Hanwha Group's U.S. Philly Shipyard, which was acquired last year with an investment of $100 million (approximately 143.1 billion won), continues to incur losses. With ongoing investments in facilities and personnel to normalize the aging shipyard, it is expected to take more time to secure profitability.
According to the shipbuilding industry on the 30th, Philly Shipyard reported an operating loss of 29.2 billion won in the second quarter (April to June). This represents a larger loss than the 2 billion won loss reported in the first quarter.
Due to the expanded losses of Philly Shipyard, Hanwha System's operating profit (33.5 billion won) in the second quarter decreased by 58% compared to the second quarter of last year. The operating profit margin of Hanwha System in the second quarter dropped by 7.9 percentage points from 12.3% in the second quarter last year, before the acquisition of Philly Shipyard.
Hanwha System explained that the significant decrease in operating profit was due to cost items that were omitted before the acquisition of Philly Shipyard being reflected. Philly Shipyard, which has incurred losses for seven consecutive years from 2018 to last year, is also expected to find it difficult to achieve profitability this year.
Since completing the acquisition of Philly Shipyard with Hanwha Ocean at the end of last year, Hanwha System has been accelerating productivity improvements and process efficiencies. It has significantly reduced the assembly time for ship blocks and is also in the process of converting idle space under the 60-meter-tall Goliath crane into assembly and production space.
The shipbuilding industry expects that expenses for normalizing Philly Shipyard will continue in the second half of the year. Currently, Hanwha Ocean is dispatching employees to Philadelphia for technical training and education. It plans to train 200 personnel annually through an academy at Philly Shipyard, aiming to increase the number of available production personnel from the current level of 1,500 to more than double.
Some results of the productivity improvement efforts are already being realized. Recently, a launch ceremony for the Subsea Rock Installation Vessel (SRIV) was held at Philly Shipyard. When Hanwha Group acquired the shipyard last year, it was anticipated that the launch would take place in December this year, but this has been moved up by five months. It is expected that reducing earlier contracts secured at low prices could accelerate the pace of revenue recovery.
Philly Shipyard is being noted on both the Korean and U.S. sides as the first case of a Korean shipbuilder acquiring a U.S. shipyard. Hanwha Group plans to utilize Philly Shipyard primarily as a base for constructing commercial vessels in the United States. The goal is to increase the current ship production capacity, which is at 1 to 1.5 vessels annually, to more than 10 vessels per year within 10 years.
On the 22nd, Hanwha Ocean and Philly Shipyard signed a contract to construct one liquefied natural gas (LNG) carrier at the Geoje Shipyard. This is a project ordered by Hanwha Shipping, Hanwha Ocean's U.S. shipping subsidiary. According to the Jones Act, vessels operating in U.S. waters must be U.S.-flagged and constructed in the United States, therefore Philly Shipyard will take on this project.
As Philly Shipyard currently lacks the environment to construct LNG carriers, most of the construction work will be undertaken by Hanwha Ocean's Geoje Shipyard. Hanwha Group plans to continue winning contracts for vessels in the U.S. through this kind of collaboration between Korean and U.S. shipyards.