Hyundai Heavy Q2 net drops, industry outlook weak

Hyundai Heavy reported a steeper-than-expected 40 percent drop in second-quarter net profit after foreign exchange-related losses, but its operating margin held up on strength in plants, power equipment and engines. The shipbuilding industry is reeling under a prolonged downturn and a shipping glut, and the outlook remains weak for the second half as an order drought continues and cash-poor shipping companies are seeking to adjust or delay payments on existing orders. However, Hyundai Heavy, the world's largest shipbuilder, has a ship order backlog of nearly three years and is expected to benefit from stablising steel prices.
Hyundai, which competes with domestic rivals Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering said its electronic equipment and plant divisions enjoyed healthy order streams. Hyundai posted a 393 billion won ($315.3 million) net profit in the quarter ended June, well below a forecast of 526.6 billion won by earnings tracker IBES. But quarterly operating profit came at 534.7 billion won, largely in line with a forecast 549.2 billion won. Operating profit margins stood at 10 percent in the second quarter, down from 11.6 percent a year earlier, but better than 8.6 percent in the January-March quarter. April-June sales rose 13 percent from a year earlier to 5.33 trillion won, bolstered by the weak local currency. Hyundai is also pinning hopes on its renewable energy business and offshore projects by oil companies. It expects continued demand for vessels for deep-sea oil development on growing energy demand and plans to expand into wind power generation and other renewable energy projects. Its shares have risen 9.5 percent so far this year, lagging the broader Korean market's 33.6 percent gain.