Samsung Heavy Leads Shipyard Gains on Earnings Expectations

  • Daewoo Ship, Hyundai Heavy both posted quarterly losses
  • Shipbuilders say prospects should brighten from fourth quarter

Samsung Heavy Industries Co. led advances among South Korean shipyards in Seoul trading on expectations that results from offshore operations will improve in the fourth quarter.

Shares of Samsung Heavy advanced as much as 7.1 percent Tuesday, their biggest intraday jump since Oct. 8, to 14,300 won and closed up 2.6 percent at 13,700 won in Seoul. Hyundai Heavy Industries Co. closed up 6 percent at 102,500 won. Daewoo Shipbuilding & Marine Engineering Co. gained 2.4 percent to close at 7,130 won.

Samsung Heavy on Monday reported a net income in the third quarter after reporting a loss in the previous three months, raising expectations that losses from delays and cancellations on offshore drilling and production facilities already have been reflected in earnings. A plunge in oil prices since the second half of 2014 prompted Royal Dutch Shell Plc and other oil majors to cut spending, leading to fewer orders for shipyards.

“Investors are hoping that Samsung Heavy’s profit signals a turnaround for shipbuilders,” said Park Moo Hyun, an analyst at Hana Daetoo Securities Co. in Seoul. “But they’re forgetting that a large part of the problem the shipyards face is not making deliveries on time, and if more projects are delayed then this may not be the end of losses for their offshore businesses.”

Samsung Heavy posted net income of 53.7 billion won ($48 million), compared with the 22.2 billion-won average of 10 analyst estimates, after it received some payments from a client for design changes to a rig under construction. 

Daewoo Shipbuilding, which announced results after the market closed Tuesday, reported a net loss of 1.35 trillion won ($1.2 billion), compared with a 35.5 billion-won profit a year earlier. It was the company’s second straight quarterly loss, although it said it sees better times ahead in the fourth quarter.

Hyundai Heavy, which reported Monday, showed a loss of 434.1 billion won ($384 million), exceeding analyst estimates for a 61 billion won loss, but also said earnings should improve in the fourth quarter.

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