Korea Shipbuilding & Offshore Engineering Reports 897.3 Billion KRW Operating Loss in 2Q, Turns to Deficit

Deficit Turned Due to Advance Reflection of Construction Loss Provisions Amid Steel Price Surge
Performance Improvement from Second Half with Advance Price Increase and Profitability-Focused Orders

[Asia Economy Reporter Hwang Yoon-joo] Korea Shipbuilding & Offshore Engineering, the intermediate holding company for the shipbuilding division of Hyundai Heavy Industries Group, posted a loss in the second quarter of this year. This was due to the early reflection of construction loss provisions caused by the increase in steel prices.

Korea Shipbuilding & Offshore Engineering announced on the 21st that it recorded an operating loss of 897.3 billion KRW on a consolidated basis in the second quarter of this year, turning to a deficit compared to the previous year. During the same period, sales increased by 3.1% to 3.7973 trillion KRW. The offshore division saw an increase in fixed costs due to decreased sales, and the plant division's losses widened due to delays in processes caused by COVID-19 and other factors.

A representative from Korea Shipbuilding & Offshore Engineering said, "Due to the expected sharp rise in steel prices, we conservatively reflected predictable losses, temporarily increasing the scale of the deficit. Raw material price increases are leading to contract price hikes, and based on a stable order backlog, we are pursuing a profitability-focused business strategy, so performance is expected to improve significantly from the second half."

In the first half of this year alone, Korea Shipbuilding & Offshore Engineering secured a total of 162 vessels (including 2 offshore plants) worth 14 billion USD, achieving the shipbuilding and offshore division's annual target of 14.9 billion USD early, securing a stable order backlog equivalent to more than two and a half years.

Korea Shipbuilding & Offshore Engineering expects the pace of performance improvement to accelerate as the price of iron ore, the raw material for steel, stabilizes and the sales proportion of ships ordered this year gradually increases.

Additionally, supported by rising shipping freight rates and oil prices, orders for ships and offshore plants continue steadily. The global strengthening of environmental regulations is also reshaping the shipbuilding market around eco-friendly technologies, which is expected to have a positive impact on performance improvement.

Meanwhile, Hyundai Electric and Hyundai Construction Equipment, affiliates of Hyundai Heavy Industries Group, are scheduled to announce their second-quarter results on Thursday the 22nd, and Hyundai Heavy Industries Holdings on Friday the 23rd.

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