HD Hyundai reports 61.8% drop in operating profit
Published: 27 Jul. 2023, 18:01
HD Hyundai reported a 61.8 percent decline in operating profit compared to the same period last year, posting 472.6 billion won ($369.94 million) as its oil refining segment, which accounts for a substantial part of the group's overall performance, was impacted by the global drop in oil prices.
The group's quarterly operating profit also missed the market consensus of 552.4 billion won, as compiled by FnGuide.
The company's revenue recorded 15.62 trillion won, a 0.8 percent decrease from the previous year but surpassing the market consensus of 14.95 trillion won.
Its net profit declined by 80.5 percent to 186.3 billion won but exceeded the market consensus of 53.3 billion won.
"The shipbuilding sector successfully turned a profit, and other significant businesses like construction equipment and power devices maintained steady performance," HD Hyundai said. "However, the oil refining sector faced challenges due to weak overall market conditions, leading to decreased revenue and operating profit."
HD Hyundai explained that the reduced profitability in the oil refining sector was primarily caused by inventory valuation losses related to products and raw materials, stemming from an international oil price decline. Major economies also continued their belt-tightening policies, driven by concerns about a global economic slowdown and limited demand recovery influenced by weak economic indicators in China, subsequently leading to a decline in refining margins.
However, HD Hyundai's other business segments reported positive quarterly earnings.
HD Korea Shipbuilding & Offshore Engineering (HD KSOE), the intermediate shipbuilding subsidiary of HD Hyundai, reported its second-quarter operating profit at 71.2 billion won in the second quarter. This marks a turnaround compared to the same period last year when the company faced an operating loss of 265.1 billion won. However, the reported operating profit fell short of the market consensus of 128.9 billion won.
Revenue also went up by 30.2 percent year-on-year to 5.45 trillion won, fueled by an increase in shipbuilding capacity and marine engine deliveries, but was below the market consensus of 5.47 trillion won.
Net profit returned to profitability, hitting 39.4 billion won, although it was also below the market expectation of 54.7 billion won.
HD KSOE has secured contracts for 112 vessels amounting to 14.59 billion dollars, achieving approximately 92.7 percent of its $15.74 billion annual target.
HD Hyundai remains optimistic about further improvements in profitability, primarily driven by a forecasted increase in ship prices during the second half of the year.
"We anticipate maintaining a stable profit trend across all business sectors based on improved profitability in the shipbuilding sector and more favorable conditions in the oil market during the second half of the year," an official from HD Hyundai said.
BY SEO JI-EUN [seo.jieun1@joongang.co.kr]
with the Korea JoongAng Daily
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