Hyundai Heavy Counts on More Orders to Sustain Earnings Recovery

(Bloomberg) -- Hyundai Heavy Industries Co., the world’s second-biggest shipbuilder, said it’s counting on making more higher-value vessels such as gas carriers and a surge in new orders to help sustain a recovery in earnings.

Hyundai Heavy got $1.42 billion of orders in the first four months of this year and affiliate Hyundai Mipo Dockyard Co. received $910 million, the Ulsan, South Korea-based company said in a statement Thursday. The vesselmaker also reported first-quarter operating profit jumped 90 percent on year to 618.7 billion won ($548 million), beating analyst estimates for 353.2 billion won.

“We are getting double the number of inquiries for orders this year,” Hyundai Heavy said. “We have also been able to get higher ship prices.”

Hyundai Heavy’s earnings are on the mend after the company suffered losses through much of 2014 and 2015 amid a plunge in demand for new vessels and shipping platforms used for drilling oil in deep sea. South Korea’s shipbuilding industry -- home to the world’s top three builders -- eliminated at least 20,000 jobs last year and the biggest manufacturer Daewoo Shipbuilding & Marine Engineering Co. was bailed out by its creditors earlier this month.

Thursday’s earnings announcement is the last quarterly earnings report by the undivided Hyundai Heavy, which is spinning off its divisions into four separate companies -- shipbuilding, electronics, construction equipment and robotics. This was part of a pledge made to the company’s creditors last year to raise funds by selling non-core assets, reduce production and job cuts.

Hyundai Heavy shares, which were suspended March 30 pending the restructuring, will resume trading May 10. The four companies will be Hyundai Robotics Co., Hyundai Heavy Industries Co., Hyundai Electric & Energy Systems Co. and Hyundai Construction Equipment Co. Hyundai Robotics will also serve as the group’s holding company.

To contact the reporter on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net.

To contact the editors responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net, Lena Lee

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