Nov. 8 (Bloomberg) -- Hyundai Heavy Industries Co., the world's largest shipbuilder, said third-quarter profit more than doubled to a record after it raised vessel prices and as China's trade with Europe and the U.S. spurred demand for ships.

Net income rose to 434.7 billion won ($479 million), from 210.7 billion won a year earlier, the Ulsan, South Korea-based company said in a filing today. That compares with a 395 billion won average of 12 analyst estimates compiled by Bloomberg. Sales climbed 19 percent to 3.73 trillion won.

Shipyards in South Korea, the largest shipbuilding nation, predict record earnings this year on demand for vessels to transport raw materials to China and finished goods to the rest of the world. Hyundai Heavy is expanding production capacity to work through more than three years of order backlogs.

``Earnings will continue to grow as they build vessels from orders they won when prices rose,'' said Song Jae Hak, an analyst at Woori Investment & Securities Co. in Seoul who has a ``buy'' recommendation on Hyundai Heavy shares.

The company's shares dropped 1.7 percent to 519,000 won at 12:18 p.m. in Seoul. The stock has more than quadrupled this year, making it the best performer among the 50 biggest companies traded on South Korea's Kospi index.

Operating Profit

Operating profit, or sales minus the cost of goods sold and administrative expenses, climbed 87 percent to 423.4 billion won in the third quarter.

Hyundai Heavy's operating profit margin was 11.4 percent in the third quarter, an increase from 9.5 percent in the second quarter. That compares with 11 percent in the first quarter and 7.2 percent in the July-September period last year.

Samsung Heavy Industries Co., the world's second-largest shipbuilder, had an operating margin of 5.9 percent in the quarter. Its net income more than tripled to a record 141.5 billion won. Daewoo Shipbuilding & Marine Engineering Co., the world's third-largest yard, achieved a margin of 4.4 percent.

Ship prices, which have been rising since 2003 from a 10- year low, have more than doubled to a record, according to Clarkson Plc, the world's biggest shipbroker.

Hyundai Heavy delivered 65 vessels valued at $5.03 billion in the first nine months of this year, including six liquefied- natural-gas tankers and 36 container ships, according to the company's Web site. In the same period in 2006, the shipyard delivered 58 vessels valued at $3.82 billion.

Shipyard Expansion

The company plans to spend 750 billion won this year to expand capacity at an existing yard and to build more quays. It will build a 10th dock, expand its existing block plant in Pohang city and extend the length of existing docks.

Hyundai Heavy received $21.5 billion of orders for ships, offshore platforms, marine engines and other products in the first nine months, 35 percent more than in the same period last year, according to a previous announcement. That is more than the record $19 billion the company received in 2006.

The price of capesize bulk carriers, the biggest of its kind, surged to a record $93 million at the end of September, compared with $68 million at the end of last year, according to Clarkson.

Hyundai Heavy said Jan. 2 that sales will probably climb 21 percent this year to a record 15.2 trillion won as it builds more higher-priced vessels.

To contact the reporter on this story: Kyunghee Park in Hong Kong kpark3@bloomberg.net.

Last Updated: November 7, 2007 22:41 EST