South Korea’s three largest shipbuilders are on track to post a combined annual operating profit of 10 trillion won ($6.6 billion) for the first time, propelled by high-margin liquefied natural gas carriers and improved shipyard productivity.

HD Korea Shipbuilding & Offshore Engineering, Hanwha Ocean and Samsung Heavy Industries are expected to report a combined operating profit of 2.33 trillion won for the second quarter, according to market consensus data compiled by financial information provider FnGuide on Monday.

The estimate represents a 52.5 percent increase from a year earlier and a 12.7 percent rise from the first quarter.

Breaking down, HD KSOE, the shipbuilding subholding company of HD Hyundai, is expected to lead the gains with an operating profit of 1.42 trillion won, up 49 percent on year.

Hanwha Ocean’s operating profit is projected to rise 40.3 percent to 521.7 billion won, while Samsung Heavy Industries’ profit is expected to surge 90.5 percent to 390.2 billion won.

After posting a combined operating profit of 2.07 trillion won in the first quarter, the three companies are forecast to generate 9.04 trillion won for the full year.

HD KSOE is expected to contribute 5.64 trillion won, followed by Hanwha Ocean with 1.9 trillion won and Samsung Heavy Industries with 1.5 trillion won. Industry officials expect stronger earnings in the second half to push the combined figure closer to or above 10 trillion won.

High-value vessels ordered during the latest shipbuilding upcycle, particularly LNG carriers, have contributed to the boost in revenue. Cost reductions and improved productivity at shipyards have also strengthened profitability, industry watchers say.

Uncertainty remains, however, about their overseas naval expansion.

Hanwha Ocean and HD Hyundai Heavy Industries recently suffered a setback in Canada’s Canadian Patrol Submarine Project after Germany’s Thyssenkrupp Marine Systems was selected as the preferred bidder.

The industry is now closely watching efforts to deepen South Korea-US shipbuilding cooperation, which gained momentum following last week’s NATO summit and recent US outreach to the three shipbuilders seeking information on their naval vessel design and construction capabilities.

Source: the Korea Herald