Shipyards May Gain on Hyundai Heavy Profit, Daewoo Container-Vessel Orders
Shipyards May Gain on Hyundai Heavy Profit
George Frey/Bloomberg
Keh-Sik Min, CEO of Hyundai Heavy Industries Co. Ltd.
Keh-Sik Min, CEO of Hyundai Heavy Industries Co. Ltd. Photographer: George Frey/Bloomberg
South Korean shipyards may rise after Hyundai Heavy Industries Co. reported better-than-expected profit and Daewoo Shipbuilding & Marine Engineering Co. won its first container-ship order in two years.
Hyundai Heavy, the world’s largest shipyard, more than doubled second-quarter net income to 910.5 billion won ($757 million) after completing more offshore units and paying less for raw materials, it said late yesterday. Daewoo, the second- biggest yard, announced a contract for 10 container ships worth $975 million from an unidentified customer.
The Daewoo order, following a similar-sized deal for third- ranked Samsung Heavy Industries Co., may spur optimism among investors about the outlook for ship contracts, said J.D. Yang, an analyst at Korea Investment & Securities Co. in Seoul. Shipping lines slashed orders for new vessels last year as the global recession hammered trade.
“Orders in the second half could be higher than what people are expecting,” Yang said. “This year is also going to be Hyundai Heavy’s best ever for earnings given the size of its orderbook.”
Hyundai Heavy secured $9.99 billion of orders in the first half, about triple the tally a year earlier, as economic growth and depleting reserves spurred oil companies to order new offshore drilling and production platforms. The Ulsan, South Korea-based shipyard expects full-year offshore orders to surpass ship contracts for the first time in nine years.
First-half orders for offshore structures jumped to $2.66 billion from $179 million a year earlier. Ship orders rose to $1.64 billion from $4 million, the company said yesterday.
Steel Costs
Operating margin, or operating profit income as a percentage of sales, widened to 14 percent from 10 percent. The company paid less for steel plate after mills including Posco, South Korea’s largest steelmaker, cut prices because of slowing demand amid the global recession.
The shipyard gained 3.9 percent to close at 256,500 won in Seoul yesterday, before the earnings announcement. The stock has advanced 48 percent this year, the second-best performer among 50 top companies traded on South Korea’s benchmark Kospi index.
Daewoo rose 1.6 percent to close at 19,700 won in Seoul trading before its order announcement. The stock has advanced 13 percent this year.
Daewoo will deliver the ships, each able to carry as many as 8,400 20-foot containers, by the first quarter of 2014, it said yesterday. The shipyard has won orders for vessels and offshore projects worth $4.9 billion this year, achieving 70 percent of its $7 billion target.
Samsung Heavy announced a $1 billion order for 10 container ships from Taiwan-based Evergreen Group earlier this month.
Hyundai Heavy aims to win $17.7 billion of contracts this year, compared with $10.7 billion in 2009. That includes boosting ship orders to $4.03 billion from $444 million, according to a company forecast in December. Orders for offshore projects may increase 79 percent to $4.2 billion, it said.
To contact the reporter on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net
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