Samsung Heavy Industries will pay performance bonuses for the first time in 12 years. The move comes as results improved significantly after clearing out low-priced orders and winning high value-added ship contracts.
According to the business community on the 28th, Samsung Heavy Industries set this year's Overall Performance Incentive (OPI) at 208% of the bonus base amount (base salary + allowances). OPI is the Samsung Group's key performance bonus program, paid at the start of the following year based on annual results.
Unlike Samsung Electronics, which caps the bonus at up to 50% of an individual's annual salary, Samsung Heavy Industries calculates the performance bonus based on the bonus base amount, which combines base salary and fixed allowances. The bonus is scheduled to be paid on the 30th.
The recipients include not only employees of Samsung Heavy Industries but also employees of in-house partner companies. For in-house partner employees with five years or more of service, the rate is the same as for Samsung Heavy Industries employees at 208% of the bonus base amount. Those with three years or more receive 80%, and those with two years or more receive 70%, with payment differentiated by years of service. A Samsung Heavy Industries official said, "This is a system we have continued to maintain our skilled workforce at shipyards in a stable manner."
This is the first time in 12 years that Samsung Heavy Industries is paying OPI since the shipbuilding downturn began in 2014. Performance bonuses were cut off as operating losses and net losses continued from 2015. In 2023, the company posted operating profit for the first time in eight years, but recorded a net loss of 148 billion won, failing to meet the OPI payment requirement.
Samsung calculates OPI based on economic value added (EVA), which deducts corporate taxes and capital costs such as investment funds from operating profit after tax. Last year as well, Samsung Heavy Industries returned to net profit, but performance bonus payments fell through as expenses such as costs related to the cancellation of construction contracts due to the fallout from the Russia-Ukraine war were reflected.
Samsung Heavy Industries improved profits last year by increasing orders for high value-added vessels such as liquefied natural gas (LNG) carriers and offshore projects (FLNG). According to the financial investment industry, the company's annual operating profit consensus (average of securities firms' estimates) last year is estimated at 873.9 billion won, with net profit at 666.6 billion won. Compared with the previous year (operating profit 503 billion won, net profit 64 billion won), operating profit is expected to have increased by about 70%, with net profit nearly tenfold.
The mood inside the company has also changed noticeably. Among employees, some say they feel a sense of how times have changed, saying, "There was a time when rumors circulated that the group might spin us off and sell us, and we never thought we would receive performance bonuses again after 12 years."
In fact, Samsung Electronics Chairman Lee Jae-yong has made back-to-back visits to major manufacturing affiliates such as Samsung Display, Samsung Electro-Mechanics and Samsung Biologics, but he has not publicly visited a Samsung Heavy Industries business site even once since 2015.
There is also strong expectation that this year's bonuses will not be a one-off. Samsung Heavy Industries has cleared most of the low-priced orders it won during the downturn and, based on an order backlog of about 41 trillion won, has secured more than three years' worth of work. Observers say the company has built a structure to consistently generate profits through selective orders that "command full price."
A shipbuilding industry official said, "This year, increased construction volume and higher ship prices will combine to further improve the quality of earnings," adding, "With orders piling up through 2028, the solid trend of performance improvement will continue for the time being."