Profits surge 590% at Samsung Heavy

Samsung Heavy Industries Co., the world’s second-largest shipbuilder, said first-quarter profit surged almost sixfold as rising U.S. and Chinese fuel imports spurred orders for tankers. Its share price rose to a record.
Net income climbed to 90.2 billion won ($97 million) from 15.3 billion won a year earlier, the Seoul-based company said in regulatory filing yesterday. That compares with a median estimate of 64.9 billion won in a Bloomberg survey of four analysts.
Earnings at Samsung Heavy and Hyundai Heavy Industries Co., the world’s biggest shipbuilder, are increasing thanks to vessels bought in 2004 and 2005, when ship prices rose by as much as 56 percent from a decade low. The companies are building tankers to carry liquefied natural gas, or LNG, the most expensive type of cargo carrier, ordered two years ago at then all-time-high prices.
“Profit is better than expected, and it will continue to increase because of the orders received for high-priced vessels,” said Kim Jun-ki at Hanwha Investment Trust Management Co. in Seoul.
The orders in 2005 for the liquefied natural gas tankers came from Qatar, which overtook Indonesia in 2006 to become the world’s biggest exporter of the fuel. Samsung Heavy has the world’s biggest backlog to build LNG vessels.
“Earnings improved because we had been selective by winning contracts that bore higher prices as well as by our efforts to increase productivity,” Samsung Heavy said in its statement.
First-quarter sales at Samsung Heavy gained 24 percent to 1.82 trillion won. The company has won about $5 billion in orders this year, almost half of its annual target of $11 billion. It has a backlog of about $28 billion, or about three years of work.
The Korean yard expects to deliver 49 ships this year, including 10 LNG carriers and 19 oil tankers. It produced the same number of vessels last year but will deliver more tankers and offshore-related carriers this year. Samsung Heavy shares surged as much as 9.2 percent to 30,300 won yesterday in Seoul.