," adding, "Shipowners are hesitating to place new ship orders and scrubber retrofit orders in the second half due to the COVID-19 situation and falling international oil prices."

Regarding the merger review with Daewoo Shipbuilding & Marine Engineering, which has been repeatedly delayed recently, the official stated, "We expect it to be possible within this year without fail."

They further explained, "The schedule was delayed because EU officials have been working from home due to the COVID-19 pandemic," and "The final result announcement was scheduled for September but is expected to be slightly delayed."

A Hyundai Heavy Industries Group official said, "In the global economic downturn caused by COVID-19 and other factors, all affiliates have made efforts to improve profitability through revising management strategies and cost reduction," and added, "We will continue to do our best to maintain solid earnings by proactively responding to changes in the external business environment."

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