HHI’s four new affiliates all record a profit in Q2

The four new affiliates of Hyundai Heavy Industries Group that were spun off in April all managed to record a profit in the second quarter, according to the company’s regulatory filing on Tuesday.

The group’s main affiliate Hyundai Heavy Industries has managed to stay in the black for six consecutive quarters. In the second quarter this year the shipbuilder raked in sales of 4.6 trillion won ($4.1 billion) and an operating profit of 151.7 billion won.

Revenue from the shipbuilding sector was down 6.9 percent from the previous session to 2.7 trillion won due to the global decline in ship construction. However, operating profits rose 14.6 percent to 145.6 billion won thanks to cost reductions in the work force and materials.

Components for offshore plants and marine engines were sectors within Hyundai Heavy Industries that generated more sales compared to the first quarter.

The group’s other three affiliates also saw positive results.

The results are very positive for HHI, which embarked on a major management reform plan last June to reduce its debt ratio, which was 134 percent in the first quarter of 2016. The company has pushed through various measures to pull this figure down through an IPO and selling shares of affiliates and property. These efforts lowered HHI Group’s debt ratio to 94 percent - the lowest among its local competitors.

Rival ship maker Samsung Heavy Industries also announced second quarter earnings - 2.3 trillion won in sales and operating profits of 20.6 billion won - last week. Sales had declined 15 percent year on year but the operating loss last year had made a turn around. Daewoo Heavy Industries & Construction has not yet released its quarterly earnings report, but the general analyst consensus collected by FnGuide is that sales and operating profits will each rise by 8 and 6 percent.

In short, Korea’s top three shipbuilders have successfully remained in the black during this year’s first half. But industry insiders say that their performance in the next year is more important, as the effect of an order shortage that started in 2015 is likely to start surfacing on earnings reports in the second half.

BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]