Hyundai Heavy Industries Co. (009540), the world’s largest shipbuilder, had the biggest drop in almost three months in Seoul trading after reporting lower-than- expected operating profit.
Operating profit in the fourth quarter fell 62 percent from a year earlier as the shipbuilder worked through vessel orders won at reduced prices during the global financial crisis that began in 2008. The company is now focusing on more complex products for the energy sector, such as drill ships and floating production units, to revive profit margins.
“The market was expecting a decline in operating profit, but not this much,” said Lee Ji Hoon, an analyst at SK Securities Co. in Seoul. “Earnings may have hit a bottom in the fourth quarter, but it will take a while before any improvement is seen because of the weak demand for ships.”
Hyundai Heavy’s operating profit, or sales minus the cost of goods sold and administrative expenses, fell to 404.6 billion won for the three months ended Dec. 31, the Ulsan, South Korea- based company said in a filing today. The market was expecting about 500 billion won, Lee said. Net income in the period dropped 91 percent to 71.3 billion won.
Today’s share-price decline trimmed Hyundai Heavy’s gain this year to 14 percent, compared with an 8 percent gain for South Korea’s benchmark Kospi index.
Hyundai Heavy won orders for a record 11 drill ships last year. The shipyard’s contracts for oil tankers, container ships and dry-bulk vessels halved to 23 last year because of competition from China and a drop in global orders caused by a capacity glut.
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